FPQP -Module 5
Which of the following statements regarding the elimination period of a disability
insurance policy is correct?
A) the elimination has no impact on premiums.
B) the elimination determines how long coverage lasts.
C.) all else being equal, the longer the elimination, the lower the premium.
D) all else being equal, but the shorter the elimination, lower the premium. - answerC.)
all else being equal, the longer the elimination, the lower the premium.
Explanation:
The elimination period is similar to a deductible. All else being equal, the longer the
insured has to wait before receiving a benefit, the lower the premium will be.
LO 5-6
Under the coinsurance provision in a medical insurance policy, the insured is required to
pay?
A) a percentage of the covered loss after the maximum coverage limit has been
exceeded.
B) the cost of any loss up to a specified amount.
C) a percentage of the covered loss up to a stated amount.
D) the cost of the covered loss after the maximum coverage limit has been exceeded. -
answerC) a percentage of the covered loss up to a stated amount.
Explanation:
The coinsurance provision in a medical insurance policy requires that the insured pay a
percentage of the covered loss up to a specified amount.
LO 5-4
Which of the following situations would be best suited for a decreasing term insurance
policy (a policy that provides a lower death benefit for each passing year)?
A) a single homeowner with no dependents
B) a single parent with a home mortgage and a special-needs child
C) a retire couple in excellent health living in a house with no mortgage
D) a young couple, just starting out and living in a rented apartment - answerA) a single
homeowner with no dependents
Explanation:
A single homeowner is the ideal candidate for decreasing term insurance because she
would likely not need life insurance for anything other than final expenses and paying off
the mortgage.
LO 5-1
, Which of the following elements is not considered in the process of determining the cost
of a life insurance premium?
A) credited interest
B) morbidity charges
C) expense charges
D) mortality charges - answerB) morbidity charges
Explanation:
Three main elements combine to determine the amount of an insurance premium:
mortality charges, expense charges, and if there is any, credited interest. Morbidity is
the occurrence of illness and relates primarily to disability insurance.
LO 5-1
Which of the statements regarding life insurance dividends is correct?
A) dividends are a result of higher than expected expenses or lower than expected and
investment results
B) after cumulative dividends received exceed cumulative premiums paid they are
income tax free
C) dividends may be used to reduce premium payments, thus maintaining insurance
coverage and reducing out-of-pocket expenses
D) dividends may not be used to increase the death benefit and cash value of a contract
- answerC) dividends may be used to reduce premium payments, thus maintaining
insurance coverage and reducing out-of-pocket expenses
Explanation:
Dividends may be used to reduce the owner's out-of-pocket expense. Until cumulative
dividends paid exceed the cumulative premiums paid, the dividends are income tax
free. After this point, dividends will be taxable. They are a result of lower-than-expected
mortality expenses, lower administrative or other expenses, better-than-expected
investment results, or a combination of these factors. It would be unusual for the
dividend total to exceed the amount of premiums paid.
LO 5-2
What typically occurs if an irrevocable beneficiary passes away before the insured?
A) policy rights transfer to the closest relative of the insured
B) policy rights transfer to the closest relative of the owner
C) policy rights are included in the irrevocable beneficiary's estate
D) policy rights revert to the owner - answerD) policy rights revert to the owner
Explanation:
If an irrevocable beneficiary passes away before the insured, policy rights usually revert
to the owner.
LO 5-2
Which of these is a characteristic of the Affordable Care Act (ACA)?
A) the ACA created government health insurance
Which of the following statements regarding the elimination period of a disability
insurance policy is correct?
A) the elimination has no impact on premiums.
B) the elimination determines how long coverage lasts.
C.) all else being equal, the longer the elimination, the lower the premium.
D) all else being equal, but the shorter the elimination, lower the premium. - answerC.)
all else being equal, the longer the elimination, the lower the premium.
Explanation:
The elimination period is similar to a deductible. All else being equal, the longer the
insured has to wait before receiving a benefit, the lower the premium will be.
LO 5-6
Under the coinsurance provision in a medical insurance policy, the insured is required to
pay?
A) a percentage of the covered loss after the maximum coverage limit has been
exceeded.
B) the cost of any loss up to a specified amount.
C) a percentage of the covered loss up to a stated amount.
D) the cost of the covered loss after the maximum coverage limit has been exceeded. -
answerC) a percentage of the covered loss up to a stated amount.
Explanation:
The coinsurance provision in a medical insurance policy requires that the insured pay a
percentage of the covered loss up to a specified amount.
LO 5-4
Which of the following situations would be best suited for a decreasing term insurance
policy (a policy that provides a lower death benefit for each passing year)?
A) a single homeowner with no dependents
B) a single parent with a home mortgage and a special-needs child
C) a retire couple in excellent health living in a house with no mortgage
D) a young couple, just starting out and living in a rented apartment - answerA) a single
homeowner with no dependents
Explanation:
A single homeowner is the ideal candidate for decreasing term insurance because she
would likely not need life insurance for anything other than final expenses and paying off
the mortgage.
LO 5-1
, Which of the following elements is not considered in the process of determining the cost
of a life insurance premium?
A) credited interest
B) morbidity charges
C) expense charges
D) mortality charges - answerB) morbidity charges
Explanation:
Three main elements combine to determine the amount of an insurance premium:
mortality charges, expense charges, and if there is any, credited interest. Morbidity is
the occurrence of illness and relates primarily to disability insurance.
LO 5-1
Which of the statements regarding life insurance dividends is correct?
A) dividends are a result of higher than expected expenses or lower than expected and
investment results
B) after cumulative dividends received exceed cumulative premiums paid they are
income tax free
C) dividends may be used to reduce premium payments, thus maintaining insurance
coverage and reducing out-of-pocket expenses
D) dividends may not be used to increase the death benefit and cash value of a contract
- answerC) dividends may be used to reduce premium payments, thus maintaining
insurance coverage and reducing out-of-pocket expenses
Explanation:
Dividends may be used to reduce the owner's out-of-pocket expense. Until cumulative
dividends paid exceed the cumulative premiums paid, the dividends are income tax
free. After this point, dividends will be taxable. They are a result of lower-than-expected
mortality expenses, lower administrative or other expenses, better-than-expected
investment results, or a combination of these factors. It would be unusual for the
dividend total to exceed the amount of premiums paid.
LO 5-2
What typically occurs if an irrevocable beneficiary passes away before the insured?
A) policy rights transfer to the closest relative of the insured
B) policy rights transfer to the closest relative of the owner
C) policy rights are included in the irrevocable beneficiary's estate
D) policy rights revert to the owner - answerD) policy rights revert to the owner
Explanation:
If an irrevocable beneficiary passes away before the insured, policy rights usually revert
to the owner.
LO 5-2
Which of these is a characteristic of the Affordable Care Act (ACA)?
A) the ACA created government health insurance
