AFLAC STUDY PRE-CERT. PRACTICE
EXAM QUESTIONS AND ANSWERS
ABC Company is attempting to minimize the severity of potential losses within its
company. The company is engaged in risk
A. transfer
B. retention
C. reduction
D. avoidance - Correct Answers -C. reduction
"The potential for loss" is also known as a
A. hazard
B. risk
C. transference
D. peril - Correct Answers -B. risk
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the
A. State Guaranty Association
B. Fair Labor Standards Board
C. Fair Credit Reporting Act
D. National Association of Insurance Commissioners - Correct Answers -C. Fair Credit
Reporting Act
Which one of these is NOT considered to be an element of an insurable risk?
A. Speculative risk
B. Pure risk
C. Loss cannot be catastrophic
D. Loss must be due to chance - Correct Answers -A. Speculative risk
Who would be the most likely party for legally entering into a contract?
A. Mentally ill person
B. Minor
C. Person under the influence of alcohol
D. Small employer - Correct Answers -D. Small employer
,The powers directly given to an agent in an agency contract are called
A. express
B. apparent
C. implied
D. assumed - Correct Answers -A. express
An insurance company's voluntary refusal to enforce a contract's provision is called a(n)
A. waiver
B. warranty
C. assignment
D. concealment - Correct Answers -A. waiver
What happens when an initial offer is answered with a counteroffer?
A. An arbitrator decides on a compromise
B. The counteroffer is legally enforceable
C. Initial offer is void
D. Initial offer is automatically accepted - Correct Answers -C. Initial offer is void
An insurance contract may be voided if a misrepresentation found on the application is
determined to be
A. conditional
B. aleatory
C. material
D. intentional - Correct Answers -C. material
Which of the following is NOT a function of accidental and health insurance?
A. Pays a death benefit as a result of an illness
B. Covers the loss of income from a disability
C. Covers the cost of medical care as a result of an accident
D. Pays for hospice care in the event of a terminal illness - Correct Answers -A. Pays a
death benefit as a result of an illness
A disabled business owner who has payroll and business expenses paid for has what
kind of insurance policy?
A. Key person
B. Franchise disability
C. Business overhead expense
D. Disability income - Correct Answers -C. Business overhead expense
Which of the following statements BEST describes disability buy-sell insurance policies?
, A. Benefits are taxable to the business entity
B. Premiums are typically tax-deductible
C. Benefits are typically tax-free
D. Benefits are paid to the disabled insured - Correct Answers -C. Benefits are typically
tax-free
An accident and health insurance policy defines an injury as "bodily injury by accidental
means". For an injury to be covered on this policy, what is required?
A. The accident must be external and violent
B. The cause of the accident must be intentional
C. Only the injury resulting from an accident must be unintentional
D. Both the cause and the result of an accident must be unintentional - Correct Answers
-D. Both the cause and the result of an accident must be unintentional
How many employees must an employer have for the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) to apply?
A. At least 10
B. At least 15
C. At least 20
D. At least 100 - Correct Answers -C. At least 20
Which parties are directly involved in a group accident and health insurance contract?
A. Insurer and employees
B. Insurer, employees, and employer
C. Insurer and employer
D. Employer and employees - Correct Answers -C. Insurer and employer
A characteristic of a Preferred Provider Organizations (PPOs) is
A. PPO's operate like an HMO on a prepaid basis
B. If service is obtained outside the PPO, benefits are reduced and costs increase
C. PPO's are generally public in nature rather than private
D. Health care providers themselves are barred from forming a PPO due to conflict of
interest - Correct Answers -B. If service is obtained outside the PPO, benefits are
reduced and costs increase
Mike had both of his legs amputated after a boulder fell on them. He has a policy that
pays a lump sum benefit for this injury. What type of insurance does Mike have?
A. Catastrophic
B. Accidental death and dismemberment
C. Major medical
EXAM QUESTIONS AND ANSWERS
ABC Company is attempting to minimize the severity of potential losses within its
company. The company is engaged in risk
A. transfer
B. retention
C. reduction
D. avoidance - Correct Answers -C. reduction
"The potential for loss" is also known as a
A. hazard
B. risk
C. transference
D. peril - Correct Answers -B. risk
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the
A. State Guaranty Association
B. Fair Labor Standards Board
C. Fair Credit Reporting Act
D. National Association of Insurance Commissioners - Correct Answers -C. Fair Credit
Reporting Act
Which one of these is NOT considered to be an element of an insurable risk?
A. Speculative risk
B. Pure risk
C. Loss cannot be catastrophic
D. Loss must be due to chance - Correct Answers -A. Speculative risk
Who would be the most likely party for legally entering into a contract?
A. Mentally ill person
B. Minor
C. Person under the influence of alcohol
D. Small employer - Correct Answers -D. Small employer
,The powers directly given to an agent in an agency contract are called
A. express
B. apparent
C. implied
D. assumed - Correct Answers -A. express
An insurance company's voluntary refusal to enforce a contract's provision is called a(n)
A. waiver
B. warranty
C. assignment
D. concealment - Correct Answers -A. waiver
What happens when an initial offer is answered with a counteroffer?
A. An arbitrator decides on a compromise
B. The counteroffer is legally enforceable
C. Initial offer is void
D. Initial offer is automatically accepted - Correct Answers -C. Initial offer is void
An insurance contract may be voided if a misrepresentation found on the application is
determined to be
A. conditional
B. aleatory
C. material
D. intentional - Correct Answers -C. material
Which of the following is NOT a function of accidental and health insurance?
A. Pays a death benefit as a result of an illness
B. Covers the loss of income from a disability
C. Covers the cost of medical care as a result of an accident
D. Pays for hospice care in the event of a terminal illness - Correct Answers -A. Pays a
death benefit as a result of an illness
A disabled business owner who has payroll and business expenses paid for has what
kind of insurance policy?
A. Key person
B. Franchise disability
C. Business overhead expense
D. Disability income - Correct Answers -C. Business overhead expense
Which of the following statements BEST describes disability buy-sell insurance policies?
, A. Benefits are taxable to the business entity
B. Premiums are typically tax-deductible
C. Benefits are typically tax-free
D. Benefits are paid to the disabled insured - Correct Answers -C. Benefits are typically
tax-free
An accident and health insurance policy defines an injury as "bodily injury by accidental
means". For an injury to be covered on this policy, what is required?
A. The accident must be external and violent
B. The cause of the accident must be intentional
C. Only the injury resulting from an accident must be unintentional
D. Both the cause and the result of an accident must be unintentional - Correct Answers
-D. Both the cause and the result of an accident must be unintentional
How many employees must an employer have for the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) to apply?
A. At least 10
B. At least 15
C. At least 20
D. At least 100 - Correct Answers -C. At least 20
Which parties are directly involved in a group accident and health insurance contract?
A. Insurer and employees
B. Insurer, employees, and employer
C. Insurer and employer
D. Employer and employees - Correct Answers -C. Insurer and employer
A characteristic of a Preferred Provider Organizations (PPOs) is
A. PPO's operate like an HMO on a prepaid basis
B. If service is obtained outside the PPO, benefits are reduced and costs increase
C. PPO's are generally public in nature rather than private
D. Health care providers themselves are barred from forming a PPO due to conflict of
interest - Correct Answers -B. If service is obtained outside the PPO, benefits are
reduced and costs increase
Mike had both of his legs amputated after a boulder fell on them. He has a policy that
pays a lump sum benefit for this injury. What type of insurance does Mike have?
A. Catastrophic
B. Accidental death and dismemberment
C. Major medical
