Accident and Sickness Insurance Mock
Exam 1
Albert fell down a staircase and fractured his leg. He was immobilized for three months as
his leg was in a cast. He received disability benefits from his individual disability policy for
two months following the waiting period of one month. He had creditor disability insurance on
his credit card, but the credit card company did not consider Albert disabled.
What definition of disability governed his creditor disability insurance?
a) Own occupation
b) Regular occupation
c) Any occupation
d) Total disability - ANS-(correct) Total disability
Rationale:
Total disability is the definition used by CPP. It defines total disability as the inability to
perform the functions of any occupation for which the insured is suited by education or
experience. It also entails that the insured will never recover and be able to return to
employment and, in fact, will likely eventually die from the cause of the disability. Such a
drastic definition is seldom used in individual or group disability insurance (DI) policies but
may be found more often in creditor insurance coverage. (Refer to Section 2.2.3.3)
Brandy is a client who has come for advice about a difficult situation. Her Aunt Jane owned a
policy with an accidental death benefit rider. Aunt Jane was badly hurt in a skiing accident
and spent months in the hospital. She returned home after being discharged from the
hospital but died shortly thereafter due to complications caused by the accident. Brandy's
mother Ida is the beneficiary of Aunt Jane's insurance policy. Aunt Jane's insurer is being
difficult about paying out her accidental death benefit. Her advisor tells Brandy not to worry.
The policy states that if Aunt Jane's death was directly attributable to the accident within a
certain time period, the insurer must pay the accidental death benefit.
What is the time limit?
a) 7 days
b) 180 days
,c) 365 days
d) 720 days - ANS-(correct) 365 days
Rationale:
For a claim to be receivable, the death must occur within 365 days of the accident and the
death must be directly attributable to the accident. (Refer to Section 2.2.4.5)
Carol goes to her advisor's office one day to sign some documents. She is interested in the
insurance policy approval process and asks her several questions about it. She tells her
advisor that while she was discussing taking out insurance on her line of credit and her
mortgage with her bank, the subject of critical illness insurance came up. Her bank offered
her a generous life, critical illness and long-term care policy. Carol wants to know where the
bank's underwriters will be able to obtain information on her past history of insurance
applications.
What does Carol's advisor tell her?
a) Medical Information Bureau (MIB)
b) Individual Insurance Bureau (IIB)
c) Provincial Health Bureau (PHB)
d) Personal Information Bureau (PIB) - ANS-(correct) Medical Information Bureau (MIB)
Rationale:
The Medical Insurance Bureau (MIB) is a database where an insurer reports information with
regard to an applicant's risks as determined during the insurance company's investigation of
the applicant. The MIB also provides insurance companies with historical information on data
obtained during the applicant's previous life insurance applications. (Refer to Section 7.3.3)
Chester is discussing insurance with a group insurance representative. He wants to provide
extended health care benefits to his 20 employees that will include reimbursement of
prescription drug and dental expenses. This will be the first time this group will be covered
by a group policy. The group representative tells Chester that the initial premium for the plan
will be derived from their experience with a similar group based on size and industry.
What premium funding mechanism is the group representative suggesting?
a) Administrative service only
b) Experience rating
c) Blended rating
, d) Manual rating - ANS-(wrong) Experience rating
Rationale:
If a prospective group applying for coverage has had no previous experience, the group
premium will be based exclusively on a rate derived on a "manual" basis. The manual sets
out standards for groups of similar size and industry sector based primarily on their past
claims experience. This method is also referred to as "pooled pricing." (Refer to Section 8.4)
Crystal is employed in a firm that provides substantial group benefits. She is covered by her
group plan for life insurance, disability insurance, and extended health care benefits. Crystal
also has coverage through her association life insurance policy (provided by her alumni
association) and creditor life and disability insurance on her credit cards and line of credit
(provided by her carriers). She feels that she is covered adequately. Crystal asks for the
differences between the various coverage she has.
Identify the differences.
a) The group life insurance policy is convertible to an individual insurance policy upon
quitting the plan.
b) Her group disability and extended health care benefits can be converted to individual life
insurance.
c) Her creditor life insurance on her credit cards will clear her credit card balance in the
event she is disabled.
d) The creditor insurance on the line of credit will c - ANS-(wrong) Her group disability and
extended health care benefits can be converted to individual life insurance.
Rationale:
Group life insurance is convertible to individual insurance within 31 days of quitting the plan;
group disability insurance may be convertible if the policy provides for conversion. Group
extended health care is not convertible. In the event of disability, creditor insurance on her
credit cards will only pay the minimum amount due every month. The creditor insurance on
the line of credit will charge a premium based upon the actual credit used from the line of
credit. (Refer to Section 2.3)
Darla's client, Chris, comes to her for some supplemental health insurance. Darla sets up a
policy with a $135 monthly premium. Chris has a fairly new job and he has been told he is
covered by a corporately-owned individual disability policy. Chris' employer will be paying the
$135 premium every month and this premium will be a taxable benefit to Chris. He finds this
quite confusing and does not understand if his benefits will be taxed.
Which of the following statements is true?
Exam 1
Albert fell down a staircase and fractured his leg. He was immobilized for three months as
his leg was in a cast. He received disability benefits from his individual disability policy for
two months following the waiting period of one month. He had creditor disability insurance on
his credit card, but the credit card company did not consider Albert disabled.
What definition of disability governed his creditor disability insurance?
a) Own occupation
b) Regular occupation
c) Any occupation
d) Total disability - ANS-(correct) Total disability
Rationale:
Total disability is the definition used by CPP. It defines total disability as the inability to
perform the functions of any occupation for which the insured is suited by education or
experience. It also entails that the insured will never recover and be able to return to
employment and, in fact, will likely eventually die from the cause of the disability. Such a
drastic definition is seldom used in individual or group disability insurance (DI) policies but
may be found more often in creditor insurance coverage. (Refer to Section 2.2.3.3)
Brandy is a client who has come for advice about a difficult situation. Her Aunt Jane owned a
policy with an accidental death benefit rider. Aunt Jane was badly hurt in a skiing accident
and spent months in the hospital. She returned home after being discharged from the
hospital but died shortly thereafter due to complications caused by the accident. Brandy's
mother Ida is the beneficiary of Aunt Jane's insurance policy. Aunt Jane's insurer is being
difficult about paying out her accidental death benefit. Her advisor tells Brandy not to worry.
The policy states that if Aunt Jane's death was directly attributable to the accident within a
certain time period, the insurer must pay the accidental death benefit.
What is the time limit?
a) 7 days
b) 180 days
,c) 365 days
d) 720 days - ANS-(correct) 365 days
Rationale:
For a claim to be receivable, the death must occur within 365 days of the accident and the
death must be directly attributable to the accident. (Refer to Section 2.2.4.5)
Carol goes to her advisor's office one day to sign some documents. She is interested in the
insurance policy approval process and asks her several questions about it. She tells her
advisor that while she was discussing taking out insurance on her line of credit and her
mortgage with her bank, the subject of critical illness insurance came up. Her bank offered
her a generous life, critical illness and long-term care policy. Carol wants to know where the
bank's underwriters will be able to obtain information on her past history of insurance
applications.
What does Carol's advisor tell her?
a) Medical Information Bureau (MIB)
b) Individual Insurance Bureau (IIB)
c) Provincial Health Bureau (PHB)
d) Personal Information Bureau (PIB) - ANS-(correct) Medical Information Bureau (MIB)
Rationale:
The Medical Insurance Bureau (MIB) is a database where an insurer reports information with
regard to an applicant's risks as determined during the insurance company's investigation of
the applicant. The MIB also provides insurance companies with historical information on data
obtained during the applicant's previous life insurance applications. (Refer to Section 7.3.3)
Chester is discussing insurance with a group insurance representative. He wants to provide
extended health care benefits to his 20 employees that will include reimbursement of
prescription drug and dental expenses. This will be the first time this group will be covered
by a group policy. The group representative tells Chester that the initial premium for the plan
will be derived from their experience with a similar group based on size and industry.
What premium funding mechanism is the group representative suggesting?
a) Administrative service only
b) Experience rating
c) Blended rating
, d) Manual rating - ANS-(wrong) Experience rating
Rationale:
If a prospective group applying for coverage has had no previous experience, the group
premium will be based exclusively on a rate derived on a "manual" basis. The manual sets
out standards for groups of similar size and industry sector based primarily on their past
claims experience. This method is also referred to as "pooled pricing." (Refer to Section 8.4)
Crystal is employed in a firm that provides substantial group benefits. She is covered by her
group plan for life insurance, disability insurance, and extended health care benefits. Crystal
also has coverage through her association life insurance policy (provided by her alumni
association) and creditor life and disability insurance on her credit cards and line of credit
(provided by her carriers). She feels that she is covered adequately. Crystal asks for the
differences between the various coverage she has.
Identify the differences.
a) The group life insurance policy is convertible to an individual insurance policy upon
quitting the plan.
b) Her group disability and extended health care benefits can be converted to individual life
insurance.
c) Her creditor life insurance on her credit cards will clear her credit card balance in the
event she is disabled.
d) The creditor insurance on the line of credit will c - ANS-(wrong) Her group disability and
extended health care benefits can be converted to individual life insurance.
Rationale:
Group life insurance is convertible to individual insurance within 31 days of quitting the plan;
group disability insurance may be convertible if the policy provides for conversion. Group
extended health care is not convertible. In the event of disability, creditor insurance on her
credit cards will only pay the minimum amount due every month. The creditor insurance on
the line of credit will charge a premium based upon the actual credit used from the line of
credit. (Refer to Section 2.3)
Darla's client, Chris, comes to her for some supplemental health insurance. Darla sets up a
policy with a $135 monthly premium. Chris has a fairly new job and he has been told he is
covered by a corporately-owned individual disability policy. Chris' employer will be paying the
$135 premium every month and this premium will be a taxable benefit to Chris. He finds this
quite confusing and does not understand if his benefits will be taxed.
Which of the following statements is true?
