XCEL SOLUTIONS: CHAPTER 7 - LIFE INSURANCE UNDERWRITING AND POLICY ISSUE (CALIFORNIA)

XCEL SOLUTIONS: CHAPTER 7 - LIFE INSURANCE UNDERWRITING AND POLICY ISSUE (CALIFORNIA) “The California Insurance Code defines "policy" as a(n) - CORRECT ANSWER written contract" "The cost of services charged by the Health Insurance Counseling Advocacy Program (HiCap) is - CORRECT ANSWER no cost" "Which word implies permissiveness according to the California Insurance Code? - CORRECT ANSWER May" "Which of the following does the California Insurance Code NOT require an insurance policy to specify? - CORRECT ANSWER Insurer's financial rating" "How many "activities of daily living" must an insured be UNABLE to perform in order to meet the chronically ill requirement of a Long-Term Care policy? - CORRECT ANSWER Minimum of two activities of daily living" "Which of the following is NOT considered to be an unfair claims settlement practice? - CORRECT ANSWER Advising a claimant to hire an attorney" "A person who asserts a right of recovery under an insurance policy is called - CORRECT ANSWER claimant" "According to the PPACA, an adult can be covered by a parent's health care plan until what age? - CORRECT ANSWER Age 26" "According to the California Insurance Code, what is "insurance"? - CORRECT ANSWER A contract" "The free-look period for life insurance policyowners age 60 or older is - CORRECT ANSWER 30 days" "Which of the following is NOT considered to be an act of insurance solicitation? - CORRECT ANSWER Publishing a magazine where one of the advertisers is an insurer" "Paul has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n) - CORRECT ANSWER unnecessary replacement" "The California Insurance Code requires that an insurer must have enough assets to cover its liabilities a - CORRECT ANSWER Its paid-in capital" "When an insurer has met the qualifications necessary to transact business in California, it is said to be - CORRECT ANSWER admitted" "How long must life agents keep their transaction records? - CORRECT ANSWER 5 years" "Life insurance surplus must be distributed to policyowners at what frequency? - CORRECT ANSWER Annually" "The California Life and Health Insurance Guarantee Association covers all of these types of policies EXCEPT - CORRECT ANSWER Self-funded plans" "MRMIP is a - CORRECT ANSWER state program that offers health coverage to California residents who are not able to obtain coverage due to pre-existing conditions" "Both the Federal and state governments jointly finance which health insurance entitlement program? - CORRECT ANSWER Medi-Cal" "In what order are people on the MRMIP waiting list allowed to enroll? - CORRECT ANSWER Based on the date an individual's application is received" "Who does a life settlement broker represent? - CORRECT ANSWER Individual wanting to sell their life policy to a third party" "According to the California Insurance Code, how is the word "may" interpreted? - CORRECT ANSWER Permissive" "What does the term "illustration" mean when used in the phrase "life insurance policy illustration", according to the California Insurance Code? - CORRECT ANSWER Presentation of policy features that includes non-guaranteed elements" "An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n) - CORRECT ANSWER Life agent" "A representation may be altered or withdrawn - CORRECT ANSWER only before the insurance is in effect" "When intentional concealment is involved, what course of action is the injured party entitled to? - CORRECT ANSWER Rescission of the contract" "Which of the following does NOT have to be included on life insurance policy illustrations? - CORRECT ANSWER Statement that all values and benefits are guaranteed" "According to the PPACA, the medical enrollment tier that has 80% actuarial value is called - CORRECT ANSWER gold" "What does the term "indemnity" mean as it pertains to insurance? - CORRECT ANSWER to make whole" "_________ is a small transaction fee charged by some insurers for the first or subsequent years of the life of an insurance policy in addition to the regular premium - CORRECT ANSWER Policy fee" "The medical information bureau consists of members from which group - CORRECT ANSWER insurance companies" "M becomes disabled and is unable to work for six months. M dies soon after from complications arising from this disability. M has a Disability Income policy that pays $2,000 a month. Which of the following statements BEST describes what is owed to her estate? - CORRECT ANSWER earned, but unpaid benefits" "According the the _____ each I'm sure they must conform with state And federal laws regarding the dissemination of an applicants for insureds private information - CORRECT ANSWER Information and privacy protection act" "The total premium is a combination of earned premium and - CORRECT ANSWER Unearned Premium" "Which report contains information regarding an individual's general reputation and credit standing? - CORRECT ANSWER Consumer report" "When does the producer Give a premium receipt for a life insurance application - CORRECT ANSWER When the initial premium has been collected with the application" "Which of these documents is signed by policy delivery that certifies no change in health has occurred original application date - CORRECT ANSWER Good health statement" "The initial premium for a life insurance policy is typically paid in what way? - CORRECT ANSWER It is typically obtained by the producer and forwarded to the insurer" "Period of time for which a policy remains in existence is known as - CORRECT ANSWER Policy term" "During the underwriting process, all of these may be utilized to help determine a life insurance applicant's insurability EXCEPT a(n) - CORRECT ANSWER eye examination" "Which of the following is permitted in the sale of life insurance? - CORRECT ANSWER Replacement" "Premium is a term used to describe the - CORRECT ANSWER Initial payment and subsequent periodic payments to keep the policy in force" "Which of these is not considered the responsibility of a producer in the underwriting writing process - CORRECT ANSWER Choosing final approval date" "Which of these is not a factor in the underwriting process application - CORRECT ANSWER National origin" "All of these are duties of a producer when delivering an insurance policy except - CORRECT ANSWER Leave a conditional receipt with client" "A preferred life insurance premiums be obtained by an applicant exhibiting all of these factors except - CORRECT ANSWER Living in the mountains" "Mike recently lost sight in both eyes. He has a policy that pays a lump sum benefit for this injury. What type of insurance does Mike have? - CORRECT ANSWER accidental death and dismemberment" "Laura has an employer-based preventative health care plan that focuses on an enrollee's problems, such as drug abuse or stress. These plans are called - CORRECT ANSWER wellness programs" "Trade association groups that are eligible for group medical benefits normally are - CORRECT ANSWER in the same industry" "Which parties are directly involved in a group accident and health insurance contract? - CORRECT ANSWER employer and insurer" "What is the name of the period of time during which a new employee is ineligible for group Health insurance coverage? - CORRECT ANSWER probationary period" "In a disability buy-sell agreement, the policies funding the agreement are owned by the - CORRECT ANSWER business entity" "For employees covered in multiple states under a group health plan, jurisdiction rules cannot alter - CORRECT ANSWER COBRA laws" "The health insurance premiums paid for by each partner in a partnership is considered to be - CORRECT ANSWER 100% tax deductible" "Notice of information practices must be given to a policyholder at least - CORRECT ANSWER every 3 years" "How do birthing centers reduce medical costs? - CORRECT ANSWER Using certified nurse midwives" "Kate received a group accident and health termination notice. How many days does she have to apply for a converted policy? - CORRECT ANSWER 31" "In regards to health insurance, employees age 65 or older are typically required to - CORRECT ANSWER be offered the same group health benefits offered to the younger employees" "An employer pays the accident and health insurance premiums for its employees. The premiums paid by the employer are - CORRECT ANSWER deductible to the business" "Age Change - CORRECT ANSWER the date halfway between birthdays when the applicant's age changes to the next higher age." "Applicant - CORRECT ANSWER the person completing the application to the insurance company for the insurance policy" "Application - CORRECT ANSWER the Statement of information given when a person applies for life, health, or disability insurance." "Attending Physician Statement (APS) - CORRECT ANSWER are used when the application or medical examiner's report reveals conditions or situations, past or present, about which more information is desired" "Disclosure Form - CORRECT ANSWER a comparison form required by various state regulatory agencies to be given to every policyowner when replacing an existing policy with another." "Evidence of Insurability - CORRECT ANSWER describes a statement or proof of a person's health history and current health status that qualifies that person for coverage." "Fair Credit Reporting Act - CORRECT ANSWER a federal law passed in 1970 that provides an insurer with the right to receive additional information with regard to applicants for insurance coverage" "Field underwriter - CORRECT ANSWER the agent or producer completing the applicant's application for insurance" "Free-look Period - CORRECT ANSWER If the policy owner decides to return the contract to the insurer during this period, they will receive a full premium refund" "Inspection Report - CORRECT ANSWER a report that contains general information regarding the health, habits, finances, and reputation of an applicant." "Insurable Interest - CORRECT ANSWER describes the financial or emotional relationship between two or more parties justifying one owning a life insurance policy on the other" "Medical Information Bureau - CORRECT ANSWER a service organization that collects medical data on life and health insurance applicants for member insurance companies" "Policy Summary - CORRECT ANSWER summarizes the basic terms of an insurance policy, including the conditions, coverage limitations, and premiums." "Replacement - CORRECT ANSWER a legal activity where a producer convinces a prospective client to lapse or surrender a life or health policy and purchase a new one" "Representations - CORRECT ANSWER the applicant's statements on the application are considered _________ and not warranties. A ________ need only be substantially accurate to the best of the applicant's knowledge." "Risk Classification - CORRECT ANSWER describes the underwriting category into which risk is placed depending upon the applicant's susceptibility to injury, illness, or death" "Special Class - CORRECT ANSWER describes an applicant who cannot qualify for a standard policy, but may secure one with a rider waiving the payment for a loss involving certain existing health impairments." "Standard Risk - CORRECT ANSWER describes a person who, according to a company's underwriting standards, is considered an average risk and insurable at standard rates" "Substandard Risk (Impaired Risk) - CORRECT ANSWER describes an applicant whose physical condition does not meet the usual minimum standards" "Underwriter - CORRECT ANSWER a person who identifies, examines, and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate." "Underwriting - CORRECT ANSWER the analysis of information obtained from various sources pertaining to an applicant for insurance and the determination of whether or not the insurance should be issued as requested, offered at a higher premium, or declined." "Warranties - CORRECT ANSWER must be absolutely and literally true." "Which of the following is NOT covered by the Family and Medical Leave Act (FMLA)? - CORRECT ANSWER Traveling overseas with a spouse" "Which of the following acts is NOT a Federal offense committed by an insurance agent? - CORRECT ANSWER Misrepresentation on an insurance application" "Which of the following is NOT a primary objective of insurance regulation? - CORRECT ANSWER Interpret policy provisions" "Which type of jurisdiction requires an insurer to have its rates accepted by the Insurance Department prior to using them? - CORRECT ANSWER Prior approval" "What is the purpose of the Pre-Existing Condition Insurance Plan (PCIP)? - CORRECT ANSWER PCIP was created by the PPACA for people rejected by private health insurers due to pre-existing conditions" "According to PPACA, what is a health benefits exchange? - CORRECT ANSWER An entity to which individuals and small businesses can have access to affordable health coverage" "What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer? - CORRECT ANSWER Notice of appointment must be submitted to the Commissioner" "According to the California Insurance Code, what term is used to describe a fact so important it could affect the policy premium? - CORRECT ANSWER Materiality" "Which of the following actions is NOT allowed by Health Insurance Counseling and Advocacy Program (HiCAP) counselors? - CORRECT ANSWER Charge a fee" "According to PPACA, how long can an adult be covered as a dependent under their parents' insurance plan? - CORRECT ANSWER Up to age 26" "How long must a policy be in force before an insurer is prohibited from denying claims based on misstatements made on the health policy application? - CORRECT ANSWER 2 years" "Kimberly is an employee on leave under the Family and Medical Leave Act (FMLA). What will happen to her group health coverage? - CORRECT ANSWER She continues to be enrolled during the leave" "Jim is applying to become an insurance agent and has a past misdemeanor conviction that was later expunged due to California Penal Code 1203.4. Which of the following statements is correct? - CORRECT ANSWER Jim must still disclose the conviction on his insurance license application" "According to the California Insurance Code, what is the maximum penalty per violation for anyone who unwillfully commits an unfair method of competition? - CORRECT ANSWER $5,000" "What type of license is required for an individual who charges a fee to review an insured's existing life insurance policy? - CORRECT ANSWER Life and disability analyst" "Which of the following is NOT an accurate description of Access for Infants and Mothers Program (AIM)? - CORRECT ANSWER Only women who have private insurance plans with a maternity-only deductible or copayment greater than $1,500 are eligible" "Which entity has jurisdiction over health care coverage providers? - CORRECT ANSWER Department of insurance" "The California Insurance Code requires that an insurer must have enough assets to cover its liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess additional assets equal to what amount? - CORRECT ANSWER Its paid-in capital" "Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance - CORRECT ANSWER solicitor" "An agent's attempt to stop the replacement of an existing life insurance policy is known as - CORRECT ANSWER conservation" Mike applied for life insurance and was issued a conditional receipt. He is later found to be insurable and is issued a policy. When does his coverage become effective? - CORRECT ANSWER Date of issuance of the conditional receipt" "An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true? - CORRECT ANSWER Applicant has a right to receive a copy of the report" "And employer provides a non-contributory disability income group plan to its employees. How would be treated for tax purposes - CORRECT ANSWER As taxable income" "When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice? - CORRECT ANSWER producer" "On health insurance applications statements made on the application are considered - CORRECT ANSWER Representations" "What must be given to a life insurance application when the agent receives an application and the initial premium - CORRECT ANSWER Conditional receipt" "K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true? - CORRECT ANSWER Proceeds will be paid to ps estate" "A sign to get health statement would be collected by a producer at the time of - CORRECT ANSWER Policy delivery" Which of the following statements is NOT true concerning the relationship between group health insurance plans and Medicare? (assuming the business has more than 20 employees) - CORRECT ANSWER group health coverage is NOT available for workers over the age of 65" "Typically, working individuals age 65 or over must be - CORRECT ANSWER offered the same Health benefits as the younger employees" "A certificate of coverage for a group health policy is best described as - CORRECT ANSWER proof of coverage for the employee" "Nonqualified medical expense distributions from a Health Savings Account (HSA) have a tax penalty of - CORRECT ANSWER 20%" "What is the federal income tax liability of a death benefit paid from a health insurance policy to a named beneficiary? - CORRECT ANSWER benefits are not taxable" "Which of the following statements BEST describes a double indemnity provision in travel accident insurance? - CORRECT ANSWER benefits are doubled under certain circumstances stated in the policy" "Which of the following is NOT a function of accident and health insurance? - CORRECT ANSWER pays a death benefit as a result of natural causes" Adverse Selection - CORRECT ANSWER the tendency of a disproportionate number of poor risks to seek or buy insurance or maintain existing insurance in force" "Backdating - CORRECT ANSWER the practice of making the effective date of a policy earlier than the application date" "Binding Receipt (Unconditional Receipt) - CORRECT ANSWER one of the types of receipts given by an insurance company upon the completion of an insurance application if the initial premium is collected with the application" "Buyer's Guide - CORRECT ANSWER a pamphlet that describes and compares various forms of life or health insurance. This guide must be provided to a consumer by the producer when the latter is attempting to solicit insurance" "Conditional Receipt - CORRECT ANSWER a form customarily required to be signed by the agent and given to the prospective owner at the time a new application is completed." "Consumer Report (Investigative Consumer Report) - CORRECT ANSWER a detailed background investigation that may include an interview with coworkers, friends, and neighbors about an applicant's character, reputation, lifestyle, etc" "Credit Report - CORRECT ANSWER a summary of an insurance applicant's credit history (credit score, debt levels, repayment history, and assumed creditworthiness, etc.), made by an independent organization that has investigated the applicant's credit standing." "Declined Risk - CORRECT ANSWER describes an individual whose application for coverage was rejected by an insurance company" "Preferred Risk - CORRECT ANSWER describes an applicant who represents the likelihood of risk lower than that of the standard applicant, typically due to better than average physical condition, occupation, mode of living, and other characteristics compared to other applicants of the same age." "Proposed Insured - CORRECT ANSWER the person whose life is requesting to be insured. Typically, but not always, this is also the applicant." "Rated Policy (Rating Up) - CORRECT ANSWER basis for an additional charge to the standard premium because the person insured is classified as a higher -than-average risk"