ESTUDYR
MICHIGAN LIFE AND HEALTH UPDATED EXAM WITH MOST
TESTED QUESTIONS AND ANSWERS | GRADED A+ | ASSURED
SUCCESS WITH DETAILED RATIONALES
1. Insurable interest does NOT occur in which relationship?
A. Business owner and key employee
B. Business owner and business client
C. Spouse and spouse
D. Parent and child
Answer: B. Business owner and business client
Rationale: Insurable interest requires a financial/legal stake in the insured’s life;
ordinary clients typically don’t create that.
2. An applicant intentionally lies on an application to obtain a cheaper premium. This is:
A. Concealment
B. Misrepresentation (innocent)
C. Fraud
D. Estoppel
Answer: C. Fraud
Rationale: Intentional deception for gain is fraud.
3. A deferred insurance commission may be paid to an individual when:
A. The individual verbally promised to the company
B. The individual was a licensed producer at time of sale
C. The individual is a relative of a policyowner
D. The company decides after the sale
Answer: B. Individual was licensed producer at the time of the sale
Rationale: Deferred commissions require proper licensure at the time the business was
produced.
4. If an annuitant dies during the payout period, which annuity returns the difference
between value and income already paid?
A. Life-only annuity
B. Joint survivor annuity
C. Refund annuity
D. Period-certain annuity
Answer: C. Refund annuity
,ESTUDYR
Rationale: Refund annuities guarantee beneficiaries the remaining principal if payments
made are less than the account value.
5. Replacing a whole life policy with an annuity without tax penalty is called a:
A. 401(k) rollover
B. 1035 exchange
C. Transfer-for-value exchange
D. Nonqualified transfer
Answer: B. 1035 exchange
Rationale: IRC §1035 allows tax-free exchange of life/annuity policies when rules are
satisfied.
6. A life insurance application may be backdated to:
A. Increase contestability period
B. Save on premiums by using an earlier effective age
C. Avoid underwriting
D. Increase face amount without extra cost
Answer: B. Save on premiums
Rationale: Backdating to an earlier age can lower age-based premiums (subject to
insurer rules).
7. Newborn coverage under health policies MUST include coverage for:
A. Routine dental care
B. Birth abnormalities (congenital defects)
C. Elective cosmetic procedures
D. Private nursery charges
Answer: B. Birth abnormalities
Rationale: Most statutes/policies require coverage for congenital anomalies at birth.
8. When a PPO member goes out-of-network, the insurer:
A. Pays the same as in-network
B. Pays nothing under any circumstances
C. Pays a reduced amount
D. Pays full charges but patient owes balance
Answer: C. Pays a reduced amount
Rationale: PPOs reimburse out-of-network care at lower benefit levels.
9. Under COBRA, a terminated employee’s continuation benefits must:
A. Be different from active employee benefits
B. Be the same and premium cannot exceed 102%
, ESTUDYR
C. Be identical but premiums may be 150%
D. End immediately upon termination
Answer: B. Be the same and the premium cannot exceed 102%
Rationale: COBRA continuation provides same coverage; premiums can include up to a
small administrative charge (commonly 102%).
10. If a newborn is covered at birth under a family policy, the first payment for added
coverage is due within:
A. 7 days
B. 14 days
C. 31 days
D. 60 days
Answer: C. 31 days
Rationale: Many policies require notice/payment within 31 days to continue coverage.
11. Sonya’s policy shows an effective date of May 30; which date does coverage begin?
A. April 1 (application)
B. April 6 (submission)
C. May 15 (premium paid)
D. May 30 (policy effective date)
Answer: D. May 30
Rationale: Coverage starts on the stated effective date.
12. Under the Misstatement of Age provision, an insurer must:
A. Deny the claim outright
B. Cancel the policy
C. Pay age-corrected benefits
D. Subrogate to another insurer
Answer: C. Pay age-corrected benefits
Rationale: Benefits are adjusted to match the premium that would have been
purchased at the correct age.
13. Denying coverage based on which characteristic would be unfair discrimination?
A. Occupational exposure
B. Smoking status
C. Marital status
D. Health history
Answer: C. Marital status
Rationale: Marital status is generally a prohibited actuarial basis for discrimination.
MICHIGAN LIFE AND HEALTH UPDATED EXAM WITH MOST
TESTED QUESTIONS AND ANSWERS | GRADED A+ | ASSURED
SUCCESS WITH DETAILED RATIONALES
1. Insurable interest does NOT occur in which relationship?
A. Business owner and key employee
B. Business owner and business client
C. Spouse and spouse
D. Parent and child
Answer: B. Business owner and business client
Rationale: Insurable interest requires a financial/legal stake in the insured’s life;
ordinary clients typically don’t create that.
2. An applicant intentionally lies on an application to obtain a cheaper premium. This is:
A. Concealment
B. Misrepresentation (innocent)
C. Fraud
D. Estoppel
Answer: C. Fraud
Rationale: Intentional deception for gain is fraud.
3. A deferred insurance commission may be paid to an individual when:
A. The individual verbally promised to the company
B. The individual was a licensed producer at time of sale
C. The individual is a relative of a policyowner
D. The company decides after the sale
Answer: B. Individual was licensed producer at the time of the sale
Rationale: Deferred commissions require proper licensure at the time the business was
produced.
4. If an annuitant dies during the payout period, which annuity returns the difference
between value and income already paid?
A. Life-only annuity
B. Joint survivor annuity
C. Refund annuity
D. Period-certain annuity
Answer: C. Refund annuity
,ESTUDYR
Rationale: Refund annuities guarantee beneficiaries the remaining principal if payments
made are less than the account value.
5. Replacing a whole life policy with an annuity without tax penalty is called a:
A. 401(k) rollover
B. 1035 exchange
C. Transfer-for-value exchange
D. Nonqualified transfer
Answer: B. 1035 exchange
Rationale: IRC §1035 allows tax-free exchange of life/annuity policies when rules are
satisfied.
6. A life insurance application may be backdated to:
A. Increase contestability period
B. Save on premiums by using an earlier effective age
C. Avoid underwriting
D. Increase face amount without extra cost
Answer: B. Save on premiums
Rationale: Backdating to an earlier age can lower age-based premiums (subject to
insurer rules).
7. Newborn coverage under health policies MUST include coverage for:
A. Routine dental care
B. Birth abnormalities (congenital defects)
C. Elective cosmetic procedures
D. Private nursery charges
Answer: B. Birth abnormalities
Rationale: Most statutes/policies require coverage for congenital anomalies at birth.
8. When a PPO member goes out-of-network, the insurer:
A. Pays the same as in-network
B. Pays nothing under any circumstances
C. Pays a reduced amount
D. Pays full charges but patient owes balance
Answer: C. Pays a reduced amount
Rationale: PPOs reimburse out-of-network care at lower benefit levels.
9. Under COBRA, a terminated employee’s continuation benefits must:
A. Be different from active employee benefits
B. Be the same and premium cannot exceed 102%
, ESTUDYR
C. Be identical but premiums may be 150%
D. End immediately upon termination
Answer: B. Be the same and the premium cannot exceed 102%
Rationale: COBRA continuation provides same coverage; premiums can include up to a
small administrative charge (commonly 102%).
10. If a newborn is covered at birth under a family policy, the first payment for added
coverage is due within:
A. 7 days
B. 14 days
C. 31 days
D. 60 days
Answer: C. 31 days
Rationale: Many policies require notice/payment within 31 days to continue coverage.
11. Sonya’s policy shows an effective date of May 30; which date does coverage begin?
A. April 1 (application)
B. April 6 (submission)
C. May 15 (premium paid)
D. May 30 (policy effective date)
Answer: D. May 30
Rationale: Coverage starts on the stated effective date.
12. Under the Misstatement of Age provision, an insurer must:
A. Deny the claim outright
B. Cancel the policy
C. Pay age-corrected benefits
D. Subrogate to another insurer
Answer: C. Pay age-corrected benefits
Rationale: Benefits are adjusted to match the premium that would have been
purchased at the correct age.
13. Denying coverage based on which characteristic would be unfair discrimination?
A. Occupational exposure
B. Smoking status
C. Marital status
D. Health history
Answer: C. Marital status
Rationale: Marital status is generally a prohibited actuarial basis for discrimination.
