FLORIDA 240 LICENSE EXAM QUESTIONS WITH VERIFIED CORRECT ANSWERS

FLORIDA 240 LICENSE EXAM QUESTIONS WITH VERIFIED CORRECT ANSWERS “The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called: - Correct Answer Reserves" "An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the: - Correct Answer Fair Credit Reporting Act" "A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as: - Correct Answer A fraternal benefit society" "What I the name of the law that requires insurers to disclose information gathering practices and where the information was obtained? - Correct Answer Fair Credit Reporting Act" "Who elects the governing body of a mutual insurance company? - Correct Answer Policyholders" "A group-owned insurance company that is formed to assume and spread the liability ricks of its members is known as a: - Correct Answer Risk retention group" "What type of reinsurance contract involves two companies automatically sharing their risk exposure? - Correct Answer treaty" "What year was the McCarran-Ferguson Act enacted? - Correct Answer 1945" "Which of these describe a participating life insurance policy? - Correct Answer Policy owners are entitled to receive dividends" "At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? - Correct Answer Upon completion of the application" "Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated: - Correct Answer 1970 - Fair Credit Reporting Act" "What type of reinsurance contract involves two companies automatically sharing their risk exposure? - Correct Answer Treaty" "A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a: - Correct Answer risk retention group" "All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: - Correct Answer Bilateral" "The part of a life insurance policy guaranteed to be true is called a(n) - Correct Answer warranty" "Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called - Correct Answer representations" "Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features? - Correct Answer Aleatory" "When must insurable interest be present in order for a life insurance policy to be valid? - Correct Answer When the application is made" "A life insurance arrangement which circumvents insurable interest statutes is called: - Correct Answer Investor-Originated Life Insurance" "Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements? - Correct Answer Legal Purpose (Insurable Interest)" "Who makes the legally enforceable promises in a unilateral contract? - Correct Answer Insurance company" "A policy of adhesion can only be modified by whom? - Correct Answer insurance company" "When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: - Correct Answer insurable interest in the proposed insured" "Which of these is considered a statement that is assured to be true in every aspect? - Correct Answer Warranty" "Which of these require an offer, acceptance, and consideration? - Correct Answer contract" "If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? - Correct Answer insured" "Insurance contracts are known as _____ because certain future conditions or acts must occur before any claims can be paid. - Correct Answer conditional" "Insurance policies are offered on a "take it or leave it" basis, which make them: - Correct Answer Contracts of Adhesion" "In regards to representations or warranties, which of these statements is TRUE? - Correct Answer If material to the risk, false representations will void a policy" "Which of these arrangements allows one to bypass insurable interest laws? - Correct Answer Investor-Originated Life Insurance" "In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? - Correct Answer unilateral" "Which of these is NOT a type of agent authority? - Correct Answer principal" "E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to? - Correct Answer In this situation, the proceeds from E's life insurance policy will go to F." "When must insurable interest exist for a life insurance contract to be valid? - Correct Answer Inception of the contract" "Life and health insurance policies are: - Correct Answer unilateral contracts" "A policy of adhesion can only be modified by whom? - Correct Answer insurance company" "At what point does an informal contract become binding? - Correct Answer When one party makes an offer and the other party accepts that offer" "What is the consideration given by an insurer in the Consideration clause of a life policy? - Correct Answer Promise to pay a death benefit" "What is the consideration given by an insurer in the Consideration clause of life policy? - Correct Answer Promise to pay a death benefit to a named beneficiary" "Insurance policies are considered aleatory contracts because: - Correct Answer performance is conditioned upon a future occurrence" "Taking receipt of premiums and holding them for the insurance company is an example of - Correct Answer fiduciary responsibility" "The Consideration clause in a life insurance contract contains what pertinent information? - Correct Answer The schedule and amount of premium payments" "Which of the following consists of an offer, acceptance, and consideration? - Correct Answer Contract" "Which of the following consists of an offer, acceptance, and consideration? - Correct Answer contract" "Which of these is NOT considered to be an element of an insurance company? - Correct Answer Negotiating" "What is a warranty? - Correct Answer is a statement guaranteed to be true" "A life insurance policy would be considered a wagering contract WITHOUT: - Correct Answer insurable interest" "G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is - Correct Answer Business Overhead Expense" "Which of the following claims are typically excluded from Medical expense policies? - Correct Answer Intentionally self-inflicted injuries" "XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is - Correct Answer 100%" "A Business Overhead Expense policy: - Correct Answer covers business expenses such as rent and utilities" "A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled? - Correct Answer Utilities and office rent" "What is issued to each employee of an employer health plan? - Correct Answer certificate" "The benefits under a Disability Buy-Out policy are - Correct Answer payable to the company or another shareholder" "A policy owner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need? - Correct Answer irrevocable" "Which contract permits the remaining partners to buy-out the interest of a disabled business partner? - Correct Answer Disability Buy-Sell" "T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive? - Correct Answer $0" "Which of the following medical expenses does Cancer insurance NOT cover? - Correct Answer arthritis" "The difference between group insurance and blanket health policies is: - Correct Answer Blanket health policies do not issue certificates" "Which type of policy would pay an employee's salary if the employer was injured in a bicycle accident and out of work for six weeks? - Correct Answer Business Overhead Expense" "On an Accidental Death and Dismemberment (AD&D) insurance policy, who is qualified to change the beneficiary designation? - Correct Answer Policyowner" "The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers (and their families) whose employment has been terminated the right to: - Correct Answer continue group health benefits" "K is the insured and P is the sole beneficiary on an Accidental Death and Dismemberment (AD&D) 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 P's estate" "How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy? - Correct Answer If the primary beneficiary dies before the insured" "Which mode of payment is NOT used by health insurance policies? - Correct Answer Single Premium" "G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is - Correct Answer Business Overhead Expense" "Which of the following is the reimbursement of benefits for the treatment of a beneficiary's injuries caused by a third party? - Correct Answer Subrogation" "S is employed by a large corporation that provides group health coverage for its employees and their dependents. If S dies, the company must allow his surviving spouse and dependents to continue their group health coverage for a maximum of how many months under COBRA regulations? - Correct Answer 36" "When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans? - Correct Answer contributory" "Which of these circumstances is a Business Disability Buy-Sell policy designed to help in the sale of a business? - Correct Answer Business owner becoming disabled" "An accident policy will most likely pay a benefit for a(n) - Correct Answer off-the-job accident" "An insurance company would MOST likely pay benefits under an Accidental Death and Dismemberment policy for which of the following losses? - Correct Answer Loss of eyesight due to an accidental injury" "Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for: - Correct Answer health information" "Under which of the following circumstances will the benefits under COBRA continuation coverage end? - Correct Answer All group health plans are terminated by the employer" "The provision in a Group Health policy that allows the insurer to postpone coverage for a covered illness 30 days after the policy's effective date is referred to as the - Correct Answer waiting period" "Which of the following statements BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition? - Correct Answer Less restrictive" "Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy? - Correct Answer reimbursement" "The federal income tax treatment of employer-provided group Medical Expense insurance can be accurately described as: - Correct Answer Employee's premiums paid by the employer is tax-deductible to the employer as a business expenditure" "P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to - Correct Answer P only" "J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. What is the MAXIMUM J will receive from his policy? - Correct Answer $25,000" "Which of the following characteristics is associated with a large group disability income policy? - Correct Answer No medical underwriting" "K has an Accidental Death and Dismemberment (AD&D) insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed? - Correct Answer daughter" "Which of the following statements does NOT accurately describe the tax treatment of premiums and benefits of individual Accident and Health insurance? - Correct Answer Disability income policy premiums are tax-deductible" "coordination of benefits provision - Correct Answer prevents an insured covered by two health plans from making a profit on a covered loss" "Accidental Death coverage is provided to commercial airline passengers in which of he following types of policies? - Correct Answer Blanket Accident policy" "If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act? - Correct Answer Insured's contingent beneficiary" "Which of the following statements is correct regarding an employer/employee group health plan? - Correct Answer the employer receives a master policy and the employees receive certificates" "Which of the following is the reimbursement of benefits for the treatment of a beneficiary's injuries caused by a third party? - Correct Answer Subrogation" "All students attending a large university could be covered by - Correct Answer a blanket policy" "Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is - Correct Answer Business Overhead Expense" "How does group insurance differ from individual insurance? - Correct Answer Premiums are lower" "P is an employee who quits her job and wants to convert her group health coverage to an individual policy. After the expiration of COBRA laws, which of the following statements is TRUE? - Correct Answer She does NOT need to provide evidence of insurability" "An insured covered by AD&D insurance has just died. What will happen if the primary beneficiary had already died before the insured and contingent beneficiary? - Correct Answer Proceeds will go to the contingent beneficiary" "All of the following statements regarding group health insurance is true, EXCEPT: - Correct Answer An individual policy is given to each member" "What kind of Accidental Death and Dismemberment (AD&D) insurance beneficiary requires his/her consent when a change of beneficiary is made? - Correct Answer Irrevocable beneficiary" "Which statement is TRUE regarding a group accident & health policy issued to an employer? - Correct Answer The employer receives the policy and each employee is issued a certificate" "P is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period? - Correct Answer Sign an enrollment card" "M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son? - Correct Answer Revocable" "T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary? - Correct Answer Request of the change will be refused" "Which of these types of coverage is best described as a short term medical policy? - Correct Answer interim coverage" "A Business Disability Buyout plan policy is designed: - Correct Answer to pay benefits to the Corporation or other shareholders" "Group/voluntary long-term care policy premiums are typically deducted from the employee's income and - Correct Answer are less costly as compared to individual long term care coverage" "B has a $100,000 Accidental Death and Dismemberment policy that pays triple indemnity for common carrier death. If B is killed from an accident on a commercial flight, what will the policy pay B's beneficiary? - Correct Answer $300,000" "A policyowner's rights are limited under which beneficiary designation? - Correct Answer irrevocable" "The reason for a business having a Business Overhead Expense Disability Plan is to cover - Correct Answer fixed business expenses" "Which statement is true regarding a minor beneficiary? - Correct Answer Normally, a guardian is required to be appointed in the Beneficiary clause of the contract" "T is covered by two health insurance plans: a group plan through his employer and his spouse's plan as a dependent. When T submits a claim, his employer's plan is considered what type of carrier under the Model Group Coordination of Benefits provision? - Correct Answer Primary carrier" "Which of the following BEST describes how a Preferred Provider Organization (PPO) is less restrictive than a Health Maintenance Organization (HMO)? - Correct Answer More physicians to choose from" "The health insurance program which is administered by each state and funded by both the federal and state governments is called: - Correct Answer Medicaid" "Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured? - Correct Answer PPO" "The individual who provides general medical care for a patient as well as the referral for specialized care is known as a - Correct Answer primary care physician" "A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary? - Correct Answer Her group health plan" "Which of the following does Social Security NOT provide benefits for? - Correct Answer dismemberment" "Medicaid was designed to assist individuals who are - Correct Answer below a specific income limit" "What is the maximum Social Security Disability benefit amount an insured can receive? - Correct Answer 100% of the insured's Primary Insurance Amount" "What is Medicare? - Correct Answer is a hospital and medical expense insurance program" "Medicare is intended for all of the following groups EXCEPT - Correct Answer Those enrolled as a full-time student" "Medicare Part A and Part B do NOT pay for - Correct Answer Dental work" "Which of the following reimburses its insureds for covered medical expenses? - Correct Answer Commercial insurers" "The situation in which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n): - Correct Answer closed panel" "What does Medicare Parts A and B cover? - Correct Answer Part A covers hospitalization; Part B covers doctor's services" "A medical care provider which typically delivers health services at its own local medical facility is known as a - Correct Answer Health maintenance organization (HMOs)" "Which of the following statements is true about most Blue Cross/Blue Shield organizations? - Correct Answer They are nonprofit organizations" "Which of these is considered a true statement regarding Medicaid? - Correct Answer Funded by both state and federal governments" "Which of the following types of organizations are prepaid group health plans, where members pay in advance for the services of participating physicians and hospitals that have agreements? - Correct Answer HMO" "Which of these statements is INCORRECT regarding a Preferred Provider Organization (PPO)? - Correct Answer PPO's are NOT a type of managed care systems" "J is a subscriber to a plan which contracts with doctors and hospitals to provide medical benefits at a preset price. What type of plan does J belong to? - Correct Answer health maintenance organization" "Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenses? - Correct Answer Commercial insurer" "The percentage of an individual's Primary Insurance Amount (PIA) determines the benefits paid in which of the following programs? - Correct Answer Social Security Disability Income" "Which type of provider is known for stressing preventative medical care? - Correct Answer Health Maintenance Organizations (HMO's)" "Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges? - Correct Answer The maximum amount considered eligible for reimbursement by an insurance company under a health plan" "Which of the following phrases refers to the fees charged by a healthcare professional? - Correct Answer Usual, customary, and reasonable expenses" "Comprehensive Major Medical policies usually combine: - Correct Answer Major Medical with Basic Hospital/Surgical coverage" "Which of these options can an individual use their medical flexible spending account to pay for? - Correct Answer prescription drugs" "Which of the following BEST describes a Hospital Indemnity policy? - Correct Answer Coverage that pays a stated amount per day of a covered hospitalization" "Which of the following is NOT a limited benefit plan? - Correct Answer Life insurance policies" "An insured covered by a group Major Medical plan is hospitalized after sustaining injuries that resulted from an automobile accident. Assuming the plan had a $1,000 deductible and an 80/20 Coinsurance clause, how much will the INSURED be responsible to pay with $11,000 in covered medical expenses? - Correct Answer $3,000" "Deductibles are used in health policies to lower: - Correct Answer overuse of medical services" "All of the following statements about Major Medical benefits are true, EXCEPT: - Correct Answer Benefits have no maximum limit" "Major Medical policies typically: - Correct Answer contain a deductible and coinsurance" "In Major Medical Expense policies, what is the intent of a Stop Loss provision? - Correct Answer Limits an insured's out-of-pocket medical expenses" "What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)? - Correct Answer Dread disease insurance" "Basic Hospital and Surgical policy benefits are: - Correct Answer lower than the actual expenses incurred" "Basic Medical Expense insurance: - Correct Answer has lower benefit limits than Major Medical insurance" "T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition? - Correct Answer Insurer will likely treat as a pre-existing condition which may not be covered for one year" "Which of the following costs would a Basic Hospital/Surgical policy likely cover? - Correct Answer Surgically removing a facial birthmark cosmetic surgery" "A characteristic of Preferred Provider Organizations (PPOs) would be: - Correct Answer Discounted fees for the patient" "Which of the following situations does a Critical Illness plan cover? - Correct Answer leukemia" "A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will - Correct Answer continue coverage but exclude the heart condition" "A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered, EXCEPT for: - Correct Answer experimental and investigative services" "An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause. How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred? - Correct Answer $7,000" "A Hospital/Surgical Expense policy was purchased for a family of four in March of 2013. The policy was issued with a $500 deductible and a limit of four deductibles per calendar year. Two claims were paid in September 2013, each incurring medical expenses in excess of the deductible. Two additional claims were filed in 2014, each in excess of the deductible amount as well. What would be this family's out-of-pocket medical expenses for 2013? - Correct Answer $1,000" "Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy? - Correct Answer Discourages overutilization of the insurance coverage" "Which of the following statements BEST describes dental care indemnity coverage? - Correct Answer Services are reimbursed after insurer receives the invoice" "C was injured while deep sea diving and requires a hospital stay. C has a Major Medical policy with a 80/20 coinsurance clause and a $400 deductible. What is the MAXIMUM C will pay if the covered medical expenses are $2000? - Correct Answer $720" "Which of the following policy features allows an insured to defer current health charges to the following year's deductible instead of he current year's deductible? - Correct Answer Carryover provision" "M is insured under a basic Hospital/Surgical Expense policy. A physician performs surgery on M. What determines the claim M is eligible for? - Correct Answer Determined by the terms of the policy" "N has a Major Medical policy that only pays a portion of N's medical expenses. N is responsible for paying the remaining balance. This provision is known as - Correct Answer coinsurance" "With a Basic Medical Expense policy, what does the hospitalization expense cover? - Correct Answer hospital room and board" "Which of the following individual health insurance policies will provide the broadest protection? - Correct Answer major medical" "For which of the following expenses does a Basic Hospital policy pay? - Correct Answer hospital room and board" "In order to establish a Health Reimbursement Arrangement (HRA), it MUST - Correct Answer be established by the employer" "Which of the following health insurance coverages is BEST suited for meeting the expenses of catastrophic illness? - Correct Answer major medical" "Which of these is NOT a characteristic of a Health Reimbursement Arrangement (HRA)? - Correct Answer Employee funds the HRA entirely" "All of the following are limited benefit plans, EXCEPT: - Correct Answer Life insurance policies" "The phrase "This policy will only pay for a semi-private room" is an example of a(n): - Correct Answer Internal limit" "M has a Major Medical insurance policy with a $200 flat deductible and an 80% Coinsurance clause. If M incurs a $2,200 claim for an eligible medical expense, how much will M receive in payment for this claim? - Correct Answer $1,600" "Q is hospitalized for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim? - Correct Answer $2,100" "Which of the following types of health coverage frequently uses a deductible? - Correct Answer Major Medical policy" "Which of the following statements about Health Reimbursement Areangements (HRA) is CORRECT? - Correct Answer If the employee paid for qualified medical expenses, the reimbursements may be tax-free" "A Health Reimbursement Arrangement MUST be established: - Correct Answer by the employer" "J's Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay: - Correct Answer $3,600" "The first portion of a covered Major Medical insurance expense that the insured is required to pay is called the - Correct Answer initial deductible" "S wants to open a tax-exempt Health Savings Account. To qualify for this type of account, Federal law dictates that S must be enrolled in a - Correct Answer High Deductible Health Plan" "Which of the following services is NOT covered under a hospitalization expense policy? - Correct Answer surgeon's fees" "Which of the following medical expenses does Cancer insurance NOT cover? - Correct Answer arthritis" "A major medical policy typically: - Correct Answer provides benefits for reasonable and necessary medical expenses, subject to policy limits" "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" "Which of these statements concerning an individual Disability Income policy is TRUE? - Correct Answer Normally includes an Elimination period" "When determining the monthly benefit amount for a Disability Income policy, the factor that limits the amount a prospective insured may purchase is: - Correct Answer income" "An insured owns an individual Disability Income policy with a 30-day Elimination Period for sickness and accidents and a monthly indemnity benefit of $500. If the insured is disabled for 3 1/2 months, what is the MAXIMUM amount he would receive for an approved claim? - Correct Answer $1,250" "J has a Disability Income policy that does NOT provide benefits for losses occurring as the result of his employment. What kind of coverage is this? - Correct Answer Nonoccupational coverage" "An individual Disability Income insurance applicant may be required to submit all of the following information EXCEPT - Correct Answer spouse's occupation" "V is insured under an individual Disability Income policy with a 30-day Elimination period. On July 1, he is involved in an accident and temporarily disabled. He returns to work on December 1. How many months of benefit are payable? - Correct Answer 4 months" "Disability policies do NOT normally pay for disabilities arising from which of the following? - Correct Answer war" "What is the elimination period of an individual disability policy? - Correct Answer Time period a disabled person must wait before benefits are paid" "What does a Guaranteed Insurability rider provide a Disability Income policyowner? - Correct Answer The ability to periodically increase the amount of coverage without evidence of insurability" "B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type of policy does B have? - Correct Answer Disability Income" "In a Disability Income policy, which of these clauses acts as a deductible? - Correct Answer Elimination period" "When a person returns to work after a period of total disability but cannot earn as much as he or she did before the disability, this situation is called which of the following? - Correct Answer Residual disability" "T has Disability Income policy that pays a monthly benefit of $5000. If T becomes partially disabled, what can he likely expect? - Correct Answer Less than $5,000 per month benefit regardless of the cause" "Which of the following is the MOST important factor when deciding how much Disability Income coverage an applicant should purchase? - Correct Answer Applicant's monthly income" "R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity? - Correct Answer Residual disability" "With Disability Income insurance, an insurance company may limit the monthly benefit amount a prospective policy holder may obtain because of the insured's - Correct Answer gross income at the time of purchase" "K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income? - Correct Answer Disability Income" "D is an architect receiving Disability Income benefits who is not able to return to work full time, but can work on a part-time basis. Which of these features would allow D to continue receiving benefits? - Correct Answer Residual Benefit clause" "Non-occupational disability coverage is designed for: - Correct Answer employees who suffer non-work related disabilities, since work-related disabilities are covered by Workers' Compensation" "N is covered under an individual Disability policy with a 30-day Elimination period and a monthly benefit of $500. N is totally disabled for 3 1/2 months. N's total benefit received on this claim is - Correct Answer $1,250" "The provision in a health insurance policy that interrupts premiums being paid to the insurer while the insured is disabled is called the - Correct Answer Waiver of Premium" "A Disability Income policyowner suffers a disability which was due to the same cause as a previous disability. Both disabilities occurred within a five-month period. The insurer may cover the second disability without a new elimination period under the: - Correct Answer Recurrent Disability provision" "When an insured has the same disability within a specified time period and the insurance company provides the same benefits without a new waiting period, the second disability is covered under which of the following benefits? - Correct Answer Recurrent Disability" "P received Disability income benefits for 3 months then returns to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as? - Correct Answer Recurrent Disability" "A disability elimination period is best described as a - Correct Answer time deductible" "Z owns a Disability Income policy with a 30-day Elimination period. Z contracts pneumonia that leaves him unable to work from January 1 until January 15. Z then becomes disabled from an accident on February 1 and the disability lasts until July 1 the same year. Z will become eligible to receive benefits starting on - Correct Answer March 1" "A CEO's personal assistant suffered injuries at home and as a result, was unable to work for four months. Which type of policy will pay a monthly benefit to the personal assistant? - Correct Answer Disability income" "What is the primary factor that determines the benefits paid under a disability Income policy? - Correct Answer wages" "T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take? - Correct Answer The insurer will rescind the policy, deny the claim, and recover all payments made" "Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this? - Correct Answer Guaranteed insurability rider" "A physician opens up a new practice and qualifies for a $7,000/month Disability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow? - Correct Answer Guaranteed Insurability Option rider" "Which of the following types of care is typically not covered in a Long-Term Care policy? - Correct Answer acupuncture" "How long is the typical free look period for Long Term care insurance policies? - Correct Answer 30 days" "Nursing home benefits must be provided for at least 12 consecutive months in which of the following types of policies? - Correct Answer long term care" "Under a Long Term Care policy, which benefit would be typically excluded or limited? - Correct Answer Alcohol rehabilitation" "The individual most likely to buy a Medicare Supplement policy would be a(n) - Correct Answer 68-year old male covered by Medicare" "Which Long Term Care insurance statement is true? - Correct Answer Pre-existing conditions must be covered after the coverage has been in force for six months" "Which of the following will a Long Term Care plan typically provide benefits for? - Correct Answer home health care" "Medicare Part C is: - Correct Answer Available to those who are enrolled in Medicare Part A and Part B" "What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits? - Correct Answer 2" "Long Term Care policies will usually pay for eligible benefits using which of the following methods? - Correct Answer Expense incurred" "Qualified Long-Term Care policies may take into consideration an applicant's pre-existing conditions for a maximum of not more than __ month(s) prior to the effective date of coverage. - Correct Answer 6" "The guarantee of insurability option provides a long-term care policyowner the ability to - Correct Answer buy additional coverage at a later date" "A "reimbursement policy" pays what amount of covered Long-Term Care expenses? - Correct Answer Actual covered expenses up to the daily maximum" "Medicare Part B does NOT cover - Correct Answer inpatient hospital services" "If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital expenses? - Correct Answer Medicare Supplement" "T files a claim on his Accident and Health policy after being treated for an illness. The insurance company believes that T misrepresented his actual health on the initial insurance application and is, therefore, disputing the claim's validity. The provision that limits the time period during which the company may dispute a claim's validity is called - Correct Answer Time Limit on Certain Defenses" "Which of the following is NOT included in the policy face? - Correct Answer Exclusions" "The clause in an Accident and Health policy which defines the benefit amounts the insurer will pay is called the - Correct Answer Insuring clause" "What is the initial requirement for an insured to become eligible for benefits under the Waiver of Premium provision? - Correct Answer Insured must be under a physician's care" "Which of the following BEST describes a short-term Medical Expense policy? - Correct Answer nonrenewable" "An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the: - Correct Answer insurer dates the policy" "Which Accident and Health policy provision addresses preexisting conditions? - Correct Answer Time Limit on Certain Defenses" "With Optionally Renewable Health policies, the insurer may - Correct Answer review the policy annually and determine whether or not to renew it" "What must the policyowner provide to the insurer for validation that a loss has occurred? - Correct Answer Proof of Loss" "J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained in an accident. J's age as stated on the application five years ago was found to be understated by ten years. Which of the following actions will the insurance company take? - Correct Answer The insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age" "The clause identifying which losses resulting from an accident or sickness are insured by the policy is called the - Correct Answer Insuring clause" "If an individual has an Accidental Death and Dismemberment policy and dies, an autopsy can be performed in all these situations, EXCEPT: - Correct Answer When the state prohibits this by law" "According to the Time Limit of Certain Defenses provision in an Individual Health Insurance Policy, non fraudulent misstatements first become incontestable: - Correct Answer Two years from the date of the policy was issued" "Health insurance benefits NOT covered due to an act of war are: - Correct Answer excluded by the insurer in the contract provisions" "The insuring clause - Correct Answer States the scope and limits of the coverage" "With Accidental Death and Dismemberment policies, what is the purpose of the Grace Period? - Correct Answer Gives the policyowner additional time to pay past due premiums" "When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the - Correct Answer Entire Contract provision" "An insured must notify an insurer of a medical claim within how many days after an accident? - Correct Answer 20" "What is the purpose of Time of Payment if Claims provision? - Correct Answer Prevents delayed claim payments made by the insurer" "Which health policy clause specified the amount of benefits to be paid? - Correct Answer Insuring" "Which of these is considered a mandatory provision? - Correct Answer Payment of Claims" "G is involved in an automobile accident as a result of driving while intoxicated and suffers numerous injuries. According to the Intoxicants and Narcotics exclusion in G's policy, who is responsible for paying the medical bills? - Correct Answer insured" "Which of the following statements describes what an Accident and Health policyowner may NOT do? - Correct Answer Adjust the premium payments" "S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning - Correct Answer November 1" "When an insured changes to a more hazardous occupation, which disability policy provision allows an insurer to adjust policy benefits and rates? - Correct Answer Change of occupation provision" "Which of these statements accurately describes the Waiver of Premium provision in an Accident and Health policy? - Correct Answer Premiums are waived after the insured has been totally disabled for a specified time period" "The Legal Actions provision of an insurance contract is designed to do all of the following EXCEPT - Correct Answer protect the producer" "What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy? - Correct Answer Premiums may increase at time of renewal" "Which of the following statements about a Guaranteed Renewable Health Insurance policy is CORRECT? - Correct Answer Premiums normally increase at time of renewal" "In health insurance policies, a waiver of Premium provision keeps the coverage in force without premium payments: - Correct Answer After an insured has become totally disabled as defined in the policy" "An insurer receives proof of loss for an acceptable medical expense claim under an Individual Health Insurance Policy. Under the Time of Payment of Claims provision, the insurer MUST pay the benefits - Correct Answer immediately" "An insurance company receives E's application for an individual health policy. E did not complete all of the medical history questions because she could not remember the exact dates. E signed the policy and submitted it to the insurance company anyway. A few weeks later, E suffers a heart attack and is hospitalized without completing the medical history questions and paying the initial premium. E is not insured. Which of the following clauses details the conditions that E did not meet? - Correct Answer Consideration clause" "What should an insured do if the insurer does not send claims forms within the time period set forth in a health policy's Claims Forms provision? - Correct Answer Submit the claim in any form" "P is a Major Medical policyowner who is hospitalized as a result of injuries sustained from participating in a carjacking. How will the insurer most likely handle this claim? - Correct Answer Claim will be denied" "An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision? - Correct Answer 31 days" "Which of the following health policy provisions states that the producer does NOT have the authority to change the policy or waive any of its provisions? - Correct Answer Entire Contract" "An insurer must provide an insured with claim forms within __ days after receiving notice of a loss. - Correct Answer 15" "J purchased a Disability Income Policy that ONLY J can terminate and on which the rates will never increase above those illustrated in the policy. Which of the following types of policies did J purchase? - Correct Answer Noncancelable" "According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options? - Correct Answer monthly" "The provision that defines to whom the insurer will pay benefits to is called - Correct Answer Payment of Claims" "K failed to pay a renewal premium within the time granted by the insurer. K then sends in a payment which the insurer subsequently accepts. Which policy provision specifies that coverage may be restored in this situation? - Correct Answer Reinstatement" "Periodic health claim payments MUST be made at least - Correct Answer monthly" "M's insurance company denied a reinstatement application for her lapses health insurance policy. The company did not notify M of this denial. How many days from the reinstatement application date does the insurance company have to notify M of the denial before the policy will be automatically placed back in force? - Correct Answer 45 days" "The policy provision that entitles the insurer to establish conditions the insured must meet while a claim is pending is - Correct Answer Time Limit on Certain Defenses" "What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled? - Correct Answer Waiver of premium rider" "If an insurance company issues a Disability Income policy that it cannot cancel or for which it cannot increase premiums, the type of renewability that best desribes this policy is called - Correct Answer noncancellable" "Which of the following statements BEST describes what the Legal Actions provision of an Accident and Health policy requires? - Correct Answer An insured must wait at least 60 days after Proof of Loss has been submitted before a lawsuit can be filed" "T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take? - Correct Answer Increase her policy's coverage amount" "An assignment of benefits of a Health Policy - Correct Answer transfers payments to someone other than the policyowner" "When does a Probationary Period provision become effective in a health insurance contract? - Correct Answer At the policy's inception (The probationary period begins when a policy goes into effect. During this period, no benefits will be paid under the policy.)" "The sections of an insurance contract which limit coverage are called - Correct Answer Exclusions" "Which of the following provisions specified how long a policyowner's health coverage will remain in effect if the policyowner does not pay the premium when it is due? - Correct Answer Grace period" "K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered - Correct Answer Guaranteed renewable" "Which of the following health insurance policy provisions specified the health care services a policy will provide? - Correct Answer Insuring clause" "A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of the application. How will the insurer handle this claim? - Correct Answer Claim will be paid and coverage will remain in force" "Which type of renewability best describes a Disability Income policy that covers an individual until the age of 65, but the insurer has the right to change the premium rate? - Correct Answer Guaranteed renewable" "Which of the following policy provisions prohibits an insurance company from incorporating external documents into an insurance policy? - Correct Answer Entire Contract" "The Notice of Claims provision requires a policyowner to - Correct Answer notify an insurer of a claim within a specified time" "Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract? - Correct Answer Entire Contract" "After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms? - Correct Answer File written proof of loss" "What type of renewability quarantines premium rates and renewability? - Correct Answer Noncancelable" "According to the Mandatory Uniform Policy Provisions, what is the maximum amount of time after the premium due date during which the policy remains in force even though the premium has not been paid? - Correct Answer 31" "P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax? - Correct Answer $0" "From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant? - Correct Answer Fair Credit Reporting Act" "An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to - Correct Answer determine if the applicant is an acceptable risk by completing standard underwriting procedures" "Any changes made on an insurance application requires the initials of whom? - Correct Answer applicant" "K completes an application for a disability policy but does not pay the initial premium. The company approves the policy standard and the agent delivers the policy. K then pays her initial premium 3 days later. At what point does K's policy take effect? - Correct Answer Date the initial premium is collected" "Which of these do NOT constitute policy delivery? - Correct Answer Policy issued with a rating" "Which of the following statements about the classification of applicants is INCORRECT? - Correct Answer Substandard applicants are never declined by underwriters" "Which of the following are NOT managed care organizations? - Correct Answer Medical Information Bureau (MIB)" "What action should a producer take if the initial premium is NOT submitted with the application? - Correct Answer Forward the application to the insurer without the initial premium" "M completes an application for health insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT - Correct Answer free-look period has expired" "K applies for a health insurance policy on herself and submits the initial premium with the application. She is given a receipt by the producer stating that coverage begins immediately if the application is approved. What kind of receipt was used? - Correct Answer conditional" "Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a Disability Income policy? - Correct Answer Issue the policy with an altered Time of Payment of Claims provision" "An incomplete health insurance application submitted to an insurer will result in which of these actions? - Correct Answer application will be returned to the writing procedure" "Which parts of a health insurance policy are guaranteed to be true? - Correct Answer Warranty" "Which of these actions should a producer take when submitting an insurance application to an insurer? - Correct Answer Inform insurer of relevant information not included on the application" "M applies for a health insurance policy and pays the initial premium. When the agent completes the application, a conditional receipt is left with the applicant. The insurance company's underwriting department request's M's medical records and determines that M has had asthma for many years. All of the following are probable underwriting outcomes, EXCEPT: - Correct Answer Changing the policy's provisions" "Which of the following BEST describes how pre-admission certifications are used? - Correct Answer Used to prevent nonessential medical costs" "Pre-hospitalization authorization is considered an example of - Correct Answer managed care" "An insurance company may NOT reject a prospective insured's insurance application on the basis of which of the following factors? - Correct Answer Gender" "A prepaid application for individual Disability Income insurance was recently submitted to an insurer. When the insurer received the Medical Information Bureau (MIB) report, the report showed that the applicant had suffered a stroke 18 months ago, something that was not disclosed on the application. Which of the following actions would the insurance company NOT take? - Correct Answer Send a notice to the MIB that the applicant was declined" "Which type of plan normally includes hospice benefits? - Correct Answer managed care plans" "An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n) - Correct Answer exclusion for the medical condition" "Before a health insurance policy is issued, which of these components of the contract is required? - Correct Answer Applicant's signature on application" "What would the Medical Information Bureau (MIB) identify? - Correct Answer Testing positive for marijuana use from a previous screening" "When an insurance application is taken by a producer, which of these statements is true? - Correct Answer Any changes made on the application require the applicant's initials" "Which Federal law allows an insurer to obtain an inspection report on a potential insured? - Correct Answer Fair Credit Reporting Act" "Which mode of payment is NOT used by health insurance policies? - Correct Answer Single Premiums" "Which of these factors do NOT play a role in the underwriting of a health insurance policy? - Correct Answer marital status" "T is receiving $3,000/month from a Disability Income policy in which T's employer had paid the premiums. How are the $3,000 benefit payments taxable? - Correct Answer Benefits are taxable to T. (When a disability income insurance plan is paid for entirely by the employer, the premiums are deductible to the employer. The benefits, in turn, are taxable to the recipient.)" "All of these are considered sources of underwriting information about an applicant EXCEPT - Correct Answer Rating Services" "An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the: - Correct Answer Applicant's physician" "Information obtained from a phone conversation to the proposed insured can be found in which of these reports? - Correct Answer inspection report" "What is being delivered during a policy delivery? - Correct Answer Insurance contract to the proposed insured" "P is a producer who notices 5 questions on a life application were not answered. What actions should P take? - Correct Answer Set up a meeting with the applicant to answer the remaining questions" "Which of these terms accurately defines an underwriter's assessment of information on a health insurance application? - Correct Answer Risk classification" "Consumer reports requested by an underwriter during the application process of a health insurance policy can be used to determine: - Correct Answer probability of making timely premium payments" "Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy? - Correct Answer Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company" "Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take? - Correct Answer Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company" "Who is NOT required to sign a health insurance application? - Correct Answer beneficiary" "Why is an applicant's signature required on a health insurance application? - Correct Answer To attest that he statements on the application are accurate to the best of the applicant's knowledge." "Which mode of payment is NOT used by health insurance policies? - Correct Answer Single Premium" "Which type of plan normally includes hospice benefits? - Correct Answer managed care plans" "What do families pay that are covered by the Florida Healthy Kids Corporation? - Correct Answer A portion of the premium" "The insurer must provide a prospective buyer with a(n) - Correct Answer Buyer's Guide and Policy Summary" "Which of the following areas of state regulation is NOT protected by the savings clause in ERISA? - Correct Answer commerce" "According to Florida Law, in which of the following situations would a dependent handicapped child NOT be covered under a Family Health policy? - Correct Answer The premiums for the handicapped child are not paid" "In Florida, an insurer licensed to conduct business in Florida, but domiciled in New Jersey, is called a(n) - Correct Answer foreign company" "In Florida, which of the following practitioners normally do NOT receive payment from health insurance policies? *Optometrists *Pediatrician