XCEL SOLUTIONS FINAL EXAM: CALIFORNIA LIFE, ACCIDENT, AND HEALTH INSURANCE

XCEL SOLUTIONS FINAL EXAM: CALIFORNIA LIFE, ACCIDENT, AND HEALTH INSURANCE "What prevents a life insurance policy from being rescinded by the insurer after being in force for two years? - CORRECT ANSWER Incontestability clause" "Which of the following is NOT a requirement of a contract? - Parties involved must be competent - Offer and acceptance must be involved - Contract must have a legal purpose - Equal consideration is required between the involved parties - CORRECT ANSWER Equal consideration is required between the involved parties" "Which of the following is NOT considered to be a definition of the term "loss"? - The amount an insurance company must pay because of an insurable event - An insurable event that takes place which results in a payment made by the insurance company - Probability that an event will occur - Unintentional decrease in the value of an asset due to a peril - CORRECT ANSWER Probability that an event will occur" "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" "Which of the following services are health maintenance organizations (HMO's) NOT required to provide? - Preventative services - Hospitalization - Prescription drugs - Emergency services - CORRECT ANSWER Prescription drugs" "A person who asserts a right of recovery under an insurance policy is called - CORRECT ANSWER claimant" "Which statement is true regarding policy dividends? - Dividends are always taxable - A dividend option is selected by the insured at the time of policy purchase - Nonparticipating policies issue dividends - Dividends are always guaranteed - CORRECT ANSWER A dividend option is selected by the insured at the time of policy purchase" "Under a disability income insurance policy, which criteria must be met for "bodily injury" to be classified as accidental? - CORRECT ANSWER The cause may be intentional, but the result must be accidental" "The free-look period for life insurance policyowners age 60 or older is - CORRECT ANSWER 30 days" "Which of the following does Medicare Part A NOT provide coverage for? - Hospice - Inpatient care - Hospitalization - Doctor's Services - CORRECT ANSWER Doctor's Services" "Rating an individual's need for long-term care benefits can be measured by - CORRECT ANSWER Activities of daily living" "Which of the following describes the number of deaths in a year compared to the number of people in a select group? - Risk ratio - Mortality rate - Morbidity rate - Law of large numbers ratio - CORRECT ANSWER Mortality rate" "Which of these is the automatic mode of settlement for life insurance policy proceeds? - Lump-sum - Extended term - Interest only - Fixed period - CORRECT ANSWER Lump-sum" "Which of the following is a situation where there is a possibility of either a loss or a gain? - Speculative risk - Hazard - Pure risk - Peril - CORRECT ANSWER Speculative risk" "All of these are common personal uses of life insurance EXCEPT - replaced an insured's income - pay final expenses - fund a child's education - fund a buy-sell agreement - CORRECT ANSWER fund a buy-sell agreement" "What time period allows an insured's life insurance policy to remain in force even if the premium was not paid on the due date? - CORRECT ANSWER Grace period" "How long is a person expected to be disabled in order to receive Social Security disability benefits? - CORRECT ANSWER 12 months" "Major medical expense plans typically use a cost containment measure for emergency hospital care. This is referred to as a(n) - CORRECT ANSWER Deductible" "Which of these statements is NOT true concerning recurrent disabilities? - The recurrence of a disability must occur within a specified time period after the prior disability - A recurrent disability is considered to be a continuation of the prior disability - The insurer continues coverage after a new elimination period - The recurrent disability must be caused from the original disability - CORRECT ANSWER The insurer continues coverage after a new elimination period" "Which of the following is NOT a characteristic of the conversion privilege? - Ex-employee pays the premium for the converted policy - Proof of insurability is not required - Conversion must take place within 31 days of employment termination - Employer pays the premium for the converted policy - CORRECT ANSWER Employer pays the premium for the converted policy" "What kind of annuity pays income to two annuitants until their deaths? - CORRECT ANSWER Joint and survivor annuity" "A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a(n) - CORRECT ANSWER Deferred annuity" "What does ESOP stand for? - CORRECT ANSWER Employee Stock Ownership Plan" "When handling premiums for an insured, an agent is acting in which capacity? - CORRECT ANSWER Fiduciary" "Health insurance policies typically contain a provision stating that insureds and their insurer will share covered losses in an agreed proportion. Which provision does this refer to? - Deductible - Internal limit - Stop loss - Coinsurance - CORRECT ANSWER Coinsurance" "A life insurance policy's limit of liability would be - CORRECT ANSWER the policy's face amount" "Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of? - CORRECT ANSWER Theft" "What is the price of insurance for each exposure unit? - CORRECT ANSWER Rate" "What does the insurance term "indemnity" refer to? - CORRECT ANSWER Make whole" "Employer-provided group term life insurance is exempt from income taxation up to - CORRECT ANSWER $50,000" "Who acts as the gatekeeper in a Health Maintenance Organization (HMO)? - CORRECT ANSWER Primary care physician" "Which of the following types of life insurance combines a savings element along with a flexible premium option? - Joint life - endowment - universal life - whole life - CORRECT ANSWER universal life" "What effect did the Pregnancy Discrimination Act have on the health industry? - CORRECT ANSWER Pregnancy must be treated as any other medical condition" "In order to be considered "currently insured" under Social Security, an individual must be credited with: - CORRECT ANSWER 6 quarters of coverage during the last 13-quarter period" "Life insurance creates an immediate estate. This phrase means - CORRECT ANSWER when the insured dies, a death benefit is paid" "The California Insurance Code allows an individual how many days to cancel a life policy for a full-refund? - CORRECT ANSWER Between 10 and 30 days" "The importance of a representation is demonstrated in what rule? - CORRECT ANSWER Materiality of concealment" "Dyan is considered partially disabled by her insurance company. Which of the following BEST describes her situation? - Her employer pays half of her disability benefit - She is working part-time and receiving lost income under her long-term disability benefit - She has a lost hearing in one ear because of an accident on the job - She is unable to work and receiving worker's compensation - CORRECT ANSWER She is working part-time and receiving lost income under her long-term disability benefit" "What distinguishes a deferred annuity from an immediate annuity? - CORRECT ANSWER The time at which benefit payments start" "Which of the following refers to a condition that may increase the chance of a loss? - hazard - risk - peril - adverse selection - CORRECT ANSWER hazard" "Which of these is NOT a valid policy dividend option? - monthly income payments - one-year term - paid up additions - reduce premium - CORRECT ANSWER monthly income payments" "Which of the following risk classifications charges the highest premium? - preferred - standard - substandard - level - CORRECT ANSWER substandard" "When a life insurance policy is surrendered, how does the cost recovery rule apply? - CORRECT ANSWER The policy's cost basis is exempt from taxation" "How does underwriting differ between group life and individual life insurance? - CORRECT ANSWER Medical questions must be answered on individual life insurance" "An insurance policy written after 1988 that fails to pass the seven-pay test is known as - CORRECT ANSWER a modified endowment contract" "Individuals become eligible for Medicare Part A benefits at what age? - CORRECT ANSWER 65" "Which of the following is NOT required in the content of a policy? - period to which the coverage exists - risk insured against - parties involved in the contract - probability of loss - CORRECT ANSWER probability of loss" "Which of the following is NOT a feature of equity-indexed annuities? - offers a minimum guaranteed rate - offers a long term inflation protection - offers protection during a decline in the stock market - offers a maximum interest rate that increases annually - CORRECT ANSWER offers a maximum interest rate that increases annually" "Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance - CORRECT ANSWER solicitor" "Which of the following is NOT an insurer policy expense? - premiums - rent - commissions - salaries - CORRECT ANSWER premiums" "All of these are examples of cost sharing in a health insurance policy EXCEPT - copayments - coordination - coinsurance - deductibles - CORRECT ANSWER coordination" "An agent's attempt to stop the replacement of an existing life insurance policy is known as - CORRECT ANSWER conservation" "A contract requires - CORRECT ANSWER an offer and acceptance of the contract terms" "Which of the following would be considered an activity of daily living under a long term care policy? - working - breathing - bathing - running - CORRECT ANSWER bathing" "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" "Life insurance surplus must be distributed to policyowners at what frequency? - CORRECT ANSWER Annually" "An eligible individual who would like to obtain group health insurance without providing evidence of insurability must - CORRECT ANSWER enroll within a specified eligibility period" "The California Insurance Code defines "policy" as a(n) - CORRECT ANSWER written contract" "Which of these factors do NOT affect the rates of medical insurance? - gender - health - occupation - race - CORRECT ANSWER race" "Who would be most likely to submit a Medicare Part A claim? - CORRECT ANSWER Hospital" "Buy-sell plans are typically funded by which two types of insurance? - CORRECT ANSWER life insurance and disability insurance" "What is a participating life insurance policy? - CORRECT ANSWER Contract that allows the policyowner to receive a share of surplus in the form of policy dividends" "What is the insurance term the state of California uses for an insurer that is eligible to transact business in this state? - CORRECT ANSWER Admitted" "Jon's health plan pays benefits of 90% for in-network providers and 70% for out-of-network providers. What kind of plan is this? - CORRECT ANSWER PPO" "Which of the following describes the increase in the probability of a loss due to an insured's dishonest tendencies? - moral hazard - speculative hazard - morale hazard - physical hazard - CORRECT ANSWER moral hazard" "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 insurance policy issued in California may be called a comprehensive long-term care insurance policy if benefits are provided for - CORRECT ANSWER Institutional (nursing facilities) and home care" "What is an "insurance broker" according to California Insurance Code? - CORRECT ANSWER A person compensated for transacting insurance on behalf of another person with an insurer" "When handling premiums for an insured, an agent is acting in which capacity? - CORRECT ANSWER Fiduciary" "Which of the following is NOT a required uniform provision in individual health policies? - notice of claim - legal actions - change of occupation - reinstatement - CORRECT ANSWER change of occupation" "Where must you specifically reside to qualify for MRMIP? - CORRECT ANSWER California" "Buy-sell agreements are typically funded by which two insurance products? - CORRECT ANSWER Life insurance and disability insurance" "Allen has a disability income policy with a $2,500 monthly benefit and a 30-day elimination period. He is unable to work 90 days following an automobile accident. What will the policy pay? - CORRECT ANSWER $5,000" "Which of the following is NOT included in comprehensive major medical plans? - First-dollar coverage - deductibles - maximum coverage limits - coinsurance - CORRECT ANSWER First-dollar coverage" "Non-deductible contributions are typically associated with a - CORRECT ANSWER Roth IRA" "All of the following circumstances must be met for loss retention to be an effective risk management technique, EXCEPT - loss cannot be catastrophic - loss must be measurable - highly predictable losses - probability of loss is unknown - CORRECT ANSWER probability of loss is unknown" "Cindy buys a 10-year certain annuity with an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary? - CORRECT ANSWER 60 payments" "At what age is a surviving spouse without dependents eligible for Social Security survivor benefits? - CORRECT ANSWER 60" "How long must life agents keep their transaction records? - CORRECT ANSWER 5 years" "What is considered the most common type of specified disease insurance policy? - CORRECT ANSWER cancer" "Who is NOT eligible for Social Security survivor benefits? - CORRECT ANSWER a deceased worker's dependent parents of any age" "A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen? - the insureds estate - the insureds mother - the insureds children - the insureds spouse - CORRECT ANSWER the insureds estate" "Which word implies permissiveness according to the California Insurance Code? - CORRECT ANSWER May" "Medical expense policies will typically cover which of the following? - voluntary cosmetic procedures - routine dental care - injuries caused by accidents - prescription eyeglasses - CORRECT ANSWER injuries caused by accidents" "A unilateral contract is one in which - CORRECT ANSWER only one party (the insurer) makes any kind of legally enforceable promise" "The elimination period in a disability income policy serves as the same purpose as - CORRECT ANSWER a deductible" "According to the California Insurance Code, how is the word "may" interpreted? - CORRECT ANSWER permissive" "Under a health insurance policy, the provision that states the kind of benefits provided and the circumstances under which they will be paid is called the? - CORRECT ANSWER insuring clause" "Which of the following are two examples of activities of failing living (ADL's) used in qualifying for long-term care benefits? - working and sleeping - driving and working - talking and sleeping - eating and dressing - CORRECT ANSWER eating and dressing" "Tom is shopping for a policy that covers two people and would pay the face amount ONLY when the first person dies. The type of life policy he is looking for is called a - CORRECT ANSWER joint life policy" "Which type of health insurance policy cannot be canceled by the insurer nor increase the premiums? - CORRECT ANSWER non-cancellable" "Which of the following is NOT considered to be an act of insurance solicitation? - an agency sending out direct mail for a promotion - airing a television commercial recommeding an insurance product - publishing a magazine where one of the advertisers is an insurer - an agent giving a rate quotation - CORRECT ANSWER publishing a magazine where one of the advertisers is an insurer" "Which of the following is NOT a risk classification that an underwriter would use? - substandard risk - dividend risk - standard risk - preferred risk - CORRECT ANSWER dividend risk" "Which of the following best describes the statement "The more times an event is repeated, the more predictable the outcome becomes"? - CORRECT ANSWER law of large numbers" “Medicare Part B has an initial enrollment period. How many months after an individual's 65th birthday month does this enrollment period end? - CORRECT ANSWER 3 months" "Which of the following is NOT true regarding a family policy that covers children? - Term insurance is used for the children's rider - Adopted children can be covered - Conversion of a child's coverage to permanent insurance requires evidence of insurability - Additional children can be added at no cost - CORRECT ANSWER Conversion of a child's coverage to permanent insurance requires evidence of insurability" "Jerry is an insured who understands his age on his life insurance application, paying $12 per $1,000 of insurance instead of $15 per $1,000. If he dies, how will the adjusted death benefit be calculated? - CORRECT ANSWER 12/15th of the policy's face amount" "Moral hazard is described as the - CORRECT ANSWER Increased chance of a loss because of the insured's dishonest tendencies" "When an insurance company requests an attending physician's report, the request must be accompanied by a - CORRECT ANSWER copy of the signed authorization" "Which of the following actions is NOT allowed by Health Insurance Counseling and Advocacy Program (HiCAP) counselors? - Medical record keeping assistance - Charge a fee - Assist in understanding Medicare Supplements Assist in policy evaluation - CORRECT ANSWER Charge a fee" "What must an applicant do in order to authorize the release of an attending physician report? - CORRECT ANSWER Sign a consent form" "Failure to report background changes within 30 days as required under section 1729.2 of the California insurance code could subject a license or applicant to - CORRECT ANSWER Denial, suspension, and/or fine" "Which of the following is NOT typically covered under vision care insurance? - Examinations - Eye surgery - Contacts - Eyeglasses - CORRECT ANSWER Eye surgery" "Restoring an insured to the same condition as before a loss is known as - CORRECT ANSWER Principle of indemnity" "Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its insureds? - Treaty insurance - Captive insurance - Reinsurance - Mutual insurance - CORRECT ANSWER Reinsurance" "What is considered to be the definition of disability, according to Social Security? - CORRECT ANSWER Unable to engage in any substantial gainful activity" "The misstatement of age provision in a health policy states that if an insured gives the wrong age at the time of application, what action can the insurance company take? - CORRECT ANSWER Benefits can be adjusted" "Which of the following types of information is NOT required for a life insurance application? - Health history - Occupation - Hobbies - Ethnicity - CORRECT ANSWER Ethnicity" "Coverage for care received from a network provider pays more than car received from a non-network provider in what type of health plan? - CORRECT ANSWER Preferred Provider Organization (PPO)" "Which of the following is a life insurance policy that does NOT require a physical exam? - Non-cancelable - Graded - Non-medical - Substandard - CORRECT ANSWER Non-medical" "How is a life insurance policy dividend legally defined? - CORRECT ANSWER A return of excess premium and not taxable" "Which of the following is NOT considered to be an insurer expenses? - Policy premiums - Maintenance costs - Utilities - Employees' salaries - CORRECT ANSWER Policy premiums" "Under the California Insurance Code, a licensee's license number must be printed at what size on all price quotes, business cards, and printed material? - CORRECT ANSWER The same size print as the licensee's phone number, fax number, or address" "According to section 1729.2 of the California Insurance Code, which of these does NOT qualify as "background information"? - A filing of felony criminal charges in state or federal court - An administrative action regarding a professional or occupational license - A breach of fiduciary duty - Misdemeanor charges filed, not resulting in a conviction - CORRECT ANSWER Misdemeanor charges filed, not resulting in a conviction" "An insurer owned by its policyholders is called a - CORRECT ANSWER Mutual insurer" "Retirement plans are prevented from favoring highly compensated employees under which government regulation? - CORRECT ANSWER Nondiscrimination" "Employee participation is noncontributory group life plan must be - CORRECT ANSWER 100%" "People with low income can be provided with medical assistance through which program? - CORRECT ANSWER Medi-Cal" "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" "Which of the following types of policies pays a stated amount for each day an individual is hospitalized? - Hospital endowment - Surgical expense - Hospital confinement indemnity - Short-term major medical - CORRECT ANSWER Hospital confinement indemnity" "What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)? - CORRECT ANSWER Disclosure and reporting" "Which of the following plans will cover medical costs that Medicare doesn't cover? - Indemnity - Medical - Major medical - Medicare supplement - CORRECT ANSWER Medicare supplement" "In regards to a group health insurance plan, which statement is CORRECT? - A contributory group plan must cover at least 50% of all eligible members - a contributory group health plan only requires participation of key employees - a non-contributory group health plan must cover all eligible members - a minimum of 75% of eligible members is required for a on-contributory group health plan - CORRECT ANSWER a non-contributory group health plan must cover all eligible members" "Which of the following is NOT a common life insurance policy rider? - extended term - automatic premium loan - accidental death - waiver of premium - CORRECT ANSWER extended term" "What type of changes can be made to a guaranteed renewable health insurance policy? - CORRECT ANSWER The premium rates of the policy owner" "How are acts of war and aviation treated under a group life insurance policy? - CORRECT ANSWER Policy exclusion" "What does the term "indemnity" mean as it pertains to insurance? - CORRECT ANSWER To make whole" "Which of the following factors is NOT used in underwriting health insurance policies? - Income - age - intelligence - sex - CORRECT ANSWER intelligence" "What does the guaranteed insurability option allow an insured to do? - CORRECT ANSWER Purchase additional coverage with no evidence of insurability required" "ABC insurance company paid an insured $30,000 in lost wages, $35,000 for hospital costs, and $20,000 for physical therapy treatments. ABC later discovers this was a fraudulent claim. How much may the insured by fined? - CORRECT ANSWER $170,000" "When an applicant applies for insurance, the process by which the insurer determines whether to issue a policy is called - CORRECT ANSWER Underwriting" "AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called? - CORRECT ANSWER Primary insurer" "Premiums are best described as - CORRECT ANSWER the amount an insured pays per unit of coverage" "Mike and Ike are 30 year old identical twins. Both are in excellent health. Each brother purchases a life policy that has a $750 annual premium. Mike buys a 10-year renewable term policy. Ike purchases a whole life policy. All of the following statements are true EXCEPT - Mike's policy will develop no cash value over the policy's term - Ike will have a level premium - Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance - Ike may eventually take out a policy loan - CORRECT ANSWER Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance" "Which of the following is NOT considered to be an unfair claims settlement practice? - Misrepresenting to insureds pertinent facts or policy provisions relating to coverage at issue - Failing to provide a reasonable basis for the denial of a claim upon request - Advising a claimant to hire an attorney - Failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims - CORRECT ANSWER Advising a claimant to hire an attorney" "Disabled workers are covered under Worker's Compensation medical expense benefits for how long? - CORRECT ANSWER No limit" "A life insurance policy that pays the face amount if the insured survives to a specified period of time is called - CORRECT ANSWER Endowment insurance" "An individual that has 40 quarters of coverage, for Social Security purposes, is considered to be - CORRECT ANSWER Fully insured" "Which of the following is NOT a valid reason to replace an existing long-term care policy? - INsured's condition has materially improved - new policy has better benefits - new policy has higher premium with fewer benefits - new policy has lower premium - CORRECT ANSWER ew policy has higher premium with fewer benefits" "Which of the following does NOT have to be included on a life insurance policy illustrations? - name of the insurer - age of the insured - statement that all values and benefits are guaranteed - name of the agent - CORRECT ANSWER statement that all values and benefits are guaranteed" "An employee for XYZ Corp is injured on the job. Where does coverage for the employee's injuries come from? - CORRECT ANSWER Worker's Compensation" "In what situation does a waiver of premium provision keep a health insurance policy in force without premium payments? - When an insured is involved in an accident at work - when an insured is confined in a hospital - when an insured becomes unemployed - when an insured becomes totally disabled - CORRECT ANSWER when an insured becomes totally disabled" "After the annual deductible is met, a Medicare Part B patient will pay __% of the remaining covered expenses. - CORRECT ANSWER 80%" "Coverage is limited for vision and dental insurance in all of the following ways EXCEPT - dollar amount for eyeglass frames - number of teeth cleanings per year - specific dollar amount for examinations - number of x-rays performed per year - CORRECT ANSWER specific dollar amount for examinations" "All of the following are considered characteristics of group life insurance, EXCEPT - master policy - individual policies - certificates of insurance - conversion privilege - CORRECT ANSWER individual policies" "Which of the following is NOT an accurate description of Access for Infants and Mothers Program (AIM)? - Only women who have private insurance plans with a maternity-only deductible or copayment greater than $1,500 are eligible - Eligibility is based on income - Only women who have private insurance plans with a maternity-only deductible or copayment greater than $500 are eligible - low-cost health care coverage for pregnant women - CORRECT ANSWER Only women who have private insurance plans with a maternity-only deductible or copayment greater than $1,500 are eligible" "Scott has just purchased a new house. He is now shopping for a life insurance policy that provides a death benefit that matches the projected outstanding debt of his mortgage. Which life policy would best suit his needs? - CORRECT ANSWER Mortgage redemption" "John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this? - CORRECT ANSWER Participating" "According to PPACA, how long can an adult be covered as a dependent under their parents' insurance plan? - CORRECT ANSWER Up to age 26" "An applicant has revealed conditions that require more information. Which of the following is needed next? - Physical examination - Agents report - Credit Report - Attending physicians statement - CORRECT ANSWER Attending physicians statement"