CEBS - GBA 1 - Practice Exam Questions &
Answers 100% Correct!!
Which of the following statements correctly describes minimum requirements that group benefit
plans typically must meet in order to be prospectively rated on contract renewal? - ANSWERThe
more unpredictable the event that will trigger a claim, the larger the minimum group size and
premium requirements
Which of the following statements correctly describes the term graduation as it applies to mortality
tables? - ANSWERIt is a mathematical process that removes anomalies that should not appear in the
mortality data
If the plan sponsor pays the premium, which of the following group insured benefits is taxable to the
plan member? - ANSWERLong-term disability (LTD)
Which of the following statements correctly describes phases of a group plan marketing? -
ANSWERPlan features of both contributory and noncontributory benefit plans must be
communicated to plan members during the enrollment process
Which of the following statements correctly describes a characteristic of an insurable risk? -
ANSWERThe loss must have financial significance to the insured (The loss must not be catastrophic to
the insurer. Option C: The loss must occur by chance. Option D: The loss must be predictable for the
insurer.)
With respect to marketing a group insurance plan, which of the following statements best describes
insurer representatives known as account executives? - ANSWERThey are involved in enrolling group
members and installing new plans
Which of the following statements correctly describes the statistical concept known as the law of
large numbers? - ANSWERFuture probabilities of loss are not valid unless a large number of incidents
exist to ensure the outcomes are less likely to deviate
Which of the following statements correctly describes an insured plan that is insurer-administered? -
ANSWERFor self-insured plans with an administrative services only (ASO) arrangement, the insurer
bills the plan sponsor monthly for administration fees
If the probability that an individual will live one year is 0.95 and the probability of dying in the
following year is 0.10, what is the probability that an individual will survive both years? -
ANSWER0.855 (P (Survive both years) = (0.95) x (1 - 0.1) = 0.95 x 0.90 = 0.855.)
Which of the following statements correctly describes the group benefits enrollment process for new
employees? - ANSWERAn employee can enroll in the plan any time between his or her date of hire
and the end of a waiting period
A type of service offered under a third-party administrators (TPAs) claims settlement only
arrangement is: - ANSWERAdjudicating and paying claims
, Unless otherwise specified in the group insurance contract, a plan member's status under a group
benefits plan terminates the earliest at which: - ANSWERThe plan member retires (Unless otherwise
specified in the group insurance contract, the order in which coverage terminates is effective the
earliest date the plan member retires, the plan member's service with the plan sponsor is
terminated, the plan member ceases active work, and the plan member is no longer a member of an
eligible class and premium payments stop.)
Which of the following statements correctly describes eligibility requirements under most group
insurance plans? - ANSWERUnmarried children under a specified age and dependent on the plan
member for support are eligible for coverage
Which of the following statements correctly describes the negotiated placement method of
marketing a group benefits plan? - ANSWEROnce potential insurers are identified, each company
submits a brief report that highlights its general strategy, philosophy and proposed group benefits
plan
True North Insurance has established a waiver-of-premium reserve of $100,000 and will have to pay
out an optional life insurance benefit of $200,000. With an interest rate of 6% compounded annually,
how many years will it take for the reserve of $100,000 to accumulate to $200,000? - ANSWER12
years (Use the relationship between future value and present value to solve for the number of time
periods.
FVt = PV x (1 + r)^t
$200,000 = $100,000 x (1 + 6%)^t
$200,000/$100,000 = (1.06)^t
2.00 = (1.06)^t
The number of time periods can be approximated using the future value table. With an interest rate
of 6%, it will take 12 years to accumulate to a sum of $200,000 (or 2.01220).)
Which of the following statements correctly describes a group insurance policy? - ANSWERIt is issued
on a group of individuals for protection against financial hazards, such as death, accident and
sickness
Last year, a small town reported that 20 people under the age of 50 died. If the population of people
under the age of 50 in the town is 10,000, what is the probability of a resident under the age of 50
dying? - ANSWER0.2% (Probability of a resident under the age of 50 dying is 20/10,000 = 0.002 =
0.2%.)
Which of the following statements correctly describes the predictability of an event and the cost of
insurance under a group benefits plan? - ANSWERAn out-of-country emergency is an unforeseen
event with a potentially high cost (Disability is an unforeseen event with a potentially high cost.
Option C: Basic dental services are a predictable event with a low cost. Option D: Paramedical
services are an unforeseen event with a low cost.)
Which of the following statements best describes individual large amount pooling? - ANSWERIt
protects the plan sponsor from claims payments with respect to any one insured individual in excess
of the pooling limit or pool ceiling.
Answers 100% Correct!!
Which of the following statements correctly describes minimum requirements that group benefit
plans typically must meet in order to be prospectively rated on contract renewal? - ANSWERThe
more unpredictable the event that will trigger a claim, the larger the minimum group size and
premium requirements
Which of the following statements correctly describes the term graduation as it applies to mortality
tables? - ANSWERIt is a mathematical process that removes anomalies that should not appear in the
mortality data
If the plan sponsor pays the premium, which of the following group insured benefits is taxable to the
plan member? - ANSWERLong-term disability (LTD)
Which of the following statements correctly describes phases of a group plan marketing? -
ANSWERPlan features of both contributory and noncontributory benefit plans must be
communicated to plan members during the enrollment process
Which of the following statements correctly describes a characteristic of an insurable risk? -
ANSWERThe loss must have financial significance to the insured (The loss must not be catastrophic to
the insurer. Option C: The loss must occur by chance. Option D: The loss must be predictable for the
insurer.)
With respect to marketing a group insurance plan, which of the following statements best describes
insurer representatives known as account executives? - ANSWERThey are involved in enrolling group
members and installing new plans
Which of the following statements correctly describes the statistical concept known as the law of
large numbers? - ANSWERFuture probabilities of loss are not valid unless a large number of incidents
exist to ensure the outcomes are less likely to deviate
Which of the following statements correctly describes an insured plan that is insurer-administered? -
ANSWERFor self-insured plans with an administrative services only (ASO) arrangement, the insurer
bills the plan sponsor monthly for administration fees
If the probability that an individual will live one year is 0.95 and the probability of dying in the
following year is 0.10, what is the probability that an individual will survive both years? -
ANSWER0.855 (P (Survive both years) = (0.95) x (1 - 0.1) = 0.95 x 0.90 = 0.855.)
Which of the following statements correctly describes the group benefits enrollment process for new
employees? - ANSWERAn employee can enroll in the plan any time between his or her date of hire
and the end of a waiting period
A type of service offered under a third-party administrators (TPAs) claims settlement only
arrangement is: - ANSWERAdjudicating and paying claims
, Unless otherwise specified in the group insurance contract, a plan member's status under a group
benefits plan terminates the earliest at which: - ANSWERThe plan member retires (Unless otherwise
specified in the group insurance contract, the order in which coverage terminates is effective the
earliest date the plan member retires, the plan member's service with the plan sponsor is
terminated, the plan member ceases active work, and the plan member is no longer a member of an
eligible class and premium payments stop.)
Which of the following statements correctly describes eligibility requirements under most group
insurance plans? - ANSWERUnmarried children under a specified age and dependent on the plan
member for support are eligible for coverage
Which of the following statements correctly describes the negotiated placement method of
marketing a group benefits plan? - ANSWEROnce potential insurers are identified, each company
submits a brief report that highlights its general strategy, philosophy and proposed group benefits
plan
True North Insurance has established a waiver-of-premium reserve of $100,000 and will have to pay
out an optional life insurance benefit of $200,000. With an interest rate of 6% compounded annually,
how many years will it take for the reserve of $100,000 to accumulate to $200,000? - ANSWER12
years (Use the relationship between future value and present value to solve for the number of time
periods.
FVt = PV x (1 + r)^t
$200,000 = $100,000 x (1 + 6%)^t
$200,000/$100,000 = (1.06)^t
2.00 = (1.06)^t
The number of time periods can be approximated using the future value table. With an interest rate
of 6%, it will take 12 years to accumulate to a sum of $200,000 (or 2.01220).)
Which of the following statements correctly describes a group insurance policy? - ANSWERIt is issued
on a group of individuals for protection against financial hazards, such as death, accident and
sickness
Last year, a small town reported that 20 people under the age of 50 died. If the population of people
under the age of 50 in the town is 10,000, what is the probability of a resident under the age of 50
dying? - ANSWER0.2% (Probability of a resident under the age of 50 dying is 20/10,000 = 0.002 =
0.2%.)
Which of the following statements correctly describes the predictability of an event and the cost of
insurance under a group benefits plan? - ANSWERAn out-of-country emergency is an unforeseen
event with a potentially high cost (Disability is an unforeseen event with a potentially high cost.
Option C: Basic dental services are a predictable event with a low cost. Option D: Paramedical
services are an unforeseen event with a low cost.)
Which of the following statements best describes individual large amount pooling? - ANSWERIt
protects the plan sponsor from claims payments with respect to any one insured individual in excess
of the pooling limit or pool ceiling.
