Accident and Sickness Insurance Mock
Exam 1 UPDATED ACTUAL Questions
and CORRECT Answers
Rhonda and Karl are equal partners of an accounting business. Their business is currently
worth $3,000,000, and their annual business expenses are $240,000. They share the business
expenses equally. The couple wants to have a buy-sell agreement in place in the event that
one of them is disabled for more than one year. Rhonda and Karl also state that they are each
responsible for 50% of their clients. If one of them were to become disabled, the clients
would move over to another accounting business. This would lead to a loss of revenue as the
business is totally dependent on their expertise in accounting to generate revenue.
Which of the following recommendations best meets the couple's needs?
a) Purchase a $3,000,000 disability buyout policy on each of their lives and a business
overhead expense policy of $10,000 per month on each of them
b) Purchase a $3,000,000 disability buyout policy on each of their lives a - CORRECT
ANSWER✔✔- (corrct) Purchase a $1,500,000 disability buyout policy on each of their lives
and a business overhead expense policy of $10,000 per month on each of them
Rationale:
Rhonda and Karl each own $1,500,000 of the business and are liable for $10,000 per month
of the business expenses. (Refer to Section 5.4)
Vince is helping his client, Charlie complete an application for a disability policy. Charlie
claims that she is a non-smoker, yet she smells mildly of cigarettes. Vince is willing to give
Charlie the benefit of the doubt until she reaches into her purse to take out her driver's license
as proof of address, and he catches a glimpse of a pack of cigarettes.
What should Vince do under the circumstances?
,a) Add a comment in the agent's comment section
b) Tell the client that she is lying about her smoking status
c) Order a medical exam to determine the client's smoking status
d) Order an inspection report to determine the client's tobacco usage - CORRECT
ANSWER✔✔- (correct) Add a comment in the agent's comment section
Rationale:
The agent's comment section is a useful tool that ensures the company possesses all the
information that the agent is privy to. (7.2.2.1)
Tina purchases a disability insurance policy on the advice of her aunt. Her insurance
representative convinces Tina to add an inexpensive rider to the policy which guarantees her
a daily cash benefit of $100 to cover expenses incurred as the result of hospitalization, such
as babysitting or daycare.
What rider does Tina have on her disability policy?
a) First day hospitalization rider
b) Hospital indemnity rider
c) Waiver of premium rider
d) Hospital expenses rider - CORRECT ANSWER✔✔- (wrong) Hospital expenses rider
Rationale:
, The hospital indemnity rider provides a daily benefit between $50 and $250 a day to cover
expenses incurred as a consequence of hospitalization. (Refer to Section 2.2.4.9)
Albert fell down a staircase and fractured his leg. He was immobilized for three months as his
leg was in a cast. He received disability benefits from his individual disability policy for two
months following the waiting period of one month. He had creditor disability insurance on
his credit card, but the credit card company did not consider Albert disabled.
What definition of disability governed his creditor disability insurance?
a) Own occupation
b) Regular occupation
c) Any occupation
d) Total disability - CORRECT ANSWER✔✔- (correct) Total disability
Rationale:
Total disability is the definition used by CPP. It defines total disability as the inability to
perform the functions of any occupation for which the insured is suited by education or
experience. It also entails that the insured will never recover and be able to return to
employment and, in fact, will likely eventually die from the cause of the disability. Such a
drastic definition is seldom used in individual or group disability insurance (DI) policies but
may be found more often in creditor insurance coverage. (Refer to Section 2.2.3.3)
Myra, 40 years old, is a freelance writer whose articles are published by leading news
magazines. Last year, she earned $50,000 from her writing. She operates her business in her
home office which she has set up in her spare bedroom. She works away from home only
when she needs to conduct onsite interviews. Her mother recently underwent bypass surgery.
Myra went scuba diving last year while on vacation. Worried that her family would lose her
income if she were to become disabled and unable to work, Myra approaches her advisor to
analyze her disability needs.
Exam 1 UPDATED ACTUAL Questions
and CORRECT Answers
Rhonda and Karl are equal partners of an accounting business. Their business is currently
worth $3,000,000, and their annual business expenses are $240,000. They share the business
expenses equally. The couple wants to have a buy-sell agreement in place in the event that
one of them is disabled for more than one year. Rhonda and Karl also state that they are each
responsible for 50% of their clients. If one of them were to become disabled, the clients
would move over to another accounting business. This would lead to a loss of revenue as the
business is totally dependent on their expertise in accounting to generate revenue.
Which of the following recommendations best meets the couple's needs?
a) Purchase a $3,000,000 disability buyout policy on each of their lives and a business
overhead expense policy of $10,000 per month on each of them
b) Purchase a $3,000,000 disability buyout policy on each of their lives a - CORRECT
ANSWER✔✔- (corrct) Purchase a $1,500,000 disability buyout policy on each of their lives
and a business overhead expense policy of $10,000 per month on each of them
Rationale:
Rhonda and Karl each own $1,500,000 of the business and are liable for $10,000 per month
of the business expenses. (Refer to Section 5.4)
Vince is helping his client, Charlie complete an application for a disability policy. Charlie
claims that she is a non-smoker, yet she smells mildly of cigarettes. Vince is willing to give
Charlie the benefit of the doubt until she reaches into her purse to take out her driver's license
as proof of address, and he catches a glimpse of a pack of cigarettes.
What should Vince do under the circumstances?
,a) Add a comment in the agent's comment section
b) Tell the client that she is lying about her smoking status
c) Order a medical exam to determine the client's smoking status
d) Order an inspection report to determine the client's tobacco usage - CORRECT
ANSWER✔✔- (correct) Add a comment in the agent's comment section
Rationale:
The agent's comment section is a useful tool that ensures the company possesses all the
information that the agent is privy to. (7.2.2.1)
Tina purchases a disability insurance policy on the advice of her aunt. Her insurance
representative convinces Tina to add an inexpensive rider to the policy which guarantees her
a daily cash benefit of $100 to cover expenses incurred as the result of hospitalization, such
as babysitting or daycare.
What rider does Tina have on her disability policy?
a) First day hospitalization rider
b) Hospital indemnity rider
c) Waiver of premium rider
d) Hospital expenses rider - CORRECT ANSWER✔✔- (wrong) Hospital expenses rider
Rationale:
, The hospital indemnity rider provides a daily benefit between $50 and $250 a day to cover
expenses incurred as a consequence of hospitalization. (Refer to Section 2.2.4.9)
Albert fell down a staircase and fractured his leg. He was immobilized for three months as his
leg was in a cast. He received disability benefits from his individual disability policy for two
months following the waiting period of one month. He had creditor disability insurance on
his credit card, but the credit card company did not consider Albert disabled.
What definition of disability governed his creditor disability insurance?
a) Own occupation
b) Regular occupation
c) Any occupation
d) Total disability - CORRECT ANSWER✔✔- (correct) Total disability
Rationale:
Total disability is the definition used by CPP. It defines total disability as the inability to
perform the functions of any occupation for which the insured is suited by education or
experience. It also entails that the insured will never recover and be able to return to
employment and, in fact, will likely eventually die from the cause of the disability. Such a
drastic definition is seldom used in individual or group disability insurance (DI) policies but
may be found more often in creditor insurance coverage. (Refer to Section 2.2.3.3)
Myra, 40 years old, is a freelance writer whose articles are published by leading news
magazines. Last year, she earned $50,000 from her writing. She operates her business in her
home office which she has set up in her spare bedroom. She works away from home only
when she needs to conduct onsite interviews. Her mother recently underwent bypass surgery.
Myra went scuba diving last year while on vacation. Worried that her family would lose her
income if she were to become disabled and unable to work, Myra approaches her advisor to
analyze her disability needs.
