Insurance Practice Test Exam Questions with correct Answers

When the courts look at a contract to determine the intent of the parties which of the following is considered ? any material added to the basic contract any words that have ambiguous definitions the entire contract the relevant portions of the contract - the entire contract Which part of an insurance contract contains the promise to pay losses covered by the policy in exchange for the insured's premium and compliance with policy terms ? insuring clause conditions policy title page definitions - insuring clause Which policy provision permits the policyowner to take a specified number of days to examine the contract , and allows for cancellation and a full refund if the policyowner rejects the terms or costs ? Insuring Clause Free look Exclusions Grace period - Free look Which policy provision permits the policyowner to take a specified number of days to examine the contract , and allows for cancellation and a full refund if the policyowner rejects the terms or costs ? Insuring Clause Free look Exclusions Grace period . - Free look What is granted to the insured in the consideration clause ? the right to change the beneficiary at any time the right to review the contract in the first 30 days right to assign the contract to another party insurance coverage if premiums are paid - insurance coverage if premiums are paid All of the following are ownership rights EXCEPT changing the beneficiary of the policy assigning all of the rights of the policy to another person borrowing funds against cash value switching the policy from one insured to another - switching the policy from one insured to another How does the per capita rule apply to proceeds from a life insurance policy ? The proceeds go to the policyholder's estate when no beneficiary is living . The proceeds are divided equally among living primary beneficiaries . The secondary beneficiary receives the proceeds if the primary beneficiary is no longer living . The proceeds go to the descendants of the primary beneficiaries - The proceeds are divided equally among living primary beneficiaries . Which of the following is TRUE regarding assignment rights for irrevocable beneficiaries ? They are LESS likely to receive a loan based on the expectations of the proceeds . They are MORE likely to receive a loan based on the expectations of the proceeds . They can be changed without the beneficiary's consent after a life changing event . They are responsible for premium payment when the policyholder fails to pay . - They are MORE likely to receive a loan based on the expectations of the proceeds . In which of the following must a beneficiary change request be filed in writing to the insurer and is made effective by the insurance company recording the change in its records ? succession of beneficiaries recording method endorsement method designation option - recording method An insured and the beneficiary are both killed in a fatal accident . Which provision presumes the insured survived the beneficiary ? irrevocable beneficiary contingent beneficiary common disaster clause endorsement method - common disaster clause Which is a common approach to addressing the problems inherent in naming a minor as a beneficiary to a life insurance policy ? establishing a trust to administer proceeds using contingent beneficiaries using class designations naming the estate as the beneficiary - establishing a trust to administer proceeds All of the following are features of the spendthrift clause EXCEPT proceeds are protected by the insurer from the beneficiary's creditors . proceeds are paid in some other way than a single lump sum . the beneficiary may encumber the proceeds . transfer of proceeds to creditors is prohibited . - the beneficiary may encumber the proceeds . Which of the following refers to how often a premium is paid ? ratio net level mode - mode What does the grace period protect the policyholder from ? an unintentional lapse of the policy a change in mind about the initial purchase of the policy having to prove whether a condition is pre - existing mistakingly omitting a beneficiary from the initial contract - an unintentional lapse of the policy Which of the following policy loans is a provision in which an amount equal to the premium due is subtracted from the cash value to pay the premium and prevent a lapse of the policy . Automatic premium loan Partial surrender loan Policy loan Reinstatement loan : - Automatic premium loan Which is a disadvantage to a flexible premium annuity ? the tax implications are less favorable for the purchaser the actual amount of the annuity benefit cannot be determined in advance it makes assumptions about future premium payment amounts the purchaser does not determine the premium amount - The actual amount of the annuity benefit cannot be determined in advance During which period of a Disability Income Policy is coverage effective but during which no benefits will be paid under the policy ? elimination period probationary period grace period benefit period - probationary period Which of the following may be thought of as a time deductible rather a dollar deductible in a disability income policy because benefits are not payable during that time ? benefit period probationary period grace period elimination period - elimination period What is the primary advantage for obtaining a reinstatement of a policy rather than obtaining a new one ? insured original issue age is used outstanding loans are cancelled No application is required No proof of insurability is required - insured original issue age is used Which one of the following represents an advantage of obtaining a policy loan vesus a withdrawal ? the loan originates from the insurance company , whereas the withdrawal comes from the policy the loan is subtracted from the death benefit and does not require payments the interest on the loan does not have to be paid if the insured dies before the loan is paid in full . the loan is not taxed while a withdrawal is taxed for amounts above the contract cost basis - the loan is not taxed while a withdrawal is taxed for amounts above the contract cost basis All of the following are nonforfeiture options EXCEPT Reduced paid - up insurance Cash surrender value Extended term insurance Cash dividend option - Cash dividend option Which is the difference between participating and non - participating policies ? Participating policy owners do not share in the divisible surplus of a company while nonparticipating policies do share in this surplus Participating policy dividends are like stock dividends , non - participating dividends are not . Participating policies have lower premiums than non - participating policies Participating policies pay dividends while non - participating policies do not . - Participating policies pay dividends while non - participating policies do not . Which of the following is exempted from the incontestability provision in insurance policies ? pre - existing conditions changes insurance fraudulent misstatements change in health - fraudulent misstatements Which type of assignment occurs when a person transfers ownership of a life insurance policy to another person , such as a son when turning 18 ? permanent contractual binding collateral - permanent When the suicide clause is inserted in a life insurance contract , death by suicide is not covered during the policy's initial : Renewal period 2 year period 5 year period 1 year period - 2 year period Under the misstatement of age provision , what happens if it is determined at death that the insured's age or gender was misstated on a life insurance policy application ? if the death is two years after originally policy purchase , complete benefits are paid benefits are adjusted to an amount that the premium would have purchased at the correct age or gender application is considered fraudulent and no benefits are payed proceeds of the policy must be determined by a probate court - Benefits are adjusted to an amount that the premium would have purchased at the correct age or gender At which point are contractual death benefit settlement options determined and by whom ? Upon the insured's death by the insurer At the time the policy is purchased by the insurer At the time the policy is purchased by the owner of the policy Upon the insured's death by the beneficiaries - At the time the policy is purchased by the owner of the policy When a policy or certificate contained an accelerated death benefit provision is applied for or delivered the producer is responsible for providing the applicant a summary of coverage that includes all of the following except. - A detailed and comprehensive summary of the accelerated death benefit Which of the following is the time limit on certain defenses after which the policy becomes incontestable ? 2 years 5 years 18 months 12 months - 2 years Which of the following must be given to the insurer within 20 days after occurrence or commencement of any loss covered by the policy , or as soon thereafter as is reasonably possible ? proof of loss supporting evidence for the claim notice of claim evidence of insurability - notice of claim What is the maximum amount of time an insurer has to provide the claimant the forms for filing proof of loss ? 90 days 7 days 15 days 30 days - 15 days Under normal conditions which of the following is TRUE for proof of loss when a single loss is claimed ? The insured is not required to file proof of loss if unable to submit it at time of loss . The insured has 90 days from the date of loss to provide proof of loss . The insured has two years to file proof of loss if unable to submit it at the time of loss The insured has 30 days from the date of loss to provide proof of loss . - The insured has 90 days from the date of loss to provide proof of loss . According to the time of payment of claims provision , the insurer must make the payment immediately after receiving proof of loss EXCEPT the death is a suicide or due to a pre - existing condition for claims involving periodic payments . if the insured is able to eventually return to work when the policy is in the incontestability period - for claims involving periodic payments . Whose responsibility is it to make sure that the company is notified of a death claim at the earliest possible opportunity ( in most cases ) ? the insured the insured's estate the funeral director the producer - the producer Some states require life insurance policies to include a provision that gives the insurer the right , at its own expense , to do which of the following ? perform a medical examination on the beneficiary investigate the claims made on the application perform a financial audit of the insured require an autopsy - require an autopsy What is the maximum amount of time the insured has to file legal action against the insurer after written proof of loss is provided ? 10 years 5 years 1 year 3 years - 3 years The right to change the beneficiary or dispose of the policy or its benefits in any manner one chooses is reserved to the policyowner UNLESS which of the following im true ? The insurer prohibits changes to beneficiaries The policyowner has named an irrevocable beneficiary . The policyowner deems the beneficiary unfit . The policyowner has named a revocable beneficiary . - The policyowner has named an irrevocable beneficiary . All of the following statements define preexisting conditions EXCEPT - any chronic health condition that presents symptoms and which was unknown at the time of application . How do most disability policies handle the case of a recurrent disability occurring at least 90 days after the first claim ? - it must be handled as a new claim for a new period of disability , requiring a new elimination period . What does coinsurance mean ? A policy covers the insured and any additional named persons . The policyowner holds multiple policies through the same insurer . The insurer and the insured share expenses over the deductible The insurer and the insured share ALL expenses . - The insurer and the insured share expenses over the deductible . What does first dollar coverage mean ? The insured pays the deductible first before coverage begins . The policy is primary to a secondary insurance policy . The insurer pays the insured first and then the insured pays the provider directly . As soon as covered medical expenses are incurred , the policy begins to pay . - As soon as covered medical expenses are incurred , the policy begins to pay . What is the difference between copayment and coinsurance ? A copayment is an amount of money that must be paid up - front annually before benefits begin . Coinsurance is an amount of money that must be paid up - front annually before benefits begin . A copayment is a set dollar amount , while coinsurance is set as a percentage . A copayment is a set percentage , while coinsurance is a set dollar amount - A copayment is a set dollar amount , while coinsurance is set as a percentage . Which provision allows for the physician to submit claim information before providing treatment to know in advance whether the procedure is covered under the insured's plan and at what rate it will be paid ? second opinion provision precertification provision concurrent review provision consideration provision - precertification provision When will a policy pay on a UCR basis ? When a surgical procedure is not pre - approved by the insurer When the provider charges a different amount than is listed on the payment schedule When the treatment is received in a different geographic area than where the insured lives When particular benefits are not listed on a payment schedule - When particular benefits are not listed on a payment schedule What happens with the lifetime maximum benefit limit has been reached ? - The insured will pay all of the remaining medical costs for as long as the policy is in force . What is the waiver of premium provision ? - In a long term care contract , the premium is waived after the insured has been confined for a specific period of time . Which option enables the insured to purchase additional disability income protection at specified future dates at the applicable premium rate at the attained age at the time of future purchase ? additional monthly benefit rider payor clause guaranteed insurability disability income rider - guaranteed insurability Which of the following provides for the continuance of life insurance coverage on a juvenile in the event of the death or total disability of the individual responsible for the payment of the premiums ? family maintenance waiver of premium survivor benefits payor clause - payor clause Why is the accidental death benefit referred to as double indemnity ? provides twice the face value in the policy for death due to accident . The beneficiaries have twice the amount of time to provide proof of loss . The beneficiaries must provide proof of death due to multiple causes . It provides for both the actual death as well as other losses from the accident - It provides twice the face value in the policy for death due to accident . How are term riders used - To purchase insurance on a family member of the orgunally insured How might someone cover the extra expenses of child care and home - related costs ? adding coverage of a grandparent adding cost of living coverage purchasing family term insurance purchasing a substitute insured rider - purchasing family term insurance Which type of rider reimburses health and social service expenses incurred in a convalescent or nursing home facility ? terminal illness rider accelerated benefits rider assisted living rider long term care rider - long term care rider What is the return of premium rider ? a provision that states the insurer must return any premiums paid during the free - look period an increasing amount of term insurance that equals the cash value of the policy at any point in time provision allows the insured to cancel the policy in the first two years and have premiums refunded an increasing amount of term insurance that always equals the total of premiums paid up to the current point - an increasing amount of term insurance that always equals the total of premiums paid up to the current point What is an impairment rider ? It states that a contract can be cancelled and premiums refunded if the policyholder was mentally impaired at time of issue . It indefinitely extends the time to provide the proof of loss until after an impairment is resolved . It lists specific conditions in the contract that are excluded from the contract It allows the reinstatement of a policy when an impairment is deemed to have caused the policy lapse . - It lists specific conditions in the contract that are excluded from the contract What is it called when a life insurance policy pays a multiple of the coverage amount when certain types of accidents occur ? Multiple benefit Multiple indemnity Multiple death rider Multiple pay - Multiple indemnity All of the following are common exclusions from loss found in disability income policies EXCEPT for that incurred while serving in the military committing a misdemeanor piloting a personal aircraft living overseas - commiting a misdemeanor In order for an insurer to increase the premium on a noncancelable policy , which of the following MUST be true ? The insured develops a medical condition that increases risk . The premium increase must be in line with current inflation rates . The premium increase must be in the contract at the time it is issued . The insured reaches the age of 65 . - The premium increase must be in the contract at the time it is issued Which of the following is true of a cancelable policy ? All unearned premiums must be returned to the insured . It relieves the insurer from paying valid existing claims . The insurer may only cancel on the premium due date . A cancelable policy is most adventageous for the insured . - All unearned premiums must be returned to the insured . How does a noncancelable policy differ from a guaranteed renewable policy ? - With the noncancelable policy the insurer may increase premiums only based on the terms of the policy . What does it mean if a health policy is conditionally renewable ? - Insurer may elect NOT to renew only under conditions specified in the policy . What does it mean if a health policy is optionally renewable ? - Insurer may elect NOT to renew for any reason only on the policy anniversary or premium due date . Upon the issuance of a conditional receipt for a renewal when the premium is paid AFTER the time granted by the insurer , what is the maximum amount of time for reinstatement of the policy ? - 45 days Which of the following is an example of a premium payment mode ? annual premium payment payment by check automatic deduction of premium $ 200 per policy year - annual premium payment Which of the following amends the Social Security Act to make Medicare secondary to group health plans ? OBRA ADEA TEFRA ERISA - TEFRA All of the following can be used to qualify for Medicare Parts A and B EXCEPT permanent kidney failure financial need age disability - financial need In a home healthcare benefit , all of the following are eligible expenses EXCEPT medical social services ; physical , occupational , or speech therapy ; intermittent part - time nursing care ; blood transfusions - blood transfusions Which of the following determines whether a person passes the financial test to qualify for Medicaid ? state law federal guidelines The Social Security Administration American with Disabilities Act - state law All of the following are requirements to qualify for Social Security disability benefits EXCEPT when total and permanent disabled for at least 5 months . unable to work in occupation in which the worker was trained or educated . disability expected to last for 12 months or end in death . credited with the appropriate number of quarters of coverage . - unable to work in occupation in which the worker was trained or educated How long after being entitled to disability benefits will an individual be eligible to receive Medicare benefits ? 2 years at age 65 1 year immediately - 2 years Under which situation must insurable interest exist between the applicant and insured at the time of application ? When a third - party applicant names the insured's company as beneficiary . When a third - party applicant names themselves beneficiary . When the applicant and the insured are the same person . When the beneficiary is a member of the applicant's immediate family - When a third - party applicant names themselves beneficiary . The group conversion option is allowed for all of the following EXCEPT loss of group coverage due to termination of employment . termination of the master policy . upon the loss of eligibility on the part of a class of insureds . during the annual benefits enrollment period . - during the annual benefits enrollment period . In noncontributory plans , which percentage of eligible members must participate ? 0.75 0.5 0 1 - 1 All of the following are tax qualified retirement plans EXCEPT 401 ( k ) . Keogh . SEP Section 529 plan . - Section 529 plan . Which of the following is characteristic of a nonqualified plan ? employer contributions are deductible business expenses plan established by the employer defined vesting schedule plan does not meet federal guidelines for tax benefits - plan does not meet federal guidelines for tax benefits Why is relying solely on employer group life insurance generally considered inadequate for most individual's needs ? It does not pay off the insured's mortgage It is based on salary amounts that are too low . It is financially insufficient cover end of life expenses . It is meant to cover funeral expenses only . - It is financially insufficient to cover end of life expenses . What type of insurance should a company purchase if it wants to insure the life of its CEO ? industrial life insurance group life policy key person insurance BOE insurance - key person insurance For an individual long - term care policy there is an annual dollar limit for tax deductions that is based on which of the following ? premium cost cost of care age policy value - age Group AD & D policies may be deducted by whom and under which deduction category ? the employee under medical expenses the employee under business expenses the employer under workers ' compensation deduction the employer under business expenses - the employer under business expenses In order to AVOID being classified as an MEC , a policy must pass which of the following ? accelerated benefits test policy loan test seven - pay test five - pay test - seven - pay test In which of the following cases are premiums paid by a business NOT tax deductible as a business expense ? when benefits received by employees are taxable as income . group disability income coverage for its employees individual disability income coverage for its employees key person disability income insurance - key person disability income insurance When would dependent children's benefits for Social Security disability payments be scaled back ? When the number of children exceeds the maximum family size When they cause the family benefit to exceed the maximum benefit amount When the disabled worker dies When the benefits extend beyond the initial 2 year period - When they cause the family benefit to exceed the maximum benefit amount What is the order in which beneficiaries receive proceeds from a life insurance policy ? progression of beneficiaries classification of beneficiaries succession of beneficiaries line of beneficiaries - succession of beneficiaries In a case where an individual's health is insured by both their own policy and their spouse's policy , which policy pays in the event of an illness ? - The individual's policy pays first , the spouse's policy pays the remaining up to coverage amount . Short term disability insurance generally only covers injuries due to which of the following ? injuries covered during the enrollment period Non - occupational injuries injuries not covered by other insurance Occupational injuries - Non - occupational injuries When can the premiums of an individually owned health insurance policy be deducted from the individual's income tax ? - when the taxpayer's medical expenses exceed 7.5 % of adjusted gross income during a taxable year Managed care plans increase efficiency by all of the following means EXCEPT - transferring the management of costs to the insureds . Why is rehabilitation considered worthy of federal help under workers ' compensation ? - it reduces insurance losses and helps regain the worker's dignity What is it called when an insurance company tries to recover from a different insurance policy all or part of its losses resulting from a claim ? coordination of benefits secondary beneficiary conversion subrogation - subrogation All of the following are required signatures on a life insurance application EXCEPT the agent . the applicant . the minor in a juvenile policy . the proposed insured . - the minor in a juvenile policy . What procedure is used by an insurer to protect itself in the event a dispute arises and the applicant and the agent do not recall the changes that were made in a completed application ? - The applicant and possibly the agent initial any changes made . All of the following are TRUE regarding incomplete applications EXCEPT the applicant will have to wait additional time before coverage begins . there will be a delay in the underwriting process . the incomplete application can be accepted with the missing information added later . the underwriting department will return the application to the agent . - the incomplete application can be accepted with the missing information added later . How do warranties differ from representations ? - a warranty is guaranteed to be true , a representation is believed to be true to the best of one's knowledge .