PSI: LIFE, ACCIDENT, AND HEALTH
PRACTICE Exam Questions with
Revised Answers () 100%
Guarantee Pass.
Dividends that are received by a life insurance policy holder can be taxed in what situation(s):
I - When the dividend amount received exceeds the amount that the policy holder paid in premiums -
CORRECT ANSWERS The amount received that is over and above the amount paid into the
policy via premiums is considered to be gain and is therefore taxable. There are no dividends paid on
term life insurance policies.
Under the misstatement of age or gender provision, what happens if it is determined at death that the
insured's age or gender was misstated on a life insurance policy application? - CORRECT ANSWERS
Benefits are adjusted to an amount that the premium would have purchased at the correct age or
gender.
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 thereafter as is reasonably possible? - CORRECT ANSWERS
Notice of claim.
When will a policy pay on a UCR basis? - CORRECT ANSWERS When particular benefits are not
listed on a payment schedule.
All of the following are non-forfeiture options EXCEPT - CORRECT ANSWERS Cash dividend
option.
What happens when the lifetime maximum benefit limit has been reached? - CORRECT ANSWERS
The insured will pay all of the remaining medial costs for as long as the policy is in force.
Whose responsibility is it to make sure that the company is notified of a death claim at the earliest
possible opportunity (in most cases)? - CORRECT ANSWERS The producer.
What is the waiver of premium provision? - CORRECT ANSWERS In a long term care contract,
the premium is waived after the insured has been confined for a specific period of time.
All of the following are common exclusions from loss found in disability income policies EXCEPT for that
incurred while? - CORRECT ANSWERS Committing a misdemeanor
Which is a disadvantage to a flexible premium annuity? - CORRECT ANSWERS The actual
amount of the annuity benefit cannot be determined in advance.
What does coninsurance mean? - CORRECT ANSWERS The insurer and the insured share
expenses over the deductible.
,Under normal conditions which of the following is TRUE for proof of loss when a single loss is claimed? -
CORRECT ANSWERS The insured has 90 days from the date of loss to provide proof of loss.
Which one of the following represents an advantage of obtaining a policy loan versus a withdrawal? -
CORRECT ANSWERS The loan is not taxed while a withdrawal is taxed for amounts above the
contract cost basis.
All of the following statements define preexisting conditions EXCEPT? - CORRECT ANSWERS
Any chronic health condition that presents symptoms and which was unknown at the time of
application.
Which is the difference between participating and non-participating? - CORRECT ANSWERS
Participating policies pay dividends while non-participating policies do not.
How does the per captia rule apply to proceeds from a life insurance policy? - CORRECT ANSWERS
The proceeds are divided equally among living primary beneficiaries.
How does a noncancelable policy differ from a guaranteed renewable policy? - CORRECT ANSWERS
With the noncancelable policy the insurer may increase premiums only based on the terms of the policy.
Which of the following refers to how often a premium is paid? - CORRECT ANSWERS Mode
What is the return of premium rider? - CORRECT ANSWERS An increasing amount of term
insurance that always equals the total of premiums paid up to the current point.
What does first dollar coverage mean? - CORRECT ANSWERS As soon as covered medical
expenses are incurred, the policy begins to pay.
When the suicide clause is inserted in a life insurance contract, death by suicide is not covered during
the policy's initial: - CORRECT ANSWERS 2 year period
All of the following are required signatures on a life insurance application EXCEPT? - CORRECT ANSWERS
The minor in a juvenile policy.
What is the purpose of Stranger-originated life insurance (STOLI)? - CORRECT ANSWERS The
policy is originated primarily or solely for the purpose of resale.
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? - CORRECT ANSWERS
The applicant and possibly the agent initial any changes made.
What specific new procedures does the USA Patriot Act require of insurance program? - CORRECT
ANSWERS Establish an anti-money laundering program.
Which of the following occurs immediately after the application is submitted and the initial premium
paid? - CORRECT ANSWERS The underwriting process begins.
,A consumer report used to determine eligibility for insurance may include all of the following EXCEPT? -
CORRECT ANSWERS Medical Underwriting exam.
Why are insurance policies considered conditional contracts? - CORRECT ANSWERS Certain
conditions need to be met to make the contract legally enforceable.
When does insurable interest come into play in a life insurance policy? - CORRECT ANSWERS
When the applicant for the policy is not the insured.
All of the following are TRUE regarding incomplete applications EXCEPT? - CORRECT ANSWERS
The incomplete application can be accepted with the missing information added later.
What is a MIB report? - CORRECT ANSWERS Medical information on an applicant for assessing
life or health insurance risk.
Obtaining consumer information reports under false pretenses is prosecutable by which of the
following? - CORRECT ANSWERS Fair Credit Reporting Act
All of the following are classifications of risk EXCEPT? - CORRECT ANSWERS Non-nicotine
Which type of receipt makes the insurer liable for the risk from the date of application, regardless of the
applicant's insurability? - CORRECT ANSWERS Binding receipt
If the insurer wishes to share an applicant's HIV status, the applicant must be given full notice of all of
the following EXCEPT? - CORRECT ANSWERS The treatment procedures that are covered by
the policy.
How do warranties differ from representations? - CORRECT ANSWERS A warranty is
guaranteed to be true, a representation is believed to be true to the best of one's knowledge.
In noncontributory plans, which percentage of eligible members must participate? - CORRECT ANSWERS
100%
Managed care plans increase efficiency by all of the following means EXCEPT? - CORRECT ANSWERS
Transferring the management of costs to the insureds.
All of the following are tax qualified retirement plans EXCEPT? - CORRECT ANSWERS Section
529 plan.
Which of the following is characteristic of a non-qualified plan? - CORRECT ANSWERS Plan
does not meet federal guidelines for tax benefits.
Under which situation must insurable interest exist between the applicant and insured at the time of
application? - CORRECT ANSWERS When a third-party application names themselves
beneficiary.
The group conversion option is allowed for all of the following EXCEPT? - CORRECT ANSWERS
During the annual benefits enrollment period.
, 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? - CORRECT ANSWERS The individual's policy pays first,
the spouse's policy pay the remaining up to coverage amount.
Why is rehabilitation considered worthy of federal help under workers' compensation? - CORRECT
ANSWERS It reduces insurance losses and helps regain the worker's dignity.
When can the premiums of an individually owned health insurance policy be deducted from the
individual's income tax? - CORRECT ANSWERS When the taxpayer's medical expenses exceed
7.5% of adjusted gross income during a taxable year.
Short term disability insurance generally only covers injuries due to which of the following? - CORRECT
ANSWERS Non-occupational injuries.
What type of insurance should a company purchase if it wants to insure the life of its CEO? - CORRECT
ANSWERS Key person insurance
For an individual long-term care policy there is an annual dollar limit for tax deduction that is based on
which of the following? - CORRECT ANSWERS Age
When should a buy-sell agreement include a provision for the buy-out of an owner's business interest in
the event of a disability? - CORRECT ANSWERS When there is a buy-sell agreement funded
with life insurance to buyout the interest of a deceased owner or partner.
Which insurance plans are commonly offered through the work-site (employer sponsored) EXCEPT? -
CORRECT ANSWERS Medicare
State generally define a true "Group" for insurance as requiring a minimum of how many participants? -
CORRECT ANSWERS 10
Which of the following policy types is considered double indemnity? - CORRECT ANSWERS
Accidental death
Which of the following is true about a decreasing term life policy? - CORRECT ANSWERS The
face amount reached zero at policy expiration.
Which of the following lists the three common types of permanent individual life insurance? - CORRECT
ANSWERS Variable Life, Whole Life, Universal Life
Which types of life policy can be continued year after year without a required medical examination but
rates are dependent on the insured's current age? - CORRECT ANSWERS Renewable term
Which of the following coverage types pays a monthly cash benefit following the elimination period for
total disability due to accident or sickness? - CORRECT ANSWERS Disability income insurance
Which of the following is TRUE of an equity-indexed annuity? - CORRECT ANSWERS It has a
guaranteed minimum interest rate.
PRACTICE Exam Questions with
Revised Answers () 100%
Guarantee Pass.
Dividends that are received by a life insurance policy holder can be taxed in what situation(s):
I - When the dividend amount received exceeds the amount that the policy holder paid in premiums -
CORRECT ANSWERS The amount received that is over and above the amount paid into the
policy via premiums is considered to be gain and is therefore taxable. There are no dividends paid on
term life insurance policies.
Under the misstatement of age or gender provision, what happens if it is determined at death that the
insured's age or gender was misstated on a life insurance policy application? - CORRECT ANSWERS
Benefits are adjusted to an amount that the premium would have purchased at the correct age or
gender.
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 thereafter as is reasonably possible? - CORRECT ANSWERS
Notice of claim.
When will a policy pay on a UCR basis? - CORRECT ANSWERS When particular benefits are not
listed on a payment schedule.
All of the following are non-forfeiture options EXCEPT - CORRECT ANSWERS Cash dividend
option.
What happens when the lifetime maximum benefit limit has been reached? - CORRECT ANSWERS
The insured will pay all of the remaining medial costs for as long as the policy is in force.
Whose responsibility is it to make sure that the company is notified of a death claim at the earliest
possible opportunity (in most cases)? - CORRECT ANSWERS The producer.
What is the waiver of premium provision? - CORRECT ANSWERS In a long term care contract,
the premium is waived after the insured has been confined for a specific period of time.
All of the following are common exclusions from loss found in disability income policies EXCEPT for that
incurred while? - CORRECT ANSWERS Committing a misdemeanor
Which is a disadvantage to a flexible premium annuity? - CORRECT ANSWERS The actual
amount of the annuity benefit cannot be determined in advance.
What does coninsurance mean? - CORRECT ANSWERS The insurer and the insured share
expenses over the deductible.
,Under normal conditions which of the following is TRUE for proof of loss when a single loss is claimed? -
CORRECT ANSWERS The insured has 90 days from the date of loss to provide proof of loss.
Which one of the following represents an advantage of obtaining a policy loan versus a withdrawal? -
CORRECT ANSWERS The loan is not taxed while a withdrawal is taxed for amounts above the
contract cost basis.
All of the following statements define preexisting conditions EXCEPT? - CORRECT ANSWERS
Any chronic health condition that presents symptoms and which was unknown at the time of
application.
Which is the difference between participating and non-participating? - CORRECT ANSWERS
Participating policies pay dividends while non-participating policies do not.
How does the per captia rule apply to proceeds from a life insurance policy? - CORRECT ANSWERS
The proceeds are divided equally among living primary beneficiaries.
How does a noncancelable policy differ from a guaranteed renewable policy? - CORRECT ANSWERS
With the noncancelable policy the insurer may increase premiums only based on the terms of the policy.
Which of the following refers to how often a premium is paid? - CORRECT ANSWERS Mode
What is the return of premium rider? - CORRECT ANSWERS An increasing amount of term
insurance that always equals the total of premiums paid up to the current point.
What does first dollar coverage mean? - CORRECT ANSWERS As soon as covered medical
expenses are incurred, the policy begins to pay.
When the suicide clause is inserted in a life insurance contract, death by suicide is not covered during
the policy's initial: - CORRECT ANSWERS 2 year period
All of the following are required signatures on a life insurance application EXCEPT? - CORRECT ANSWERS
The minor in a juvenile policy.
What is the purpose of Stranger-originated life insurance (STOLI)? - CORRECT ANSWERS The
policy is originated primarily or solely for the purpose of resale.
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? - CORRECT ANSWERS
The applicant and possibly the agent initial any changes made.
What specific new procedures does the USA Patriot Act require of insurance program? - CORRECT
ANSWERS Establish an anti-money laundering program.
Which of the following occurs immediately after the application is submitted and the initial premium
paid? - CORRECT ANSWERS The underwriting process begins.
,A consumer report used to determine eligibility for insurance may include all of the following EXCEPT? -
CORRECT ANSWERS Medical Underwriting exam.
Why are insurance policies considered conditional contracts? - CORRECT ANSWERS Certain
conditions need to be met to make the contract legally enforceable.
When does insurable interest come into play in a life insurance policy? - CORRECT ANSWERS
When the applicant for the policy is not the insured.
All of the following are TRUE regarding incomplete applications EXCEPT? - CORRECT ANSWERS
The incomplete application can be accepted with the missing information added later.
What is a MIB report? - CORRECT ANSWERS Medical information on an applicant for assessing
life or health insurance risk.
Obtaining consumer information reports under false pretenses is prosecutable by which of the
following? - CORRECT ANSWERS Fair Credit Reporting Act
All of the following are classifications of risk EXCEPT? - CORRECT ANSWERS Non-nicotine
Which type of receipt makes the insurer liable for the risk from the date of application, regardless of the
applicant's insurability? - CORRECT ANSWERS Binding receipt
If the insurer wishes to share an applicant's HIV status, the applicant must be given full notice of all of
the following EXCEPT? - CORRECT ANSWERS The treatment procedures that are covered by
the policy.
How do warranties differ from representations? - CORRECT ANSWERS A warranty is
guaranteed to be true, a representation is believed to be true to the best of one's knowledge.
In noncontributory plans, which percentage of eligible members must participate? - CORRECT ANSWERS
100%
Managed care plans increase efficiency by all of the following means EXCEPT? - CORRECT ANSWERS
Transferring the management of costs to the insureds.
All of the following are tax qualified retirement plans EXCEPT? - CORRECT ANSWERS Section
529 plan.
Which of the following is characteristic of a non-qualified plan? - CORRECT ANSWERS Plan
does not meet federal guidelines for tax benefits.
Under which situation must insurable interest exist between the applicant and insured at the time of
application? - CORRECT ANSWERS When a third-party application names themselves
beneficiary.
The group conversion option is allowed for all of the following EXCEPT? - CORRECT ANSWERS
During the annual benefits enrollment period.
, 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? - CORRECT ANSWERS The individual's policy pays first,
the spouse's policy pay the remaining up to coverage amount.
Why is rehabilitation considered worthy of federal help under workers' compensation? - CORRECT
ANSWERS It reduces insurance losses and helps regain the worker's dignity.
When can the premiums of an individually owned health insurance policy be deducted from the
individual's income tax? - CORRECT ANSWERS When the taxpayer's medical expenses exceed
7.5% of adjusted gross income during a taxable year.
Short term disability insurance generally only covers injuries due to which of the following? - CORRECT
ANSWERS Non-occupational injuries.
What type of insurance should a company purchase if it wants to insure the life of its CEO? - CORRECT
ANSWERS Key person insurance
For an individual long-term care policy there is an annual dollar limit for tax deduction that is based on
which of the following? - CORRECT ANSWERS Age
When should a buy-sell agreement include a provision for the buy-out of an owner's business interest in
the event of a disability? - CORRECT ANSWERS When there is a buy-sell agreement funded
with life insurance to buyout the interest of a deceased owner or partner.
Which insurance plans are commonly offered through the work-site (employer sponsored) EXCEPT? -
CORRECT ANSWERS Medicare
State generally define a true "Group" for insurance as requiring a minimum of how many participants? -
CORRECT ANSWERS 10
Which of the following policy types is considered double indemnity? - CORRECT ANSWERS
Accidental death
Which of the following is true about a decreasing term life policy? - CORRECT ANSWERS The
face amount reached zero at policy expiration.
Which of the following lists the three common types of permanent individual life insurance? - CORRECT
ANSWERS Variable Life, Whole Life, Universal Life
Which types of life policy can be continued year after year without a required medical examination but
rates are dependent on the insured's current age? - CORRECT ANSWERS Renewable term
Which of the following coverage types pays a monthly cash benefit following the elimination period for
total disability due to accident or sickness? - CORRECT ANSWERS Disability income insurance
Which of the following is TRUE of an equity-indexed annuity? - CORRECT ANSWERS It has a
guaranteed minimum interest rate.
