Fundamentals of Insurance Planning Practice Exam all possible questions and answers with complete solution

A loss exposure is defined as: (A) a loss that might occur (B) an undesirable end result of a risk (C) the largest possible loss (D) the probability of a loss - The answer is (A) by definition Which of the following statements concerning the beneficiary provisions in a life insurance policy is correct? (A) Only one person may be named as a primary beneficiary, but several may be named as contingent beneficiaries. (B) The primary beneficiary's share of policy proceeds is generally reduced if the contingent beneficiary outlives the insured. (C) The estate of the insured is commonly named as beneficiary to avoid transfer taxes. (D) The contingent beneficiary will receive policy proceeds only if the primary beneficiary predeceases the insured. - The answer is(D). (A) is incorrect because one or more people or entities may be named as either primary or contingent beneficiaries. (B) is incorrect because the contingent beneficiary receives nothing and all proceeds go the primary beneficiary when the insured dies unless the primary beneficiary predeceases the insured or loses entitlement to the benefits for some other reason. (C) is incorrect because transfer taxes may be incurred when the estate is the beneficiary. Which of the following types of insurance is often sold by mortgage lenders to provide the funds necessary to pay off a 10-year mortgage loan if the insured dies? (A) decreasing term (B) increasing term (C) modified whole life (D) 10-year renewable term - The answer is (A).(B) is incorrect because the amount of insurance under an increasing term policy increases while the amount needed to pay off the mortgage decreases. (C) is incorrect because the amount of insurance under a modified whole life policy remains constant while the amount needed to pay off the mortgage decreases. (D) is incorrect because the amount of insurance under a 10-year renewable term policy remains constant for 10 years while the amount needed to pay off the mortgage decreases. Which of the following is most likely to be a condition that will result in the payment of unemployment compensation benefits? (A) unemployment because of a labor dispute (B) unemployment as a result of voluntarily leaving a job without good cause (C) unemployment resulting from discharge that was prompted by misconduct (D) unemployment that results from adverse economic conditions - The answer is (D). (A), (B), and (C) are incorrect because common reasons for disqualification under unemployment compensation programs include involvement in a labor dispute, voluntarily leaving a job without good cause, and discharge for misconduct. Which of the following statements concerning inpatient hospital care under Part A of Medicare is correct? (A) There is a $200 annual deductible. (B) Benefits are paid in full after the 60th day of hospitalization. (C) There is a lifetime limit on the number of days of treatment in psychiatric hospitals. (D) There is coverage for up to 210 days of care in each benefit period. - The answer is (C). (A) is incorrect because hospital benefits are not subject to an annual deductible. However, there is a benefit period deductible, and it is much higher than $200. (B) is incorrect because benefits are paid in full for only the first 60 days in each benefit period, subject to the initial deductible. (D) is incorrect because Part A pays for hospital services in full for up to 60 days in each benefit period after the deductible has been met. It provides benefits for an additional 30 days subject to a daily patient copayment. There is also a lifetime reserve of 60 additional days, but once these days are used, they are not available for future benefit periods.Insurance policies that give the policyowner the right to renew coverage but do not guarantee future rates are referred to as (A) cancelable (B) guaranteed renewable (C) noncancelable (D) optionally renewable - The answer is (B).