California Life, Accident and Health Course Exam 1-3|130 Question 2024 Update 100% Correct

California Life, Accident and Health Course Exam 1-3|130 Question 2024 Update 100% Correct California Life, Accident and Health Course Exam 1-3|130 Question 2024 Update 100% Correct 105. Question #90543 The formula that is used to determine how much is taxable during the payout is the: AMortality ratio B7 pay test CMorbidity ratio DExclusion ratio: d Explanation: The exclusion ratio is the formula which is used by the IRS to determine how much is taxable to an annuitant during the pay out period. 106. Question #90627 During the waiting (elimination) period: AThe insured is eligible for small claims BResidual benefits are paid to the insured CThe insured is not eligible for benefits DOn the job (occupational) losses are covered: c Explanation: The waiting, or elimination period, is a period of time (number of days) the insured has to wait after becoming totally disabled before receiving any benefits 107. Question #90644 Standard levels of care provided by Long Term Care (LTC) insurance include all EXCEPT: ASkilled nursing BConvalescent care CCustodial care DHome health care: b Explanation: Standard levels of care provided by LTC policies in California include skilled nursing care, intermediate nursing care, custodial care, home health care and home care and community based care. Every LTC policy that includes coverage for home care or community care must include benefits for adult day care, hospice care and respite care in addition to home care. Convalescent care is not covered. 108. Question #90594 After 5 years, a participant in a pension plan that vests 100% after 7 years is % vested: A60% B80% C40% D90%: a Explanation: Under a 7 year graded vesting schedule, the IRS requires that employer contribu- tions to the plan be vested (owned by the employee) at least 40% after 4 years, 60% after 5 years, 80% after 6 years and 100% after 7 years. 109. Question #90540 What does a deferred annuity have that an immediate annuity does not: ALifetime payouts BTax advantages CMultiple payout options DAn accumulation period: d Explanation: An immediate annuity is purchased with a lump sum and has no accumulation period. 110. Question #90508 Agents are prohibited from engaging in any of the following activities EX- CEPT: AUsing a business name that implies that they are an insurer BHaving appointments to represent more than one insurer COffering free insurance as an inducement to purchase or sale DAdvertising on behalf of a non-admitted insurer: b Explanation: Agent may be either captive (exclusive) or independent. Captive agents are agents who agree by contract to represent only one insurer in the sale of insurance. How- ever, independent agents are usually self-employed and often represent several insurance companies. Under state law, an agent can have as many appointments as they want, although they must have at least one in order to keep their license active 111. Question #90579 On a fully contributory group disability income policy, the benefits payable to disabled employees are: ATax deferred BNot taxable CPartially taxable DFully taxable: b Explanation: Fully contributory means that the employees are paying the entire premium for their coverage. On group disability income, the benefits paid to employees are only taxable to the extent that they are attributable to the portion of the premium paid by the employer. Since the employer is not paying any part of the premium, benefits payable to the employees are not taxable. However, if the employer was paying 50% of the premium, employees would have to pay tax of 50% of the benefits. 112. Question #90507 With regard to the ethical behavior of an agent, which of the following makes it easier for agents to conduct themselves in an ethical manner: ANever asking company underwriters for exceptions to underwriting rules BUsing insurance law and regulations as a complete guide to ethical behav- ior CMaintaining production quotas DAlways putting the best interests of clients and policyholders first: d Explanation: Many ethical considerations go beyond the strict requirements of insurance law and regulation. While violating insurance laws is unethical, there is much more to being ethical than simply staying within the law. Remember, an agent should always place their customer's best interests above their own. 113. Question #90539 Who has to a sign the Notice Regarding Standards for Medi-Cal Eligibility: AApplicant BInsurer CBeneficiary DAgent: a Explanation: A life agent who offers for sale or sells any financial product on the basis of its treatment under the Medi-Cal program shall provide this form in writing which must be signed by the applicant. 114. Question #90623 When the feature of a Universal Life plan where the fixed rate of return on the cash value is replaced by an option to allow the insured to invest in varying investment vehicles, it is known as a: AVariable Annuity Policy BFlexible Premium Variable Life Policy CVariable Life Policy DAdjustable Life Policy: b Explanation: Flexible Premium Variable Life is also known as Variable Universal Life and allows the insured to pay a flexible premium and direct the cash value into a varying selection of investments. 115. Question #90562 The automatic premium loan rider will go into effect at the: ABeginning of the grace period BEnd of the grace period CEnd of the free look DPremium due date: b Explanation: The automatic premium loan rider will go into effect at the end of the grace period. It can only be added to a cash value policy, and was created to keep the policy in force if the insured forgets to pay their premium. 116. Question #90595 An annuity that has a fixed guaranteed minimum rate of return but has an excess rate of return which could also keep up with the performance of the stock market is known as a: AVariable annuity BEquity indexed annuity CMarket value adjusted annuity DDeferred annuity: b Explanation: An equity indexed annuity (EIA) is a fixed annuity where both the principal and interest is guaranteed. However, excess interest earnings above the guaranteed rate may accrue since performance is calculated using an index method that is usually linked to the Standard and Poor's 500 stock index. EIAs are not classified as securities and a federal securities license is not required to sell them. 117. Question #90649 The policy provision which requires the insurer and the insured to share in the cost of services rendered is: ACo-insurance BSharing CCo-payment DStop-loss: a Explanation: Co-insurance specifies specifically that the insured and the insurer share directly in the cost of services rendered, usually with the insurer paying the larger percentage of related expenses. 118. Question #90522 On what type of Life insurance is the beneficiary also the policyholder: AIndustrial Life BGroup Life CIndividual Life DCredit Life: d Explanation: On Group Credit Life, the bank (creditor) enrolls the insured (debtor) in a Group Credit Life plan with policy limits that are sufficient to pay off the debtor's loan upon death. Most Credit Life is written on a decreasing term basis and the policy limit cannot exceed the amount of the loan. The bank is the Master Policyholder and the insured debtor receives a Certificate of Insurance. So, the policyholder is also the beneficiary of the policy. Most Credit Life is written on a non-contributory basis with the insured paying all of the premium, which is added to the amount of their loan balance. 119. Question #90542 What is not covered as a supplementary benefit in a dread disease policy: ATravel and lodging expenses BFood CUtility bills DExperimental treatment: b Explanation: Dread disease policies can provide a number of different supplementary cover- ages related to the specific illness such as coverage for experimental treatment, travel and lodging expenses when treatment is far from home, and normal living expenses such as a car payment, mortgage/rent and utility bills. Remember, in order for this coverage to apply the insured must contract the disease specified in the policy. The costs associated with food would not be covered. 120. Question #90616 Which of the following policies provides coverage for expenses related to one illness only: ADread disease BDental insurance CLong term care DMedical expense: a Explanation: A dread (specified) disease policy, such as cancer insurance, provides coverage for one condition only. 121. Question #90518 All of the following are true about Survivorship Life insurance EXCEPT: APremiums are lower when compared to those that would be charged for two separate policies BAlthough two persons are insured, proceeds are paid only upon death of the first party CIt is usually written with face amounts in excess of $1,000,000 DIt is usually purchased to meet the need to cover estate taxes: b Explanation: Joint Life insurance can be purchased on a 'first to die' or on a 'second to die' basis. The name 'Survivorship Life' insurance implies that the policy only pays when the second party dies, meaning nothing is paid when the first party dies. This type of policy is often written to cover estate taxes, since they are due when the second spouse dies. 122. Question #90651 Each insurer selling individual life/annuity contracts to senior citizens which uses non-guaranteed elements in illustrations must provide a statement to this effect. Which of the following is true regarding this statement: ANon-guaranteed elements must be in bold type BAt the discretion of the agent guaranteed and non-guaranteed elements must be in bold print CGuaranteed elements must be in bold and non-guaranteed elements must be in plain type DAll statements must be in plain type: a Explanation: Non-guaranteed elements must be in bold type. 123. Question #90517 All of the following are true about the California Life and Health Insurance Guarantee Association EXCEPT: AVariable contracts and self-funded plans are not covered BIt protects the customers of insolvent insurers CClaims are paid without limit DAll admitted Life and Health insurers must participate as a condition of their Certificate of Authority: c Explanation: All admitted (authorized) Life and Health insurers must become members of the California Life and Health Insurance Guarantee Association, whose primary purpose is to protect the customers of insolvent (bankrupt) insurers up to certain specified limits. However, the Association does not cover customers of Surplus Lines insurers, customers who purchased variable products or persons covered by self-funded plans. 124. Question #90533 The minimum number of employees which must be covered in a group life insurance plan in California is: A10 B2 C50 D20: b Explanation: In California group life insurance must be written under a policy covering when issued not less than two public or private employees. 125. Question #90530 Which of the following terms used in the California Insurance Code is per- missive: AMay BMust CShall DNot: a Explanation: As used in the CIC the word "shall" is mandatory and the word "may" is permissive, unless otherwise apparent from the context. 126. Question #90624 If a person returns a variable annuity invested in mutual funds during the free look they will receive a return of what: AThe premium minus an administrative fee BThe value of the account on the date of cancellation CThe value of the account on the date of cancellation minus a surrender charge DThe premium paid only: b Explanation: In the case of a variable annuity for which the owner has directed that the premium be invested in the mutual funds underlying the contract during the 30-day cancellation period, cancellation shall entitle the owner to a refund of the account value. The account value shall be refunded by the insurer to the owner within 30 days from the date that the insurer is notified that the owner has canceled the contract. 127. Question #90585 The Facility of Payment clause in a group life policy allows the policy pro- ceeds to be paid to: AThe guardian of a child who is the beneficiary BThe primary beneficiary CThe estate of the insured DThe contingent beneficiary: a Explanation: The Facility of Payment clause allows the insurer to elect to choose who to pay the policy proceeds to if the beneficiary named in the policy is a minor, or is deceased. 128. Question #90628 The provision that applies in group insurance when an insured has coverage under multiple plans at one time is known as: ACoordination of benefits BCo-insurance CIntegration DPolicy maximum benefits: a Explanation: Coordination of benefits is included in all group health insurance policies in order to reinforce the principle of indemnity and determine which coverage is primary, which is the coverage the insured has where they work. Any coverage the insured has where they are covered as a dependant is secondary. 129. Question #90600 All of the following are true about "non-medical" life insurance applications EXCEPT: AApplicants need not answer medical questions on the application BApplicants are usually buying low amounts of coverage CApplicants are usually young DApplicants need not take a physical exam: a Explanation: Although applicants for non-medical life insurance need not take a physical exam, they must still answer the medical questions on the application 91. Question #90488 Which of the following classes of insurance is exempt from the California Insurance Guarantee Association (CIGA): ALife and annuity BFire CPlate glass DWorkers Compensation: a Explanation: Life and annuity policies are specifically excluded from coverage under the Cal- ifornia Insurance Guarantee Association, however, life and annuity policies are covered by the California Life and Health Insurance Guarantee Association which is a separate Act altogether. 92. Question #90383 An insurance company owned by policyholders is a: AStock company BFraternal company CReciprocal company DMutual company: d Explanation: Mutual insurers do not issue stock, since they are owned by their policyholders, who may participate in company profits in the form of dividends. Dividends may never be guaranteed and if paid, are not taxable. Mutual policies are also known as 'participating' policies, since the policyholders may participate in company profits. 93. Question #90398 A person who has contributed to Social Security 6 out of the last 13 quarters has what status: ACurrently insured BFully insured CPartially insured DNone: a Explanation: Currently insured under Social Security means that a worker must have at least 6 quarters of coverage paid in out of the last 13-quarter period ending with the quarter resulting in their death, disability or retirement. Fully insured status means that a person has paid in 40 quarters of coverage. If a person is fully insured, they are eligible for all Social Security benefits. If a person has only currently insured status, they are eligible for only certain reduced benefits. 94. Question #90596 In order to be considered disabled under social security's definition, a per- son: AMust be unable to do any job BMust be unable to do any job they are suited for CMust have a total disability DMust be unable to do their own job: c Explanation: Social security's definition of 'total disability' is much more stringent than definitions contained in policies sold by private insurers. Social security states that in order to have a total disability, the disability must be expected to last at least 12 months or result in death and must prevent the performance of any gainful work. 95. Question #90629 The annual probability of death is shown in which of the following: APolicy summaries BMorbidity tables CPolicy illustrations DMortality tables: d Explanation: Mortality tables show the probability of death occurring and morbidity table show the likelihood of accident or sickness occurring. 96. Question #90525 Which type of Life insurance utilizes the 'level premium concept': ALevel Term BGroup Life CTraditional Whole Life DDecreasing Term: c Explanation: Cash value life insurance utilizes the 'level premium concept', which means that the initial premium is calculated based upon the insured's original age and will never change, even as the client gets older. Since the client is over charged in the early years of the policy, the excess premium paid is credited to the policy's cash value, which belongs to the insured while they are alive. However, upon death, the insurer keeps the cash value and uses it offset their risk. In other words, as the cash value goes up, the insurers risk goes down, which allow them charge a level premium. 97. Question #90609 What life insurance rider will pay a monthly benefit should the insure become disabled: AAccidental death benefit BAccelerated benefits CDisability income DGuaranteed insurability: c Explanation: The disability income rider will pay a monthly benefit to the insured should they become disabled and is a type of health (disability) insurance. 98. Question #90546 Which of the following is not a type of ordinary life insurance? ALife paid up to age 50 BA 25-year decreasing term policy CGroup life insurance DAn endowment: c Explanation: There are three types of ordinary life insurance which can be remembered using the acronym WET and they are as follows: 1). Whole Life 2). Endowments 3). Term. Industrial life and group life insurance are both separate classes of life insurance. 99. Question #90619 Which of the following policies pays a death benefit when the first insured person dies: AJoint life BSurvivorship annuity CSurvivorship life DFamily policy: a Explanation: Joint life pays a death benefit when the first insured dies. Survivorship life pays a death benefit when the surviving insured dies. 100. Question #90549 The social insurance supplement benefit rider in a disability income policy: AProvides payment when the insured is totally disabled only and not receiv- ing any social security benefits BPays only if the insured is eligible for benefits from social security CProvides a bonus payment which will match the social security disability income benefit, if they become eligible DPays a benefit if the insured is injured at work and receives workers compensation coverage: a Explanation: The social insurance supplement rider was created to generate benefits during the waiting period for social security disability income coverage, which they may, or may not become eligible for. 101. Question #90582 Which of the following is not considered to be an insurance underwriting risk classification: AStandard BDeclined CNon-standard DPreferred: b Explanation: Underwriters are involved in risk selection in order to assure that the insurer makes an underwriting profit. There are 3 categories of risk: 1) Standard; 2) Non-standard; and 3) Preferred. A standard risk is the average person. A non-standard risk is a person who may have dangerous hobbies (avocations), and a preferred risk is a person that does not smoke, is not overweight and exercises regularly. If an applicant cannot be classified in one of these 3 categories, the underwriter may ask for more money, add an exclusion or decline to write the risk entirely. 102. Question #90650 A guaranteed renewable disability policy is one where the insurer: AHas the right to change any of the policy terms BWill not renew the policy if the insured does not comply with certain conditions such as continued employment CGives up the right to change the premiums DHas the right to change the premiums, but may not change any of the policy terms: d Explanation: In a guaranteed renewable health (disability) insurance policy the insurer can change premiums, by class only. 103. Question #90528 All are required duties regarding the organizational license of a co-partner- ship whose membership has changed EXCEPT: AIt must file within 30 days an application for registering the change in membership signed by a general partner. BReturn the old license with the signatures of all of the original members to the co-partnership to the Commissioner CPay the required fees DAt least one person authorized to exercise theagency powers of the original partnership must continue with the surviving partnership: b Explanation: All of these are true when the character of an insurance agency organized as a co-partnership changes EXCEPT that the old license with the signatures of the original members of the co-partnership is not required to be returned to the Commissioner. 104. Question #90523 Which of the following is true about Medicare Supplement insurance poli- cies: AThey are available to applicants of any age BThey are not needed by those who purchase Long Term Care insurance CInsurers may offer plans that contain only the 'core' benefits DThey are also known as Medicare Part B: c Explanation: They are 12 'standardized' Medicare Supplement policies, identified as Plans A through L. Although coverage is standardized, premiums will vary substantially, depending upon the insurer. In other words, if a customer buys Plan C, it really does not matter where he buys it, since the coverage is the same. Although insurers may offer all 12 plans, they may elect to offer only Plan A, which is the most basic and most inexpensive, since it only provides the 'core' benefits. Medicare Supplements are sold by private insurers to supplement Medicare, which is generally only available to those who are at least age 65. 1. Question #90476 Carol is injured driving a company car at work. Her Health insurance cover- age: AProvides excess or supplementary coverage BWill provide coverage on a pro-rata basis with Workers Compensation CWill cover her injuries DWill not cover her since this is an occupational injury: D Explanation: Most Health insurance provides 'non-occupational' (off the job) coverage for sick- ness or injury, meaning that occupational coverage is excluded. However, if a person is not required to be covered by Workers Compensation, some Health policies will cover both on and off the job, which is known as 'occupational' coverage. 2. Question #90486 The minimum participation percentage for large group insurance under the California code is: A50% B40% C75% D25%: C Explanation: The California Insurance Code requires a 75% minimum participation percentage for large group Life insurance. 3. Question #90409 All of the following are classified as Life insurance EXCEPT: AWhole life BTerm CEndowment DAccidental Death & Dismemberment (AD&D): D Explanation: AD&D is a type of Disability (Health) insurance, not Life. 4. Question #90464 A client invests $50,000 in after-tax dollars into a deferred annuity over a period of time. When he annuitizes, he will receive $4,000 a year over his projected life span. If his total return is expected to be $100,000, how much of the client's $4,000 annual annuity pay-out will be taxable each year for the first 10 years: A$800 BNone C$4,000 D$2,000: D Explanation: The client has $100,000 in his account, of which $50,000 is his own money, which was contributed with after-tax dollars. Since his contributions will be returned tax free and since they make up half of his account value, only half of his annual pay-out (the earnings portion) will be taxable as ordinary income. Further, you can find his projected life span by dividing the $100,000 total by his $4,000 annual pay-out, which would be 25 years. After 25 years, he will have recovered all of his own contributions, so the entire $4,000 would be taxable. Remember, annuity payouts are for life. 5. Question #90470 Which of the following is true regarding 'speculative' risk: AThere is no chance for gain BIt has a chance for gain or loss CIt is insurable DIt has a chance for loss only: B Explanation: Speculative risk has the chance for gain or loss and is not insurable. For example, if you buy a lottery ticket you might gain, but you will probably lose. It is 'pure' risk that is insurable, which has the chance for loss only, with no chance for gain. On Life insurance, you might die. On Health insurance, your might become sick or injured. On Fire insurance, your house could burn down. These are 'pure' risks. 6. Question #90425 Part A of Medicare provides basic hospital benefits including coverage for the care and counseling of the terminally ill, which is known as: ALong term care BHome health care CSkilled nursing facility care DHospice care: D Explanation: Medicare is a federal health insurance program for people 65 or older who qualify for Social Security, people of any age with permanent kidney failure, and those who are permanently and totally disabled. An individual is automatically eligible for Medicare Part A with no monthly premium at age 65, which includes coverage for hospitalization, skilled nursing, home health care and hospice care. 7. Question #90441 Medical Information Bureau (MIB) members must report which of the follow- ing: ALife insurance death claims BHealth conditions discovered during the underwriting process CInsurance company actions taken DAdverse underwriting decisions: B Explanation: The MIB is a non-profit information agency formed to assist health insurers uncover misrepresentations or fraudulent actions by applicants for insurance. MIB members that find an impairment in underwriting report such findings, as well as situations which applicants have previously been involved in and information received from physicians or other persons commenting on the status of a proposed insured. 8. Question #90460 If a $100,000 Whole Life insurance policy with a cash value of $10,500 lapsed and the insured selected the reduced paid-up non-forfeiture option, all of the following would be true EXCEPT: AThe new policy would have a cash value BThe new policy would have a face amount of $100,000 CThe new policy would not require proof of insurability DThe new policy would provide coverage to age 100: B Explanation: If the insured selects the reduced-paid up non-forfeiture option, the insurer will use the cash value in the lapsed policy to buy the insured a new Whole life policy at the insured's current age without evidence of insurability. The new policy will be paid-up until age 100 or the insured's death, whichever comes first, and will have an immediate cash value. However, $10,500 would not be enough to buy the insured a $100,000 policy, so coverage will be reduced. 9. Question #90495 Under the Women's Health and Cancer Rights Act all health insurance plans which cover mastectomies must also cover which of the following: ARehabilitation BReconstructive surgery CHome health care DPrescription drug coverage: B Explanation: Under WHCRA, group health plans, insurance companies and health maintenance organizations (HMOs) offering mastectomy coverage also must provide coverage for certain services relating to the mastectomy in a manner determined in con- sultation with a attending physician. This required coverage includes all stages of reconstruction of the breast on which the mastectomy was performed, surgery and reconstruction of the other breast to produce a symmetrical appearance, and prostheses and treatment of physical complications of the mastectomy. 10. Question #90423 Medical Information Bureau (MIB) members consist of: ALife & Health insurers BWorkers Compensation insurers CAll answer options are incorrect DFire & Casualty insurers: A Explanation: The MIB is a nonprofit information agency supported by Life & Health insurance companies, in order to help insurers uncover misrepresentations or fraudulent actions by applicants. MIB member companies that find health impairments in underwriting report their findings to the MIB in the form of a code number. The MIB discloses to underwriters the applicants prior health history, including information received from doctors. However, insurance company underwriting actions are not recorded anywhere in MIB files. 11. Question #90471 A Comprehensive Major Medical Expense policy generally includes all of the following EXCEPT: AFirst dollar coverage with high lifetime limits BA deductible CA capitation fee DCo-insurance: c Explanation: 'Capitation' fees are a characteristic of HMOs, not policies written by insurance companies. A 'capitation' fee is a per person fee that an HMO pays a doctor based upon the number of patients they see during a specified period of time. Comprehensive Major Medical Expense insurance is a combination of a Basic plan and a Major Medical plan, which is generally the best coverage you can obtain from an insurance company. 12. Question #90400 When an Agent pleads 'nolo contendere' to a violation of the insurance code, it means: AHe is pleading guilty to a violation of the insurance code BHe is pleading not guilty to a violation of the insurance code CHe is leaving the determination of guilt up to the opinion of the Commis- sioner DHe has been convicted of a violation of the insurance code: c Explanation: A plea of 'nolo contendere' means that the agent neither admits or disputes the charges against him, and is an alternative to pleading guilty or not guilty. It is also called a plea of 'no contest'. The Commissioner can use his or her own judgment as to whether or not a violation has occurred, and if so, what the penalties should be. 13. Question #90366 Twelve months ago, a 39 year tourist broke his neck in a swimming pool accident while on vacation and suffered paralysis, from which he is not expected to recover. He may be eligible to receive disability income benefits from: AMedicare BSocial Security CLong Term Care (LTC) DWorkers Compensation: b Explanation: After a 5 month waiting period, Social Security provides disability income benefits for those whose disability is expected to last at least 12 months or result in their death and are incapable of performing the duties of any occupation. Medicare covers medical expenses, not disability income. LTC covers custodial care in a nursing home. Workers Compensation only covers occupational, job-related injury or sickness. 14. Question #90367 An insurance company 'admitted' to do business in California is also known as an: AForeign insurer BAlien insurer CDomestic insurer DAuthorized insurer: d Explanation: All insurers, except for Surplus Lines insurers, must be 'admitted' or 'authorized' by the Insurance Commissioner before they can transact business in this state, whether they are domiciled in this state (domestic), another state (foreign) or in another country (alien). 15. Question #90412 Which of the following is not a Life insurance non-forfeiture option: APaid-up additions BCash surrender CExtended term DReduced paid-up: a Explanation: Paid-up additions is a dividend option, not a non-forfeiture option. If a mutual insurer pays a dividend, the policy owner may use that dividend as a single premium to buy additional Whole Life insurance, which is paid-up until the insured's age 100 or prior death. Dividends may never be guaranteed. 16. Question #90391 Who does the Social Security 'black-out' period affect: ADeceased spouse BChildren CSurviving spouse DEmployer: c Explanation: Widows or Widowers will receive Social Security Benefits until their youngest child turns age 16, at which time benefits will stop until the widow or widower becomes eligible for Social Security retirement benefits, which may start as early as age 60 for surviving spouses. This period of time during which no Social Security benefits are paid is known as the 'black-out' period. 17. Question #90503 A life insurance policy which will allow the insured to self direct the cash value into different sub-accounts is: AAdjustable Life BVariable Life CUniversal Life DEndowment: b Explanation: A variable life insurance policy will allow the insured to select from a number of different investment accounts to invest the cash value. Variable life is a securities product and a securities license is needed to sell it in addition to a life insurance license. 18. Question #90444 In every LTC policy that provides home care benefits, eligibility for home care benefits require that the insured be unable to perform at least Activities of Daily Living (ADLs) or have an impairment of cognitive ability: AFour BThree COne DTwo: d Explanation: LTC policies written to provide home care benefits must provide those benefits if the insured cannot perform at least two ADLs, which include such things as dressing, bathing, feeding, walking and the general ability to care for oneself. 19. Question #90413 If a Defined Benefit qualified pension plan has a 7 year 'vesting' schedule, after 7 years all employer contributions plus earnings are: ANot vested B70% vested C100% vested D30% vested: c Explanation: The word 'vesting' means ownership. ERISA requires that qualified Defined Benefit pension plans have a vesting schedule, which requires that employer contributions and earnings be gradually vested over a period time. Upon termination of employ- ment, employees may take the vested monies as a taxable distribution or roll them over to another qualified plan, such as an IRA. Voluntary employee contributions are vested immediately. 20. Question #90483 When will the first benefit check be issued for a disability income policy with a 90 day elimination period: A121st Day of continue disability B120th day of continued disability C90th day of continued disability D91st day of continued disability: a Explanation: Since the policy has a 90 day waiting or elimination period there will be no benefits paid for the first 90 days of disability. After the insured satisfies the waiting/elimination period, benefits must be paid at least monthly and will be paid on the first day of the month for the previous month. 21. Question #90469 All of the following are true about the difference between a Conditional Receipt and a Binding Receipt EXCEPT: AA Binding Receipt provides immediate coverage and a Conditional Receipt does not BThe Conditional Receipt creates immediate coverage and a Binding Receipt does not CA Binding Receipt is not generally used in Life and Health insurance whereas the Conditional Receipt is DNeither a Binding or a Conditional Receipt is given unless the premium has been paid: B Explanation: Most Life and Health insurers require that their agents use Conditional Receipts, which state that no coverage is in effect until the applicant has satisfied all the conditions (such as passing a physical exam) and the underwriter has approved the application. A Binding Receipt may be used by some insurers to provide the applicant with a small amount of coverage while the results of the physical exam and underwriting process are pending. Once the underwriter approves the application, then the full amount of coverage takes effect. Neither type of receipt may be given out unless the applicant has paid the premium. 22. Question #90480 Which of the following health care providers is not a physician? AUrologist BNeurologist CDermatologist DOptometrist: D Explanation: A physician is also known as a medical doctor (M.D.). An optometrist is a Doctor of Optometry, an O.D. not a physician, or M.D. 23. Question #90373 Which of the following is true if the Cost of Living rider is attached to a Life insurance policy: AAny increase in policy limit is subject to proof of insurability BThe rider causes the policy limit to increase, but the premium increases as well CThe rider costs extra but increases in coverage are free DThe policy limit will automatically go up or down based upon the rate of inflation: b Explanation: The Cost of Living rider is designed make sure that the insured's policy limit keeps pace with inflation. The rider costs extra as do future increases in coverage, although increases are not subject to insurability, meaning no physical exam is required. 24. Question #90398 A person who has contributed to Social Security 6 out of the last 13 quarters has what status: APartially insured BCurrently insured CNone DFully insured: b Explanation: Currently insured under Social Security means that a worker must have at least 6 quarters of coverage paid in out of the last 13-quarter period ending with the quarter resulting in their death, disability or retirement. Fully insured status means that a person has paid in 40 quarters of coverage. If a person is fully insured, they are eligible for all Social Security benefits. If a person has only currently insured status, they are eligible for only certain reduced benefits. 25. Question #90454 Which of the following is an incorrect list of Life insurance policy provisions: AIncontestability, misstatement of age, insurable interest BOwnership, assignment, entire contract CModification, free look, mode of premium payment DGrace period, reinstatement, suicide: a Explanation: Most standard provisions in a Life insurance policy are required by law and are designed to protect the customer. However, insurable interest is not a policy provision. It is an underwriting requirement that states that you cannot buy Life insurance on anyone other than yourself unless you have an insurable interest in that person at the time of application. Insurable interest is usually based upon immediate family or economics, such as Key Person Life insurance. It is designed to prevent gambling. Insurable interest need not exist at time of death. 26. Question #90465 When does an application for Life insurance become part of the Entire Contract: AWhen attached to the policy at issue BWhen signed by both the applicant and the agent CWhen signed by the applicant DWhen the policy is issued: a Explanation: Although applications don't have to be attached to the policy at issue, they usually are, because if the insurer does not attach it they may be giving up their right to contest a claim during the 2 year Incontestability period. In other words, if the application is not attached, it is not admissible in court under the rules of evidence, and the insurer would have to pay a claim even though the insured had lied about a material fact. Only the Entire Contract, which consists of the policy and the application, if attached, are admissible in court. Of course, after 2 years it doesn't matter, since a life policy is totally incontestable by law, even for fraud. 27. Question #90381 Which of the following contains a definition of total disability that is the most difficult to meet: AMedicare BLong Term Care CSocial Security DWorkers Compensation: c Explanation: To qualify for Social Security disability income benefits, the claimant must have 'fully insured' status, which means that he or she must have contributed to Social Security for at least 40 quarters, satisfy a 5 month waiting period, be unable to perform any job and have a disability that will last at least 12 months or result in death. 28. Question #90459 Which of the following is true if a Life agent submits an application for Life insurance to a Life insurer for which he holds no appointment and the insurer issues the policy: AThe policy is invalid BThe insurer must write the policy CThe agent is in violation of the state Insurance Code DThe insurer must appoint the agent within 14 days: d Explanation: Although there is no such things as a 'brokers' license in Life insurance, a licensed Life agent may transmit an application to an insurer for which he holds no appoint- ment. Although an insurer is not required to accept such an application, if they do and issue a policy, the policy is valid but the insurer must forward to the Commis- sioner a Notice of Appointment appointing the agent as their representative within 14 days. 29. Question #90445 Group insurance is generally less expensive than individual policies primar- ily because: AIt is not subject to underwriting BCoverage is more limited CInsurer expenses are lower DInsured persons are usually older: c Explanation: Group coverage is less expensive due to lower expenses. Instead of issuing individual policies to each covered person, only one Master Policy is issued, with covered persons receiving Certificates of Insurance that summarize their coverage. Group coverage is usually better than individual, and although there is no individual underwriting, the entire group may be underwritten. Persons insured are generally younger, not older. 30. Question #90364 On Disability Income insurance, the period of time between the onset of a disability and the time benefits start is known as the: AEnrollment period BProbationary period CWaiting period DUnderwriting period: c Explanation: Disability Income policies have a time deductible, instead of a dollar deductible. The period of time between the onset of a disability due to sickness or accident is the Waiting period, which is also known as the Elimination period, which is selected by the insured when they buy the policy. The longer it is, the lower the premium, and vice-versa. The probationary period limits coverage on new policies for pre-existing conditions. 31. Question #90473 The purpose of a 75% participation requirement on a contributory Group Health insurance plan is to: AAssure that every one is covered BPrevent adverse selection CRequire that dependents be covered DSet eligibility requirements: b Explanation: If employees have to contribute part of the premium for Group Health insurance, they might 'opt' out of coverage, leaving the insurer covering only the employees who have health problems, which is called 'adverse selection'. To solve this prob- lem, insurers require that when writing contributory group coverage, at least 75% of those eligible enroll. If the premium is non-contributory, meaning that the employer pays it all, then 100% of those eligible must enroll in the group insurance plan. 32. Question #90455 A $100,000 Whole life insurance policy with a cash value of $10,500 lapses and the insured selects the extended term non-forfeiture option. What is the face amount of the new policy: ALess than $100,000 B$10,500 CCannot be determined D$100,000: d Explanation: There are 3 non-forfeiture options on cash value Life insurance, including cash surrender, reduced paid-up and extended term, which is the automatic option. If the insured selects extended term, the cash value in the policy is used to buy the insured a new Term life policy without a physical exam at the insured's current age. The face amount of the new policy will be the same as the face amount of the lapsed policy, for as long as long a term (time) that $10,500 will buy. When that term runs out, the new policy expires. Remember, there is no coverage on Term life unless you die in the term. 33. Question #90485 A person convicted of the federal law regulating issues that effect the insur- ance industry and interstate commerce can be sentenced to how many years in prison: A10 or 15 B7 C3 D5: a Explanation: Depending on which violations occurred Section 1033 of the United States code states the maximum imprisonment can be either 10 or 15 years. 34. Question #90363 Insurance contracts are considered to be 'aleatory', which means that they: AAre one sided (unilateral) BAre based upon the Doctrine of Utmost Good Faith CAre subject to the Doctrine of Adhesion DHave an unequal exchange: d Explanation: While all of the above are true about insurance contracts, an 'aleatory' contract is one that has an unequal exchange due to its uncertain outcome. For example, your client buys medical expense insurance, but never has a claim, while another client buys a policy today and has a large claim tomorrow. The outcome depends on chance. Remember, consideration is defined as the exchange of value, and need not be equal. 35. Question #90468 The failure to disclose a material fact that a party knows and ought to com- municate so that the other party may make a sound and informed decision is known as: AFraud BConcealment CBreach of Warranty DMisrepresentation: b Explanation: Each party to a contract of insurance shall communicate to the other, in good faith, all facts within his or her knowledge which are material to the contract. Concealment, whether intentional or unintentional, entitles the injured party to rescind or void the insurance contract, meaning that no coverage would apply. 36. Question #90443 A Comprehensive Long Term Care (LTC) insurance policy covers all of the following EXCEPT: AAdult day care BHospice CRespite care DSkilled nursing facility: d Explanation: Comprehensive LTC policies cover both institutional and home care. Home care includes coverage for home health care, including skilled nursing or other pro- fessional services in the residence, adult day care and respite care, which is short-term care provided by other caregivers in order to provide relief for a primary caregiver. However, skilled nursing in a long term care facility (nursing home) is not covered. 37. Question #90394 On a Major Medical Expense policy, the feature that limits the insured's out-of-pocket expenses is known as a: AInside limit BCo-insurance requirement CStop-loss feature DDeductible: c Explanation: Most Major Medical Expense policies put a 'cap' on the insured's share of the co-insurance, which is known as a stop-loss feature. For example, an insured has 80/20 co-insurance, which means that after the deductible he has to pay 20% of the claim. On a large claim this could be a substantial amount, which is why many Major Medical policies have a stop-loss of $5,000, which means after the insured's share of the co-insurance reaches $5,000 on a particular claim, the insurer will pay 100%. 38. Question #90375 The Social Security 'black-out' period ends when a surviving spouse reaches age: A65 B55 C62 D60: d Explanation: Widows or Widowers of any age who have dependent children in their care are entitled to a monthly benefit after their spouse dies until their youngest child reaches age 16. At that time, the widow/widower's benefits are 'blacked-out' until they become eligible for Social Security retirement benefits, which may be as early as age 60 for surviving spouses. For example, a woman whose youngest child is age 6 becomes a widow at age 40. The widow will receive monthly benefits from Social Security until that child reaches age 16. At that time, the woman's Social Security benefits will stop (she is now age 50) and she won't receive anything further from Social Security until she reaches her earliest retirement age of 60. So, in this case, her benefits are 'blacked-out' for 10 years. It is during this time she needs to utilize the proceeds of her late husband's life insurance policy. 39. Question #90418 A qualified retirement plan that is set up to allow the employer to share their financial success with their employees is known as a: AProfit sharing plan BSplit dollar plan CEmployee Stock Ownership plan DPension plan: a Explanation: Employers may elect to establish a qualified profit sharing plan, under which contributions are made by the employer when profits are realized. The maximum contribution per employee is expressed as a percentage of compensation. Contri- butions are made in before tax dollars and are not taxable to the employee until they are distributed. Earnings in the plan are tax deferred as well. 40. Question #90371 Which type of qualified retirement plan is designed for public school teach- ers: AKeogh B401K CTSA DIRA: c Explanation: Tax Sheltered Annuities (also known as 403b plans) are tax qualified plans that allow employees of public educational institutions and certain other employees of non-profit, religious or charitable organizations to contribute before tax dollars up to certain limits on a payroll deduction basis. Since account earnings are tax deferred, upon withdrawal both the contributions and the earnings are taxable as ordinary income. TSA's are similar to 40lk plans in that employers may make matching contributions. 41. Question #90458 To make an insured 'whole' again after a loss is referring to: AReasonable Expectations BDoctrine of Adhesion CIndemnification DWaiver and Estoppel: c Explanation: Most Health insurance is based upon the Principle of Indemnity, which states that the purpose of insurance is to restore the insured to the same financial position they were in prior to a loss, but not to allow the insured to profit. Auto and fire policies also follow this same principle, but Life insurance is considered to be 'valued', in that the insurer will pay the face amount of the policy upon death, which is why it is said that Life insurance creates an immediate estate upon the death of the insured. 42. Question #90487 A person found guilty of a violation of the federal law regulating issues that effect the insurance industry and interstate commerce can be subject to a civil penalty of up to: A$10,000 B$20,000 C$30,000 D$50,000: d Explanation: The Attorney General may bring a civil action in the appropriate United States district court against any person who engages in conduct constituting an offense under section 1033 of Title 18 of the United State Code and, upon proof of such conduct such person shall be subject to a civil penalty of not more than $50,000 for each violation. 43. Question #90358 The 'black-out' period under Social Security starts when the youngest child is age: A21 B18 C16 D25: c Explanation: Widows or Widowers of any age who have dependent children in their care are entitled to a monthly benefit after their spouse dies until their youngest child reaches age 16. At that time, the widow/widower receives no benefit from Social Security until they are eligible for retirement, which may be as early as age 60. This is referred to as the 'black-out' period.