CA INSURANCE EXAM LIFE, ACCIDENT, SICKNESS OR HEALTH QUESTIONS AND ANSWERS

CA INSURANCE EXAM LIFE, ACCIDENT, SICKNESS OR HEALTH QUESTIONS AND ANSWERS "An insurance agent with a LIFE license can transact: A. Auto Insurance B. Life Insurance C. Homeowners Insurance D. All the Above - CORRECT ANSWER D. All the Above (only those with a P&C license can be called "an insurance agent" this is a trick question... this is a person who already has their p&c license AND their life license." "Which of these best describes an "agent"? - CORRECT ANSWER one who is appointed by any number of insurers, receives commissions from them and transacts on their behalf" "Which of the following best describes an express authority? - CORRECT ANSWER Authority of an agent that is specifically granted by the insurer" "Implied Authority is: - CORRECT ANSWER Authority given to an agent other than in the agent's contract" "Which of the following describes an insurer who has enough financial resources only to provide for all its liabilities and reinsurance of its outstanding risks? - CORRECT ANSWER Insolvent (Remember to be solvent you need all three, this one is missing Assets)" "An insurer must have money in reserves to cover its liabilities and reinsure its outstanding risks. In addition to this, the code requires a company to have: - CORRECT ANSWER Assets equivalent to paid in Capital" "According to the California Insurance Code, the penalty failutre to comply with a Notice of Seizure order is: - CORRECT ANSWER $1,000 fine AND/OR imprisonment for up to one year" "The California Insurance code defines a domestic insurer as an insurer organized under the laws of: - CORRECT ANSWER The state of California, whether or not it is an admitted insurer" "An insurer organized under the laws of any state outside the state of California is a: - CORRECT ANSWER Foreign Insurer" "An insurer organized in great Britain is an - CORRECT ANSWER Alien Insurer" "Which could be an admitted insurer? - CORRECT ANSWER Either a domestic, foreign, or alien insurer" "The retention limit is: - CORRECT ANSWER the maximum risk an insurance company will accept on a policy" "When an insurance company works with another insurer because it has exceeded its retention limit on a risk, this would be an example of: - CORRECT ANSWER Reinsurance" "A type of insurance where one insurer transfers loss exposures from policies written for its insured's to another insurer is known as? - CORRECT ANSWER Reinsurance" "The purpose of the 16-point bold type disclosure on a surplus lines policy is to inform the: - CORRECT ANSWER Insured that the policy is being issued through a non-admitted insurer" "A person who acts in a capacity that requires an active license without having a valid license is guilty of a: - CORRECT ANSWER Misdemeanor" "If an agent moves, he should advise the commissioner of his change in address: - CORRECT ANSWER Immediately" "Every licensee must include his license number on his business card in: - CORRECT ANSWER The same size type, and font, as any telephone number, address, or fax number" "When advertising on the internet, all of the following are required except: - CORRECT ANSWER His/her telephone number" "When an agent accepts premium from the insured and uses the money for personal gain, it is considered: - CORRECT ANSWER Theft" "Which of the following would not be an unfair trade practice? - CORRECT ANSWER charging males and females different rates for life or annuity contracts according to the mortality table that is segregated by sex" "An insurance policy may not provide which of the following? - CORRECT ANSWER Elimination of Risk" "A pure risk involves a chance of - CORRECT ANSWER Loss (or no loss)" "An example of a pure risk would be: - CORRECT ANSWER Mary has a financial loss due to an auto accident" "Which of the following is insurable? - CORRECT ANSWER Pure risk" "What is a hazard? - CORRECT ANSWER Anything that increases the chance of a loss" "Which of the following is a hazard? - CORRECT ANSWER A condition that might increase the likelihood of a loss occurring." "Which of the following best describes a moral hazard? - CORRECT ANSWER Lying on an application" "Which of the following best describes a morale hazard? - CORRECT ANSWER Driving fast and reckless" "If a house is located next door to a manufacturer of explosives, what type of hazard is this? - CORRECT ANSWER Physical" "What is a peril? - CORRECT ANSWER A cause of loss" "What is the process called whereby insurers decide which customer to insure and what coverage to offer? - CORRECT ANSWER Underwriting" "All are ordinary insurance except: - CORRECT ANSWER Group Insurance" "Which is NOT considered ordinary life insurance? - CORRECT ANSWER Group Life" "According to the code, industrial life insurance policies pay a death benefit that does not exceed what amount? - CORRECT ANSWER $10,000" "Which of these best describes a "whole life" contract? - CORRECT ANSWER It pays the face amount whenever death occurs during the entire span of life." "John purchased a life policy at age 30. Which of the following would require the highest premium payment? A. 20 Pay life B. 30 Pay Life C. Paid up in 25 years D. Paid up at age 65 - CORRECT ANSWER A. 20 Pay Life" "When the cash values of a life policy equal the face amount of the policy, what is the effect? - CORRECT ANSWER The policy has endowed and the insured can surrender it for the full face amount" "A whole life policy has: - CORRECT ANSWER Fixed Interest, Fixed Premiums" "Which of the following policies will keep up with Inflation? - CORRECT ANSWER Indexed whole life" "A flexible benefit cash value policy which earns a current rate of interest with flexible premiums is: - CORRECT ANSWER Universal Life" "The current rate of interest paid to the cash value account of a universal life policy consists of: - CORRECT ANSWER Guaranteed interest plus excess interest" "In order from lowest to highest, what is the correct order of initial premiums for life insurance policies? - CORRECT ANSWER Modified life, ordinary life, single premium" "The Cash value of a variable life policy: - CORRECT ANSWER Is determined by the investment experience of the separate account" "The SEC regulates: - CORRECT ANSWER Variable life policies" "Which of the following would require a securities license to sell? - CORRECT ANSWER Variable Life" "Term insurance is typically characterized by: - CORRECT ANSWER Low premiums and no cash value" "Which type of joint life policy pays no benefit after the death of the first insured individual? - CORRECT ANSWER Second to Die" "A handicap child's first parent dies, and the child is still financially stable. The second parent dies, and as a result the child is now financially unstable. Which policy would be most suitable for the child's needs? - CORRECT ANSWER Second to die (last survivor)" "Bob and Mary have a handicap child. bob and Mary both die in an accident. Which policy is most suitable for the handicap child's needs? - CORRECT ANSWER Last survivor policy" "An insurer pays a refund from the surplus of profits to the holder of a participating policy. What is this payment? - CORRECT ANSWER A policy dividend" "Ray has a $40,000 20-pay life policy which lapses at the end of the seventh year. The non-forfeiture option that would provide coverage for the longest period of time would be: - CORRECT ANSWER Reduced Paid-up" "A $50,000 whole life policy with a cash value of $10,000 has been in force for 11 years. The policy owner is unable to continue the premium payments. Which of the following describes the reduce paid-up non-forfeiture option? - CORRECT ANSWER The cash value is used to purchase a $20,000 paid-up policy" "Who would be considered a claimant on a life insurance policy? - CORRECT ANSWER Beneficiary" "Who has the right to change life insurance policy beneficiaries? - CORRECT ANSWER The policyholder" "All the following statements about the election of a life insurance policy's settlement options are true except: - CORRECT ANSWER When no settlement option is chosen, the proceeds are automatically paid to the policy owner's estate." "Life insurance settlement options include all of the following except: - CORRECT ANSWER Extended Term" "On a life policy when a settlement option has not been specified, the usual method of distribution is: - CORRECT ANSWER Lump sum Payment" "What is true about settlement options? A. The policy owner can choose one at the time of application. B. The policy owner may change the settlement option during his/her lifetime. C. The beneficiary may choose a settlement option if the policy owner does not specify one. D. All of the above - CORRECT ANSWER D. All of the above" "Which of the following is a correct statement regarding federal income tax consequences of the insured corporate buy-sell agreement? - CORRECT ANSWER Life insurance death proceeds constitute taxable income to the estate." "Which types of Policies are used to fund a Buy/Sell agreement? - CORRECT ANSWER Life & Disability" "What is true about annuities? - CORRECT ANSWER They liquidate an estate over a period of time." "Immediate annuities begin: - CORRECT ANSWER After a lump sum premium is paid" "Mary receives a large bonus from her company. She purchases an annuity that will start paying her $400/month immediately. This is a(n) - CORRECT ANSWER Single premium immediate annuity." "A variable annuity applicant does not request his premium to be invested in a stock portfolio. The contract is returned to the company during the right to return period. What is the applicant entitled to receive? - CORRECT ANSWER A refund of the entire amount of the investment." "Which annuity offers a guaranteed minimum interest rate, plus excess interest without any loss of principal? - CORRECT ANSWER Indexed Annuity" "The Federal act that is designed to protect group plan participants, establish pension equality, and mandates strict reporting and disclosure requirements is: - CORRECT ANSWER ERISA" "According to the Employee Retirement Income Security Act (ERISA), a plan sponsor must provide the participants with: - CORRECT ANSWER Annual financial statements" "According to the Employee Retirement Income Security Act (ERISA) fiduciary standards, benefit plans are operated for: - CORRECT ANSWER Plan participants and beneficiaries" "Which of the following is true about an IRA? - CORRECT ANSWER It grows tax deferred" "A contribution to which of the following retirement plans does not allow for a tax deduction in the year the contribution is made? - CORRECT ANSWER Roth IRA" "What type of a retirement plan is used by employees of public school systems? - CORRECT ANSWER TSA" "What is the earliest age at which an owner can start to withdraw funds from a IRA without penalty? - CORRECT ANSWER 59 1/2" "In a 6-year vesting schedule, what percentage of employer contributions must be vested after 6 years of service? - CORRECT ANSWER 100%" "In a 6-year vesting schedule, what percentage of employer contributions must be vested after 2 years of service? - CORRECT ANSWER 20% (first year nothing, every year after is 20%)" "In a 6-year vesting schedule, what percentage of employer contributions must be vested after 3 years of service? - CORRECT ANSWER 40%" "The entire contract is: - CORRECT ANSWER The policy, and when attached, the application" "All the following are required on a life insurance application except: - CORRECT ANSWER The amount of disability income in force" "Who can make a change in an insurance contract? - CORRECT ANSWER Authorized officer of the insurance company" "What is involved in a viatical contract transaction? - CORRECT ANSWER Absolute Assignment" "The complete transfer by the existing owner of all rights in an insurance policy to another person is: - CORRECT ANSWER Absolute Assignment" "Which of the following are common insurance policy provisions? - CORRECT ANSWER entire contract, grace period, reinstatement" "The policy provision which prevents an insurer from voiding a policy for misstatements after two years is: - CORRECT ANSWER Incontestability" "Which life insurance provision states the policy proceeds cannot be assigned, transferred, or encumbered in any way? - CORRECT ANSWER Spendthrift provision" "Under the 10 day right to return, the policy will pay proceeds: - CORRECT ANSWER If the policy is not returned but premium is paid" "Senior citizens are given a 30 day right to return: - CORRECT ANSWER At age 60 or older" "When does the automatic premium loan provision start? - CORRECT ANSWER At the end of the grace period" "Common Insurance Policy Riders include all of the following except: - CORRECT ANSWER Extended Term" "The insured is totally and permanently disabled. The insured's policy continues in full force without further premium payment as the policy contains a: - CORRECT ANSWER Waiver of Premium Rider" "To waive an insured's premium, most companies require an individual's disability to be: - CORRECT ANSWER Total and Permanent" "While an insurer is paying the premium for a life insurance policy under the waiver of premium rider: - CORRECT ANSWER The policy remains in full force in every respect" "If waiver of premium rider is added to a policy, the additional premium: - CORRECT ANSWER Has no effect on the cash values of a life policy" "The Cost of living rider: - CORRECT ANSWER Allows the insured to increase the death benefit - usually tied to the consumer prices index - for an additional premium" "Which rider will pay a portion of the death benefit prior to the insureds death due to serious illness? - CORRECT ANSWER Accelerated death benefit" "Who would be considered a claimant on a disability income policy? - CORRECT ANSWER Insured" "What is the tax treatment for individual disability income policies? - CORRECT ANSWER Non-deductible premiums and tax-free benefits" "Which policy would have the lowest premium if all factors are the same? - CORRECT ANSWER Cancellable" "Which of the following health plans would have the highest premium? - CORRECT ANSWER Non-cancellable" "Which of the following renewability provisions of a disability contract is likely to change the contract the least and cost the most? - CORRECT ANSWER Non-cancellable contract" "A disability policy described as "guaranteed renewable" is one where the insurance company: - CORRECT ANSWER Surrenders the right to change any of its terms but may change the premiums." "Under a individual guaranteed renewable health contract, the insurer has the right to: - CORRECT ANSWER Change premiums for a class of insureds" "Which of the following is true about the PPACA? - CORRECT ANSWER It allows individuals purchase health insurance through the exchange if insurance is not affordable." "Under PPACA, coverage for young adults was extended until what age? - CORRECT ANSWER 26" "What is medical loss ratio? - CORRECT ANSWER It is the percentage of premium dollars that must be spent on medical benefits and quality improvement." "Under the FMLA (Family and Medical Leave Act) How many weeks of leave must be provided in a 12 month period due to pregnancy? - CORRECT ANSWER 12 Weeks" "What is not a state government program? - CORRECT ANSWER Social Security" "Which program is provided for people who are low income and cannot afford health insurance? - CORRECT ANSWER Medi-Cal" "Which health entitlement program is jointly financed by the Federal and State government? - CORRECT ANSWER Medi-Cal" "All of the following are benefits under OASDHI except: - CORRECT ANSWER Long Term Care" "Retirement benefits under social security are available only for workers who are: - CORRECT ANSWER Fully insured" "All of the following statements about Social Security disability benefits are true except" - CORRECT ANSWER Benefits are designed to replace the entire amount of a worker's earnings." "Which individual collecting Social security benefits would be affected by a black out period? - CORRECT ANSWER The insured's spouse" "The Social Security blackout period ends when the surviving spouse reaches the age of: - CORRECT ANSWER 60" "During the blackout period, a child in school is eligible to receive Social Security survivor benefits until what age? - CORRECT ANSWER 19" "Medicare Part A begins automatically at age: - CORRECT ANSWER 65" "An individual may qualify for a special enrollment period outside the open enrollment period how many days after the certain qualifying life event? - CORRECT ANSWER 60 Days" "When a person enrolls in Medicare, they will automatically be enrolled in which medicare part? - CORRECT ANSWER Part A and B" "Medicare Part A provides for all of the following except: - CORRECT ANSWER Physicians Services" "Medicare Part A does not cover: - CORRECT ANSWER Prescription Drugs" "Medicare Part A does not cover which of the following? - CORRECT ANSWER Long Term Care" "All the the following are not covered under Part A of Medicare except: - CORRECT ANSWER Hospital stays and inpatient mental health care" "Which of the following is not provided by hospice care? - CORRECT ANSWER Rehabilitation" "After an insured pays the deductible on Medicare Part B, the insured pay what percent of the services received? - CORRECT ANSWER 20%" "Physicians services in the hospital, doctor's office, or clinic are covered under: - CORRECT ANSWER Medicare Part B; additional premium due" "What is Medicare Part C? - CORRECT ANSWER Medicare Advantage" "What is covered under Medicare's vision care? - CORRECT ANSWER One pair of eyeglasses with an intraocular lens after cataract surgery" "What is NOT true about Medicare's vision care? - CORRECT ANSWER Medicare covers routine eye care and eyeglasses or contact lenses" "What is the first step in submitting a claim to medicare? - CORRECT ANSWER The medical provider submits expenses to Medicare" "Who submits claims to Medicare Part A? - CORRECT ANSWER Medical Provider" "Medicare is administered by which of the following? - CORRECT ANSWER Health Care Financing Administration" "After receiving care by a doctor, how is the insured notified of Medicare's decision to cover the claim? - CORRECT ANSWER Notice from the Health Care Financing Administration" "What right does an individual have if there is a disagreement on a decision on the amount Medicare will pay? - CORRECT ANSWER He can ask Medicare to review the decision" "The term used to apply to a break (rest) given to people caring full time for an individual in their home is: - CORRECT ANSWER Respite" "Which of the following long term care policies would have the highest premium? A. 14 day elimination period; 3 year benefit period B. 14 day elimination period; 5 year benefit period C. 90 day elimination period; 5 year benefit period D. 180 day elimination period; 5 year benefit period - CORRECT ANSWER B. 14 day elimination period; 5 year benefit period." "In order to be qualified to sell LTC insurance in California, agents must comply with all of the following except: - CORRECT ANSWER Licensees must pass an LTC knowledge exam every 10 years" "If a doctor is paid a fixed monthly fee for each patient by the HMO, it is referred to as: - CORRECT ANSWER Capitation" "Basic Plan (Basic Medial Expense) - CORRECT ANSWER 1st dollar coverage - no out of pocket from subscriber Basic Hospital Basic Surgical Basic Physician" "Comprehensive Major - CORRECT ANSWER Covers essentially all medical expenses under one policy (requires deductible & coinsurance) Basic and Catastrophic Under 1 policy Comes with: Deductible (per cause, per calendar, family), coinsurance, stop loss limit (Max out of pocket from subscriber)." "Supplemental Major - CORRECT ANSWER Comes with: Once basic is exhausted you must pay corridor deductible, coinsurance, stop loss limit." "Corridor: - CORRECT ANSWER Must be paid after basic medical benefits are exhausted and before supplemental major medical benefits will apply." "Coinsurance - CORRECT ANSWER Feature of a major medical policy where insurer and insured share in the cost of medical expense (usually on a 80/20 basis)" "Copayment: - CORRECT ANSWER Fixed payment for a covered service or visit paid when an individual receives medical services" "Cost Sharing: - CORRECT ANSWER Deductibles, copayments, and coinsurance are all part of cost sharing" "Usual, Customary, and Reasonable charges: - CORRECT ANSWER Surgical benefits are not listed by dollar amount, instead insurer will pay based on the amount physicians in the same geographical area normally charge for the similar procedures." "What type of policy would have a corridor deductible? - CORRECT ANSWER Supplemental major medical policy" "What is not a feature of major medical policies? - CORRECT ANSWER First dollar coverage" "What term describes the concept that the insurer and the insured share in the cost of medical expenses, with the insurer bearing the greater share? - CORRECT ANSWER Coinsurance" "A provision stating that persons with health insurance and their insurers will share covered losses in an agreed proportion is called: - CORRECT ANSWER Coinsurance" "Many major medical policies include a provision whereby when expenses reach a certain dollar amount the insured no longer shares in the cost of expenses; the insurer pay 100% of remaining covered charges. This is referred to as: - CORRECT ANSWER Stop loss limit" "Which of the following is NOT an example of cost sharing in a health insurance policy? - CORRECT ANSWER Coordination" "On a major medical policy when two or three family members have satisfied the deductible for the entire family, this is referred to as: - CORRECT ANSWER Family deductible" "When medical expense policies do not state specific dollar benefit amounts, but instead base payments upon the charges for like services in the same geographical area, benefits are designated as which of the following? - CORRECT ANSWER Usual, customary, and reasonable charges." "A health maintenance organization (HMO) plan contains costs by promoting: - CORRECT ANSWER Preventative Care" "In HMO's, the use of a primary care physician is common as part of the: - CORRECT ANSWER Gatekeepers System" "Under an HMO, when physicians receive a flat monthly payment from the HMO for every member without regard to actual services provided by the physician, this is known as: - CORRECT ANSWER Capitation Fee" "HMO's are required to provide for all of the following except: - CORRECT ANSWER Prescription Drugs" "Waiver of Premium Rider: - CORRECT ANSWER allows insured to waiver premium during a period of total disability" "Who would be considered a claimant on a disability income policy? - CORRECT ANSWER Insured" "An insured's disability income policy defines total disability as the "insured's inability to perform the duties of any occupation for which he or she is reasonably qualified by education, training, or experience." This definition is known as the: - CORRECT ANSWER "Any Occupation" definition and is more restrictive than other definitions" "Own Occupation: - CORRECT ANSWER Defines total disability as the insured's inability to perform any/all of the duties of their OWN occupation as a result of sickness or accident" "Occupational Policy: - CORRECT ANSWER Covers losses due to work related or non work related injuries" "Non Occupational Policy: - CORRECT ANSWER will not cover the insured only while not working" "A disability income policy would do which of the following? - CORRECT ANSWER Replace a partial portion of income if you were disabled." "During the disability income elimination period: - CORRECT ANSWER No benefits are payable" "The commonly used 30, 60, 90, and 180 days in disability terminology refers to the: - CORRECT ANSWER Number of days for which no benefits are payable" "An elimination period is also known as: - CORRECT ANSWER A waiting period" "In a disability income policy, if the insured chooses a 90-day elimination period, when would the first check be issued by the insurance company? - CORRECT ANSWER 121st day - takes 31 days" "To be classified as accidental under a disability income insurance policy, the following criteria must be used: - CORRECT ANSWER The cause may be intentional, but the result must be accidental" "What is the tax treatment for individual disability income policies? - CORRECT ANSWER Non deductible premiums and tax free benefits" "A disability policy described as "guaranteed renewable" is one where the insurance company: - CORRECT ANSWER Surrenders the right to change any of its terms but may change the premiums." "Under an individual guaranteed renewable health contract, the insurer has the right to: - CORRECT ANSWER Change premiums for a class of insureds." "In a disability income insurance policy, an insured is eligible for a waiver of premium benefit: - CORRECT ANSWER After the first three to six months of disability" "Which of the following is true about the PPACA? - CORRECT ANSWER It allows individuals to purchase health insurance through the exchange if insurance is not affordable" "Under the ACA, the maximum out of pocket expense limit for any individual marketplace plan in 2020 can be no more than how much? - CORRECT ANSWER $8,150" "Which of the following would qualify for the AIM (Access for Infants and Mothers) program? - CORRECT ANSWER A California woman who has a private health insurance plan with a maternity only deductible or copayment greater than $500" "To remain a certified agent with Covered California, an agent must get recertified how often? - CORRECT ANSWER Every 5 Years" "According to the Affordable Care Act, insurers must offer vision care to which of the following? - CORRECT ANSWER Children" "A woman had breast cancer then has a mastectomy. Under the WHCRA, which of the following would be covered? - CORRECT ANSWER Breast Reconstruction" "Contributory - CORRECT ANSWER Employer and employee contribute to premium payment" "Non-contributory - CORRECT ANSWER Employer pays entire premium" "Probationary - CORRECT ANSWER Period of time an employee must work for an employer before being covered under the group insurance" "Eligibility Period: - CORRECT ANSWER Period of time employees have to enroll in the group coverage" "MET - CORRECT ANSWER Provides benefits to employees of two or more financially unrelated companies" "COBRA: - CORRECT ANSWER Applies to employers offering group insurance with 20 plus employees, allows employees to stay under the group policy for a period of time if employee is terminated/loses coverage for any reason besides gross misconduct" "Coordination of Benefits: - CORRECT ANSWER Provision that specifies which policy is primary and which is secondary." "The main master policy owner of a group health insurance contract is the: - CORRECT ANSWER Employer" "In group insurance who is the contract between? - CORRECT ANSWER Employer and Insurer (the relationship between a carrier and broker/agent is employer to employee)" "In group insurance the employee receives: - CORRECT ANSWER A certificate of Insurance" "California will recognize a group for group insurance with a minimum of how many people? - CORRECT ANSWER 2 (true group is recognized at 10)" "A mentally handicapped child who is a life dependent under the parents group life policy will remain in the policy until what age? - CORRECT ANSWER Any age" "When a group plan is contributory, what percentage of eligible employees must participate? - CORRECT ANSWER 75%" "Which of the following is true regarding participation in a group health plan? - CORRECT ANSWER A non-contributory group health plan must involve all members." "Under a group life policy, the employee does not have to report the employer paid premium for the life insurance policy as long as the coverage is which of the following? - CORRECT ANSWER $50,000 or less" "Usually, in order to join a group insurance plan without proving insurability, an employee must: - CORRECT ANSWER Join the plan during the enrollment (eligibility period) period." "The probationary period in a group health policy intended for people: - CORRECT ANSWER Who joined the group after the policy effective date" "Which of the following statements concerning the usual coordination of benefits provision is correct? - CORRECT ANSWER When the plans both have this provision, coverage as an employee is primary to coverage as a dependent." "When a claimant is covered by more than one health plan, the situation is resolved through: - CORRECT ANSWER Coordination of benefits" "A blanket policy: - CORRECT ANSWER Covers a group, not individually named" "A university covering its students with disability insurance would use which type of policy? - CORRECT ANSWER Blanket" "If 2 or more employers are grouped together to purchase insurance, this would be known as: - CORRECT ANSWER Multiple Employer Trust" "A multiple employer trust: - CORRECT ANSWER Is a legal entity of small business owners formed to purchase group insurance" "The provision of the Consolidated Omnibus Budget Reconciliation Act (COBRA) apply to companies with what number of employees? - CORRECT ANSWER 20 (CAL-COBRA applies to companies with 2-19 employees)" "What is true about COBRA? - CORRECT ANSWER Dependents of employees must be given the same conversion and extension rights as the employee" "Social Security Benefits - CORRECT ANSWER Retirement, death & survivor, disability, and Medicare" “The McCarran-Ferguson Act - CORRECT ANSWER Gave the States the right to regulate the majority of the Insurance Industry at the State level" "According to the insurance code, which of the following terms is mandatory? - CORRECT ANSWER Shall" "According to Proposition 103, the commissioner of insurance became an elected official. The commissioner may serve: - CORRECT ANSWER Two consecutive terms (8 Years)" "Any person capable of making a contract of insurance subject to the insurance code is: - CORRECT ANSWER An Insurer" "Which of the following best describes a broker? - CORRECT ANSWER A person who is NOT appointed by any insurer, but may receive compensation for the policies he/she places through the insurer and may charge the client a fee" "What describes an exclusive agent? - CORRECT ANSWER An agent who transacts for one insurer or a group of related insurers" "Stock Insurance Company - CORRECT ANSWER An insurance company with a stated amount of capital stock owned by stockholders who compose the company and direct it by means of officers and directors" "Which of the following best describes a mutual insurance company? - CORRECT ANSWER A corporation owned by individuals who contribute capital through the purchase of policies" "Which of these is a correct statement about an admitted insurer? - CORRECT ANSWER Any insurer approved to transact insurance in California is an admitted one, without regard to location." "Which is NOT covered by CLHIGA? - CORRECT ANSWER Auto Insurance" "What classes of insurance are excluded from the California Insurance Guarantee Association? - CORRECT ANSWER Life and Annuity (CIGA is p&c while CLHIGA is EH&B)" "An applicant for an insurance license had another professional license revoked. What would the commissioner most likely do? - CORRECT ANSWER Deny the application without a hearing" "Effective Jan 1, 2011, a new life/health or property & casualty agent will need to take continuing education courses to renew their license. The requirement is: - CORRECT ANSWER 24 hours per two-year license term" "When a licensed agent submits a renewal application with applicable fees on or before the expiration date: - CORRECT ANSWER The agent will be able to transact for up to 60 days after the specified expiration date" "Bill, a life agent, died. When would his insurance license terminate? - CORRECT ANSWER upon death" "If a licensee wants to terminate and surrender his license, what must he do? - CORRECT ANSWER deliver the license to the commissioner" "If a licensee wants to terminate his license and the license is in the possession of the insurer or the licensee's employer, what must he do? - CORRECT ANSWER Make the surrender by written notice to the commissioner" "Records of an agent or broker must be available to the commissioner: - CORRECT ANSWER At all times" "How long must an agent maintain records for transactions in CA? - CORRECT ANSWER 5 years" "Records of an agent/broker must be stored in which of the following? - CORRECT ANSWER Primary/principal office" "Section 770 of the California Insurance Code: - CORRECT ANSWER States that no one engaged in the business of financing real or personal property can make such financing agreement contingent upon the placing of insurance business with a specified agent or broker" "Neglecting to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision is known as: - CORRECT ANSWER Concealment" "In the California Insurance Code there is a definition that reads... "a person shall not make any representation or comparison of insurers or policies to an insured which is misleading, for the purpose of inducing him to lapse, forfeit, change or surrender his insurance on a temporary or permanent plan." This is called - CORRECT ANSWER Twisting" "All of the following are considered unfair claim practices except: - CORRECT ANSWER Directly advising a claimant to obtain the service of an attorney" "What is the definition of Insurance? - CORRECT ANSWER It is a written contract whereby one seeks to indemnify another against loss, damage, or liability arising from a contingent or unknown event" "A written contract that indemnifies another party against loss, damage, or liability arising out of a contingent or unknown event describes which of the following? - CORRECT ANSWER Insurance" "To make one whole again by returning an insured to his previous financial condition prior to the loss is: - CORRECT ANSWER Principle of Indemnity" "What is the definition of risk? - CORRECT ANSWER An uncertainty or chance of loss" "A risk management technique that eliminates a loss exposure and reduces the chance of loss to zero is: - CORRECT ANSWER Avoidance" "The purpose of insurance is: - CORRECT ANSWER To transfer risk" "What is true about insurance? - CORRECT ANSWER It is a form of transferring risk" "The purchase of an insurance contract by an applicant is the process of risk: - CORRECT ANSWER Transfer" "An underwriting department can classify acceptable risks as: A. Standard B. Preferred C. Substandard D. All the above - CORRECT ANSWER D. All the above" "Which of the following would have the lowest premium? - CORRECT ANSWER Preferred" "A policy is cancelled. The policy is exactly half way through its term. The insurer keeps 50% of the premium and returns the other 50% to the insured. Cancellation is said to be a: - CORRECT ANSWER Pro - Rata cancellation" "An insurer cancels a policy and returns the entire premium. This is a: - CORRECT ANSWER Flat Cancellation" "An applicant, insured, and policyowner are: - CORRECT ANSWER One person up to three different people" "The person whose life is the object of a life insurance policy is the: - CORRECT ANSWER Insured" "Which of the following must be included in a life insurance policy illustration? A. Name, Age and Sex of the proposed insured, except when a composite illustration is permitted. B. Name of the Insurer C. Underwriting or rating classification upon which the illustration is based. D. All of the above - CORRECT ANSWER D. All of the above" "Which statement on a life insurance policy illustration must be signed by the applicant? - CORRECT ANSWER "I have received a copy of this illustration and understand that any non guaranteed elements illustrated are subject to change or could be higher or lower. The agent has told me they are not guaranteed"" "A basic life insurance policy illustration must conform with all of the following requirements except? - CORRECT ANSWER Must use the term "vanishing", "vanishing premium" or another term that implies the policy becomes paid up, to describe a plan for using non-guaranteed elements to pay a portion of future premiums." "If a policy illustration is used in the sale of a life insurance policy, what is true? - CORRECT ANSWER A copy of the illustration must be signed by the applicant and agent and shall be submitted to the insurer at the time of application." "When using a policy illustration in the sale of life insurance, an insurer or its agent shall NOT do which of the following? - CORRECT ANSWER Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than the currently payable scale or a scale based on actual recent historical experience of the insured." "Bill has a $150,000 whole life policy which he purchased years ago. he is 100 today. He has always paid the prmium and has never borrowed against the policy. For what amount can he surrender the policy? - CORRECT ANSWER $150,000" "John, who is 42 years old, has a policy with a death benefit of $50,000. At the age of 65 the values of his policy will be $50,000. What type of policy does he have? - CORRECT ANSWER Endowment, age 65" "Due to tax changes, certain life policies have been affected. What is true about a modified endowment contract (MEC)? - CORRECT ANSWER A MEC's living benefits (loans, withdrawals, collateralizing) are treated differently." "How does a life insurer determine if a policy becomes a Modified Endowment Contract (MEC)? - CORRECT ANSWER By using the 7 pay test" "An individual who has a small income but high insurance needs should consider buying: - CORRECT ANSWER Term Insurance" "Which type of Insurance guarantees the right to renew the policy each year, regardless of health, but with an increase in premium? - CORRECT ANSWER Annual Renewable Term" "Renewable Term can be best described as: - CORRECT ANSWER Level Death Benefit; increasing premium" "Credit Life insurance is usually written as: - CORRECT ANSWER Decreasing term" "Mr. Jones has just bought a home with a 20-year mortgage. He would like to buy life insurance to guarantee that the mortgage will be paid if he should die while the debt still exists. Which type of insurance policy is especially suited to Mr. Jones' needs? - CORRECT ANSWER 20-Year decreasing term policy" "Which of these statements is correct? - CORRECT ANSWER Policy dividends cannot be guaranteed" "Must one pay income tax on policy dividends? - CORRECT ANSWER No, because they are looked upon by the federal government as a return to the policy holder of excess premium charged" "Jane buys a non-participating policy from ABC life insurance company. How may she receive policy dividends? - CORRECT ANSWER Never (bc its non participating)" "Which type of policy builds cash values? - CORRECT ANSWER Permanent policies" "In life insurance, what happens to non-forfeiture options/values? - CORRECT ANSWER They are not lost by non-payment of premiums." "If a permanent policy is surrendered, the cash surrender value (CSV) may be used for: A. Cash Surrender B. Extended Term C. Reduced Paid Up D. All the above - CORRECT ANSWER D. All the above" "Which of the following non - forfeiture provisions will provide the most life insurance protection? - CORRECT ANSWER Extended Term" "How do the rights of an irrevocable beneficiary differ from those of a revocable benficiary? - CORRECT ANSWER An irrevocable beneficiary has a vest right that neither the policy owner nor his creditors can impair without the beneficiary's consent." "Bob has named only a primary beneficiary on his life policy. At the time of Bob's death, the primary beneficiary is already dead. What happens to the proceeds from his policy? - CORRECT ANSWER They are paid to the insured's estate" "Who is the only party in a life insurance policy who has rights after the death of the insured? - CORRECT ANSWER The Beneficiary" "The beneficiary class designation that means beneficiaries who are surviving will receive equal amounts of the death benefit is: - CORRECT ANSWER Per capita" "The Uniform Simultaneous Act: - CORRECT ANSWER Is used when the time of death of the insured and beneficiary cannot be determined" "The insured and the beneficiary die in a car accident. It could not be determined who died first. Who would receive the proceeds from the policy? - CORRECT ANSWER The insured's estate" "If you should choose the fixed amount settlement option, which of the following would be correct? - CORRECT ANSWER The beneficiary will receive the principal plus interest in specified amounts until exhausted." "Which settlement option allows only the death benefit earnings to be paid to the beneficiary? - CORRECT ANSWER Interest only option" "The person receiving the benefits from an annuity is commonly called the: - CORRECT ANSWER Annuitant" "An annuity is designed to protect the annuitant from: - CORRECT ANSWER Outliving one's resources" "If your client has an annuity and wants to have guaranteed income for the rest of his life, what settlement option should he choose? - CORRECT ANSWER A life Annuity" "In an annuity, which settlement option will pay the annuitant the greater amount over a period of time? - CORRECT ANSWER Straight Life" "How long is income payable under a straight life annuity? - CORRECT ANSWER For as long as the annuitant is alive" "A life annuity with a 10-year period certain: - CORRECT ANSWER is guaranteed to pay for a minimum of 120 months or a maximum of the life of the annuitant." "A period of time in which a deferred annuity builds its proceeds tax deferred is referred to as: - CORRECT ANSWER An accumulation Period" "Ed has annuity for which he has paid $50,000 in after tax dollars over the last 20 years. At 65 he will receive $4,000/year annual income based on a life expectancy of 25 years which will yield $100,000. the amount of taxable income will be: - CORRECT ANSWER $2,000 (the first $50,000 is already paid out for taxes, leaving only the remaining $50,000 to be taxed. You take half of the yearly $4,000 to be taxed, leaving you with $2,000." "All of the following are true statements concerning the treatment of federal income tax on insurance products except: - CORRECT ANSWER Annuity death benefit proceeds are exempt from all taxation." "What is true about a variable annuity? - CORRECT ANSWER The value of the annuity unit may change." "Unless the applicant indicates otherwise during the right-to-return period in an individual annuity, the premium for a variable annuity would be invest only in: - CORRECT ANSWER Fixed income investments and money market funds" "A variable annuity applicant requests that the premium be immediately invested in a stock portfolio. The annuity contract is returned to the insurer within the cancellation period. What is the applicant entitled to receive? - CORRECT ANSWER The contract value amount on the date the returned contract was received by the insurer." "How may a life insurance policy be reinstated within time limits after it has lapsed for a non-payment of premiums? - CORRECT ANSWER By paying overdue premiums plus interest with an application and evidence of insurability" "If an insured misstated his or her age, and that fact is discovered after the death of the insured, what will the company do? - CORRECT ANSWER Pay the face amount equal to that which the premium would have purchased at the correct age" "A lady named Doris, age 30, misstated her age as 25 to obtain coverage at$10.00 per $1,000 of coverage instead of $12.00 per $1,000. The adjusted death benefit will be calculated at - CORRECT ANSWER 10/12 x face amount" "Which life provision allows the insurer to make payments to a guardian if the beneficiary is a minor? - CORRECT ANSWER Spendthrift provision" "The payor rider on a juvenile life policy provides that if the payor dies or becomes totally disabled before the insured juvenile reaches the age specified in the policy: - CORRECT ANSWER The insurer will make the payments until the insured juvenile reaches the specified age." "What is true about a payor rider? - CORRECT ANSWER If the premium payor dies, the insurance company will waive premiums until the child reaches a given age, usually 21 to 25" "Which of the following riders gives the policy holder the right to purchase additional life or disability insurance regardless of insurability? - CORRECT ANSWER Guaranteed insurability" "The guaranteed insurability rider provides that the policy owner can purchase more insurance: - CORRECT ANSWER At certain specified ages without proof of insurability" "Mary buys a policy at age 25 that has a provision that guarantees that she can purchase additional amounts of insurance without evidence of insurability at age 28, 31, 34, 37, and 40. Which type of policy rider allows Mary to do this? - CORRECT ANSWER Guaranteed Insurability rider" "An insured's disability income policy defines total disability as the "insured's inability to perform the duties of ANY occupation for which he or she reasonably qualified by education, training, or experience." This definition is known as the: - CORRECT ANSWER "Any Occupation" definition and is more restrictive than other definitions." "A disability income policy would do which of the following? - CORRECT ANSWER Replace a partial portion of income if you were disabled." "During the disability income elimination period: - CORRECT ANSWER No benefits are payable" "An elimination period is also known as a(n) - CORRECT ANSWER Waiting Period" "In a disability income policy, if the insured chooses a 90-day elimination period, when would the first check be issued by the insurance company? - CORRECT ANSWER 121st day" "To be classified as accidental under a disability income insurance policy, the following criteria must be used: - CORRECT ANSWER The cause may be intentional, but the result may be accidental (Ex. I may intentional drive, but i crashed on accident)" "To be considered currently insured under social security, a worker must have: - CORRECT ANSWER At least 6 quarters of coverage during a 13 quarter period." "Under social security, when does an individual receive retirement benefits? - CORRECT ANSWER Depends upon the individual date of birth" "Which of the following is a true statement regarding Social Security (OASDHI)? - CORRECT ANSWER The program provides only a minimum floor of income. Individuals are expected to supplement it with their own personal retirement programs." "Ed was injured in a fall 6 months ago and was left totally paralyzed. He can probably receive benefits from: - CORRECT ANSWER Social Security"