PSI: LIFE, ACCIDENT, AND HEALTH
PRACTICE EXAM
Dividends that are received by a life insurance policy holder can be taxed in what situation(s):
I - When the dividend amount received exceeds the amount that the policy holder paid in
premiums ...ANSWER...The amount received that is over and above the amount paid into the policy via
premiums is considered to be gain and is therefore taxable. There are no dividends paid on term life
insurance policies.
Under the misstatement of age or gender provision, what happens if it is determined at death that the
insured's age or gender was misstated on a life insurance policy application? ...ANSWER...Benefits are
adjusted to an amount that the premium would have purchased at the correct age or gender.
Which of the following must be given to the insurer within 20 days after occurrence or commencement
of any loss covered by the policy, or as thereafter as is reasonably possible? ...ANSWER...Notice of claim.
When will a policy pay on a UCR basis? ...ANSWER...When particular benefits are not listed on a
payment schedule.
All of the following are non-forfeiture options EXCEPT ...ANSWER...Cash dividend option.
What happens when the lifetime maximum benefit limit has been reached? ...ANSWER...The insured will
pay all of the remaining medial costs for as long as the policy is in force.
Whose responsibility is it to make sure that the company is notified of a death claim at the earliest
possible opportunity (in most cases)? ...ANSWER...The producer.
,What is the waiver of premium provision? ...ANSWER...In a long term care contract, the premium is
waived after the insured has been confined for a specific period of time.
All of the following are common exclusions from loss found in disability income policies EXCEPT for that
incurred while? ...ANSWER...Committing a misdemeanor
Which is a disadvantage to a flexible premium annuity? ...ANSWER...The actual amount of the annuity
benefit cannot be determined in advance.
What does coninsurance mean? ...ANSWER...The insurer and the insured share expenses over the
deductible.
Under normal conditions which of the following is TRUE for proof of loss when a single loss is
claimed? ...ANSWER...The insured has 90 days from the date of loss to provide proof of loss.
Which one of the following represents an advantage of obtaining a policy loan versus a
withdrawal? ...ANSWER...The loan is not taxed while a withdrawal is taxed for amounts above the
contract cost basis.
All of the following statements define preexisting conditions EXCEPT? ...ANSWER...Any chronic health
condition that presents symptoms and which was unknown at the time of application.
Which is the difference between participating and non-participating? ...ANSWER...Participating policies
pay dividends while non-participating policies do not.
How does the per captia rule apply to proceeds from a life insurance policy? ...ANSWER...The proceeds
are divided equally among living primary beneficiaries.
How does a noncancelable policy differ from a guaranteed renewable policy? ...ANSWER...With the
noncancelable policy the insurer may increase premiums only based on the terms of the policy.
Which of the following refers to how often a premium is paid? ...ANSWER...Mode
,What is the return of premium rider? ...ANSWER...An increasing amount of term insurance that always
equals the total of premiums paid up to the current point.
What does first dollar coverage mean? ...ANSWER...As soon as covered medical expenses are incurred,
the policy begins to pay.
When the suicide clause is inserted in a life insurance contract, death by suicide is not covered during
the policy's initial: ...ANSWER...2 year period
All of the following are required signatures on a life insurance application EXCEPT? ...ANSWER...The
minor in a juvenile policy.
What is the purpose of Stranger-originated life insurance (STOLI)? ...ANSWER...The policy is originated
primarily or solely for the purpose of resale.
What procedure is used by an insurer to protect itself in the event a dispute arises and the applicant and
the agent do not recall the changes that were made in a completed application? ...ANSWER...The
applicant and possibly the agent initial any changes made.
What specific new procedures does the USA Patriot Act require of insurance
program? ...ANSWER...Establish an anti-money laundering program.
Which of the following occurs immediately after the application is submitted and the initial premium
paid? ...ANSWER...The underwriting process begins.
A consumer report used to determine eligibility for insurance may include all of the following
EXCEPT? ...ANSWER...Medical Underwriting exam.
Why are insurance policies considered conditional contracts? ...ANSWER...Certain conditions need to be
met to make the contract legally enforceable.
, When does insurable interest come into play in a life insurance policy? ...ANSWER...When the applicant
for the policy is not the insured.
All of the following are TRUE regarding incomplete applications EXCEPT? ...ANSWER...The incomplete
application can be accepted with the missing information added later.
What is a MIB report? ...ANSWER...Medical information on an applicant for assessing life or health
insurance risk.
Obtaining consumer information reports under false pretenses is prosecutable by which of the
following? ...ANSWER...Fair Credit Reporting Act
All of the following are classifications of risk EXCEPT? ...ANSWER...Non-nicotine
Which type of receipt makes the insurer liable for the risk from the date of application, regardless of the
applicant's insurability? ...ANSWER...Binding receipt
If the insurer wishes to share an applicant's HIV status, the applicant must be given full notice of all of
the following EXCEPT? ...ANSWER...The treatment procedures that are covered by the policy.
How do warranties differ from representations? ...ANSWER...A warranty is guaranteed to be true, a
representation is believed to be true to the best of one's knowledge.
In noncontributory plans, which percentage of eligible members must participate? ...ANSWER...100%
Managed care plans increase efficiency by all of the following means EXCEPT? ...ANSWER...Transferring
the management of costs to the insureds.
All of the following are tax qualified retirement plans EXCEPT? ...ANSWER...Section 529 plan.
Which of the following is characteristic of a non-qualified plan? ...ANSWER...Plan does not meet federal
guidelines for tax benefits.
PRACTICE EXAM
Dividends that are received by a life insurance policy holder can be taxed in what situation(s):
I - When the dividend amount received exceeds the amount that the policy holder paid in
premiums ...ANSWER...The amount received that is over and above the amount paid into the policy via
premiums is considered to be gain and is therefore taxable. There are no dividends paid on term life
insurance policies.
Under the misstatement of age or gender provision, what happens if it is determined at death that the
insured's age or gender was misstated on a life insurance policy application? ...ANSWER...Benefits are
adjusted to an amount that the premium would have purchased at the correct age or gender.
Which of the following must be given to the insurer within 20 days after occurrence or commencement
of any loss covered by the policy, or as thereafter as is reasonably possible? ...ANSWER...Notice of claim.
When will a policy pay on a UCR basis? ...ANSWER...When particular benefits are not listed on a
payment schedule.
All of the following are non-forfeiture options EXCEPT ...ANSWER...Cash dividend option.
What happens when the lifetime maximum benefit limit has been reached? ...ANSWER...The insured will
pay all of the remaining medial costs for as long as the policy is in force.
Whose responsibility is it to make sure that the company is notified of a death claim at the earliest
possible opportunity (in most cases)? ...ANSWER...The producer.
,What is the waiver of premium provision? ...ANSWER...In a long term care contract, the premium is
waived after the insured has been confined for a specific period of time.
All of the following are common exclusions from loss found in disability income policies EXCEPT for that
incurred while? ...ANSWER...Committing a misdemeanor
Which is a disadvantage to a flexible premium annuity? ...ANSWER...The actual amount of the annuity
benefit cannot be determined in advance.
What does coninsurance mean? ...ANSWER...The insurer and the insured share expenses over the
deductible.
Under normal conditions which of the following is TRUE for proof of loss when a single loss is
claimed? ...ANSWER...The insured has 90 days from the date of loss to provide proof of loss.
Which one of the following represents an advantage of obtaining a policy loan versus a
withdrawal? ...ANSWER...The loan is not taxed while a withdrawal is taxed for amounts above the
contract cost basis.
All of the following statements define preexisting conditions EXCEPT? ...ANSWER...Any chronic health
condition that presents symptoms and which was unknown at the time of application.
Which is the difference between participating and non-participating? ...ANSWER...Participating policies
pay dividends while non-participating policies do not.
How does the per captia rule apply to proceeds from a life insurance policy? ...ANSWER...The proceeds
are divided equally among living primary beneficiaries.
How does a noncancelable policy differ from a guaranteed renewable policy? ...ANSWER...With the
noncancelable policy the insurer may increase premiums only based on the terms of the policy.
Which of the following refers to how often a premium is paid? ...ANSWER...Mode
,What is the return of premium rider? ...ANSWER...An increasing amount of term insurance that always
equals the total of premiums paid up to the current point.
What does first dollar coverage mean? ...ANSWER...As soon as covered medical expenses are incurred,
the policy begins to pay.
When the suicide clause is inserted in a life insurance contract, death by suicide is not covered during
the policy's initial: ...ANSWER...2 year period
All of the following are required signatures on a life insurance application EXCEPT? ...ANSWER...The
minor in a juvenile policy.
What is the purpose of Stranger-originated life insurance (STOLI)? ...ANSWER...The policy is originated
primarily or solely for the purpose of resale.
What procedure is used by an insurer to protect itself in the event a dispute arises and the applicant and
the agent do not recall the changes that were made in a completed application? ...ANSWER...The
applicant and possibly the agent initial any changes made.
What specific new procedures does the USA Patriot Act require of insurance
program? ...ANSWER...Establish an anti-money laundering program.
Which of the following occurs immediately after the application is submitted and the initial premium
paid? ...ANSWER...The underwriting process begins.
A consumer report used to determine eligibility for insurance may include all of the following
EXCEPT? ...ANSWER...Medical Underwriting exam.
Why are insurance policies considered conditional contracts? ...ANSWER...Certain conditions need to be
met to make the contract legally enforceable.
, When does insurable interest come into play in a life insurance policy? ...ANSWER...When the applicant
for the policy is not the insured.
All of the following are TRUE regarding incomplete applications EXCEPT? ...ANSWER...The incomplete
application can be accepted with the missing information added later.
What is a MIB report? ...ANSWER...Medical information on an applicant for assessing life or health
insurance risk.
Obtaining consumer information reports under false pretenses is prosecutable by which of the
following? ...ANSWER...Fair Credit Reporting Act
All of the following are classifications of risk EXCEPT? ...ANSWER...Non-nicotine
Which type of receipt makes the insurer liable for the risk from the date of application, regardless of the
applicant's insurability? ...ANSWER...Binding receipt
If the insurer wishes to share an applicant's HIV status, the applicant must be given full notice of all of
the following EXCEPT? ...ANSWER...The treatment procedures that are covered by the policy.
How do warranties differ from representations? ...ANSWER...A warranty is guaranteed to be true, a
representation is believed to be true to the best of one's knowledge.
In noncontributory plans, which percentage of eligible members must participate? ...ANSWER...100%
Managed care plans increase efficiency by all of the following means EXCEPT? ...ANSWER...Transferring
the management of costs to the insureds.
All of the following are tax qualified retirement plans EXCEPT? ...ANSWER...Section 529 plan.
Which of the following is characteristic of a non-qualified plan? ...ANSWER...Plan does not meet federal
guidelines for tax benefits.
