100%
LAH Exam Comprehensive Study
Guide and Practice Review 2025
An Indemnity Plan
A. Requires the insured to use only network hospitals
B. Pays all medical expenses in full
C. Provides the insured a specific dollar amount for services
D. Covers only preventive care
Rationale: Indemnity plans pay a fixed amount for services regardless of provider costs. Other
options describe managed-care or preventive plans.
A single premium cash value policy can be described as
A. A policy that requires annual renewal
B. A policy that is paid up after one payment
C. A policy that needs monthly installments
D. A term policy with no cash value
Rationale: Single-premium policies are fully funded by one lump sum. The others describe
ongoing or non-cash-value policies.
The ___ is responsible for determining the appropriateness of a Medicare supplement policy for
an applicant.
A. Insurer
B. Underwriter
C. Agent
D. Policyholder
Rationale: The agent must ensure that the plan fits the client’s financial and health needs. The
insurer and underwriter evaluate eligibility, not suitability.
Karen is a producer who has obtained personal information about a client without having a
legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for
this?
A. $1,000
B. $10,000
C. $50,000
D. License suspension only
Rationale: The Act enforces a minimum penalty of $10,000 to protect consumer privacy and
deter unauthorized information gathering.
What is the primary purpose of a rating service company such as A.M. Best?
A. Rate customer service satisfaction
B. Determine the financial strength of an insurance company
,100%
C. Approve new insurance products
D. Regulate agent licensing
Rationale: Rating agencies assess insurers’ financial stability and claims-paying ability, not
customer service or licensing.
An agent's commission for the sale of a Medicare supplement policy in the first year cannot
exceed ___ of the second-year commission.
A. 100%
B. 150%
C. 200%
D. 300%
Rationale: State and federal regulations cap the first-year commission at 200% of the renewal
year to discourage unethical selling.
Benefits provided by a Medicare supplement policy must not
A. Exceed Medicare payments
B. Duplicate Medicare benefits
C. Cover out-of-network care
D. Require additional deductibles
Rationale: Medicare supplement plans are meant to fill gaps in Medicare coverage, not pay for
what Medicare already covers.
When an agent determines annuity suitability, which is NOT usually taken into account?
A. Income level
B. Age
C. Financial goals
D. Number of dependents
Rationale: Suitability focuses on the client’s financial position and goals, not family size.
An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value
interest-free through
A. Policy loan
B. Full surrender
C. Partial surrender
D. Extended term option
Rationale: Partial surrenders allow limited cash withdrawals without canceling the policy,
unlike full surrender or loans.
Coming from an insurance point of view, the main risk associated with disability is
A. High hospital costs
B. Long-term care needs
C. Loss of income
D. Medical malpractice
Rationale: Disability insurance primarily protects against income loss, not medical or legal
costs.
, 100%
The waiver of premium does NOT include which provision?
A. Premiums waived after proof of disability
B. Refund of premiums paid during elimination period
C. Disability must meet policy definition
D. All future premiums are waived if the insured recovers from the disability
Rationale: The waiver ends once the insured recovers; premiums resume. The other provisions
correctly describe the waiver process.
An individual most likely has an insurable interest in another’s life if
A. They are social friends
B. They admire the person
C. An economic interest exists for the continuance of the insured's life
D. They live in the same household
Rationale: Insurable interest is based on financial dependency or loss potential, not emotional
ties.
Tom, the agent, replaced a client’s insurance policy when it was not in the client’s best interest.
Tom could be guilty of
A. Rebating
B. Twisting
C. Defamation
D. Misrepresentation
Rationale: Twisting is the unethical replacement of policies for the agent’s gain, harming the
client’s financial interest.
All of the following are examples of pure risk except
A. Injury at work
B. Illness
C. Death
D. Losing money at a casino
Rationale: Pure risks involve only the possibility of loss, while gambling is a speculative risk
involving possible gain or loss.
A 70-year-old insured has suffered kidney failure for 24 months and is covered by a large-group
plan. How will Medicare be utilized?
A. Will be primary
B. Will be secondary and pay for claims not fully covered by the group plan
C. Will not pay any claims
D. Will cancel the group coverage
Rationale: Employer group coverage remains primary; Medicare acts as secondary payer.
A life settlement intermediary is a
A. Licensed broker-dealer
B. Association maintaining a facility for life settlement offers and bids
C. Independent underwriter
D. Mutual insurance agent
LAH Exam Comprehensive Study
Guide and Practice Review 2025
An Indemnity Plan
A. Requires the insured to use only network hospitals
B. Pays all medical expenses in full
C. Provides the insured a specific dollar amount for services
D. Covers only preventive care
Rationale: Indemnity plans pay a fixed amount for services regardless of provider costs. Other
options describe managed-care or preventive plans.
A single premium cash value policy can be described as
A. A policy that requires annual renewal
B. A policy that is paid up after one payment
C. A policy that needs monthly installments
D. A term policy with no cash value
Rationale: Single-premium policies are fully funded by one lump sum. The others describe
ongoing or non-cash-value policies.
The ___ is responsible for determining the appropriateness of a Medicare supplement policy for
an applicant.
A. Insurer
B. Underwriter
C. Agent
D. Policyholder
Rationale: The agent must ensure that the plan fits the client’s financial and health needs. The
insurer and underwriter evaluate eligibility, not suitability.
Karen is a producer who has obtained personal information about a client without having a
legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for
this?
A. $1,000
B. $10,000
C. $50,000
D. License suspension only
Rationale: The Act enforces a minimum penalty of $10,000 to protect consumer privacy and
deter unauthorized information gathering.
What is the primary purpose of a rating service company such as A.M. Best?
A. Rate customer service satisfaction
B. Determine the financial strength of an insurance company
,100%
C. Approve new insurance products
D. Regulate agent licensing
Rationale: Rating agencies assess insurers’ financial stability and claims-paying ability, not
customer service or licensing.
An agent's commission for the sale of a Medicare supplement policy in the first year cannot
exceed ___ of the second-year commission.
A. 100%
B. 150%
C. 200%
D. 300%
Rationale: State and federal regulations cap the first-year commission at 200% of the renewal
year to discourage unethical selling.
Benefits provided by a Medicare supplement policy must not
A. Exceed Medicare payments
B. Duplicate Medicare benefits
C. Cover out-of-network care
D. Require additional deductibles
Rationale: Medicare supplement plans are meant to fill gaps in Medicare coverage, not pay for
what Medicare already covers.
When an agent determines annuity suitability, which is NOT usually taken into account?
A. Income level
B. Age
C. Financial goals
D. Number of dependents
Rationale: Suitability focuses on the client’s financial position and goals, not family size.
An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value
interest-free through
A. Policy loan
B. Full surrender
C. Partial surrender
D. Extended term option
Rationale: Partial surrenders allow limited cash withdrawals without canceling the policy,
unlike full surrender or loans.
Coming from an insurance point of view, the main risk associated with disability is
A. High hospital costs
B. Long-term care needs
C. Loss of income
D. Medical malpractice
Rationale: Disability insurance primarily protects against income loss, not medical or legal
costs.
, 100%
The waiver of premium does NOT include which provision?
A. Premiums waived after proof of disability
B. Refund of premiums paid during elimination period
C. Disability must meet policy definition
D. All future premiums are waived if the insured recovers from the disability
Rationale: The waiver ends once the insured recovers; premiums resume. The other provisions
correctly describe the waiver process.
An individual most likely has an insurable interest in another’s life if
A. They are social friends
B. They admire the person
C. An economic interest exists for the continuance of the insured's life
D. They live in the same household
Rationale: Insurable interest is based on financial dependency or loss potential, not emotional
ties.
Tom, the agent, replaced a client’s insurance policy when it was not in the client’s best interest.
Tom could be guilty of
A. Rebating
B. Twisting
C. Defamation
D. Misrepresentation
Rationale: Twisting is the unethical replacement of policies for the agent’s gain, harming the
client’s financial interest.
All of the following are examples of pure risk except
A. Injury at work
B. Illness
C. Death
D. Losing money at a casino
Rationale: Pure risks involve only the possibility of loss, while gambling is a speculative risk
involving possible gain or loss.
A 70-year-old insured has suffered kidney failure for 24 months and is covered by a large-group
plan. How will Medicare be utilized?
A. Will be primary
B. Will be secondary and pay for claims not fully covered by the group plan
C. Will not pay any claims
D. Will cancel the group coverage
Rationale: Employer group coverage remains primary; Medicare acts as secondary payer.
A life settlement intermediary is a
A. Licensed broker-dealer
B. Association maintaining a facility for life settlement offers and bids
C. Independent underwriter
D. Mutual insurance agent
