Deck 1: Health: Health and Life Insurance

Question 1

The concept of indemnity means

A)Insurance restores the insured in part to the condition prior to loss
B)`Insurance restores the insured in whole to the condition prior to loss
C)Insurance restores the insured in whole or in part to the condition prior to loss
D)Insurance restores the insured in payment only for replacement.

Answer 1

Insurance restores the insured in whole or in part to the condition prior to loss

Question 2

Risks are not all equally insurable. As such, insurers prepare for losses using specific characteristics making fairly predictable rate of loss estimates. Which of the following is one of these characteristics?

A)The loss must be certain
B)Loss must include perils of war, nuclear risks, and floods
C)Loss must be ascertainable
D)Any loss of paid wages

Answer 2

Loss must be ascertainable

Question 3

If an insured individual is indemnified for the loss of a leg, this means

A)The policy covers medical bills and possibly covers wages due to loss
B)The policy covers medical bills only
C)The policy covers loss of life
D)The policy covers only lost wages

Answer 3

The policy covers medical bills and possibly covers wages due to loss

Question 4

Insurance transacted across state lines is deemed interstate commerce. This is based on

A)Paul versus Virginia
B)McCarran-Ferguson Act
C)South-Eastern Underwriters Decision
D)Privacy Act of 1974

Question 5

If a debtor is unable to pay debts due to illness or death, the creditor is protected against financial consequences through

A)Life insurance
B)Health insurance
C)Variable insurance
D)Credit insurance

Question 6

Limit of liability is more commonly referred to as ______________ in the life and health insurance field.

A)Maximum benefit amount
B)Maximum time limit
C)Maximum deductible amount
D)Maximum claim amount

Question 7

The McCarran-Ferguson Act of 1974 states:

A)Federal government can regulate business of insurance only to the extent not regulated by state law.
B)State government can regulate business of insurance only to the extent not regulated by federal law
C)Federal government and state government mutually regulate insurance business
D)Federal law is only relevant to interstate commerce situations.

Question 8

As an insurer, if you choose to carry variable life and/or variable annuity products, you are required to carry:

A)Securities license and insurance license
B)Insurance license and credit insurance
C)Credit insurance and variable insurance
D)Variable insurance and insurance license

Question 9

Which of the following protects the insured against financial consequences of legal liability?

A)Property
B)Casualty
C)Life
D)Annuities

Question 10

Disclosure authorization must be given to applicants:

A)When the policy is written
B)In advance
C)With the first billing statement
D)Only if requested

Question 11

The majority of insurance regulation takes place at:

A)The federal level
B)The state level
C)The local level
D)The business level

Question 12

Disclosure must state the reason and purpose information is collected and how it is used. This means:

A)The reason is for the application process, the purpose is for underwriting the policy
B)The reason is for underwriting the policy, the purpose is for the application process
C)The reason is for insurance, the purpose is for collections
D)The reason is for collections, the purpose is for insurance coverage

Question 13

Insurance companies are governed by regulations intended to assure investments are

A)Only in high risk assets
B)Only in low yield assets
C)Only in high quality assets
D)Only in low risk assets

Question 14

Companies selling life insurance are taxed on both the income from investments and profits from underwriting. The underwriting profit is taxed:

A)Fully during the year earned
B)75% during the year earned; 25% when paid out to stockholders
C)25% during the year earned; 75% when paid out to stockholders
D)50% during the year earned; 50% when paid out to stockholders

Question 15

Disability insurance has an elimination period or waiting period similar to deductibles. This period is

A)The number of days that the insured must be disabled before insurance benefits become payable
B)The number of payments that must be made before the policy will pay out
C)The number of days the insured must wait to file for any claims
D)The number of deductibles that must be met before claims are paid.

Question 16

Insurers use the law of large numbers to predict how many future losses will occur for a group. The basic principle of this law is:

A)The larger the number of elderly in the group, the greater the risk of paying out policies
B)The larger the number of people in the group, the more predictable the loss
C)The larger the number of young adults in the group, the greater the loss for the group
D)The larger the number of people in the group, the more room for loss

Question 17

Studies have indicated that people who drive red colored cars are more likely to receive traffic tickets. Bob refuses to drive red cars. Bob is managing the risk of traffic tickets through.

A)Transference
B)Retention
C)Reduction
D)Avoidance

Question 18

The purpose of insurance to the insured individual is:

A)To provide opportunity to get ahead
B)To cover any type of risk the individual may encounter
C)To make them whole and restore them to their original financial position
D)To protect them against speculative risks

Question 19

The cause of potential loss is referred to as a peril. Conditions that increase the seriousness or likelihood are referred to as hazards. Which of the following are the four types of recognized hazards that can contribute to losses?

A)Mental, Moral, Ethical, Physical
B)Recklessness, Thoughtlessness, Moral, Ethical
C)Material, Structural, Operational, Behavioral
D)Physical, Moral, Morale, Legal

Question 20

In order for individuals to benefit from insurance they must have an insurable interest. Insurable interest is:

A)legitimate ownership of the property or person insured
B)legitimate interest in preserving the life or property of the insured
C)legitimate proof of continuous coverage
D)legitimate ownership of the policy and continuous coverage.

Question 21

What are the accounting measures of an insurer's liabilities to its policyholders?

A)Reserves
B)Premiums
C)Assets
D)Reinsurance

Question 22

In terms of quality underwriting, what are the basic guidelines of company underwriting?

A)Risk-based expense ratios
B)Earnings and dividends
C)Loss and expense ratios
D)Errors and omissions

Question 23

If the insured wants to break his premiums into more payments over time what will likely happen to these payments?

A)The total premium will be higher
B)The total premium will be lower
C)The total premium will fluctuate with the market
D)The total premium is not affected by this

Question 24

What helps to lower the premium rates?

A)Credit scores
B)Expenses
C)Interest on debt
D)Interest on premiums

Question 25

All of the following will impact premium rates except?

A)Mortality
B)Morbidity
C)Loss ratios
D)Expenses

Question 26

How much must the contributory life insurance plan cover?

A)At least 25% of the eligible employees
B)At least 50% of the eligible employees
C)At least 75% of the eligible employees
D)All eligible employees

Question 27

Because of downsizing, Steve has been terminated from ABC Firearms. Two weeks later Steve is cleaning up his personal items at home and a gun misfires killing Steve. The beneficiary to Steve's policy will still receive payments. Why is this?

A)Steve's accident occurred with an ABC Firearm.
B)Steve's accident occurred in the grace period of conversion to an individual policy
C)Steve's insurance continues to cover him for up to one year.
D)Steve's insurance has accidental death clause

Question 28

Dependents are individuals that the insured can add to their policy. These can include which of the following?

A)Part-time student children of the insured
B)Step-children and foster children
C)Live-in help for individuals needing continuous care
D)Exchange students under the age of 21

Question 29

Standard provisions found in the NAIC Model Group Life Insurance Bill have been adopted by most states. This model designates a specific number of people a group must have. What is this number?

A)10 people
B)25 people
C)50 people
D)100 people

Question 30

An agent accepts the initial premium with the sale of a policy and then forwards it on to the company. If there is nothing in the agent's contract about continuing to accept premium payments, what type of authority does this agent have?

A)Apparent authority
B)Express authority
C)Implied authority
D)Lingering applied authority

Question 31

When an individual receives a life insurance contract, they will receive all of the following except

A)Conditions
B)Exclusions
C)Insuring clause
D)Policy folder

Question 32

When known facts are not disclosed, this is referred to as

A)Concealment
B)Fraud
C)Impersonation
D)Misappropriation

Question 33

Which of the following is not taken into account in the human life value approach for life insurance policies?

A)Needs for illness and burial
B)Individual's annual expenses
C)Individual's net annual salary
D)Number of years the individual had left to work.

Question 34

When determining the amount and kind of insurance an individual needs, an agent should consider other income and benefit sources the applicant has or will have. Which of the following is not an income or benefit figured into this consideration?

A)Gifts
B)Medicare
C)Annuities
D)Rental property

Question 35

Bob and Jill are interested in purchasing a life insurance policy. They want to know that should one of them die prematurely, the other will be supported for the rest of their life and upon their death the children will receive a large inheritance. Of the methods to calculate insurance, which one would be best?

A)Capital liquidation
B)Human life value
C)Needs based
D)Capital conservation

Question 36

What is the purpose of an annuity?

A)To protect an individual against accidental death
B)To protect an individual against early death
C)To protect an individual against the risk of living too long
D)To protect an individual against accidental dismemberment

Question 37

Annuity payments can be arranged to last for how long?

A)A lifetime
B)Up to age 75
C)Up to age 85
D)Up to age 95

Question 38

Principal earns interest on all types of annuities. The interest is

A)Earned on the principal each time
B)Earned on the principal and accrued interest
C)Earned on the interest only
D)Earned on the principal plus a percentage

Question 39

Which of the following specifies a guaranteed minimum rate of interest that will be paid on the principal amount invested into the annuity?

A)Interest rate
B)Annuity rate
C)Fixed rate
D)Accumulation rate

Question 40

Which part of the annuity is taxable as income?

A)The interest portion of the annuity payment
B)The principal portion of the annuity payment
C)The principal and interest are taxable
D)Annuity payments are not taxable.

Question 41

An annuity is a combination of three things. What are these three things?

A)Deposits, interests, and principal
B)Deposits, principal, and taxes
C)Deposits, payments, and taxes
D)Deposits, interests, and mortality rates

Question 42

Annuities can be purchased in various ways. One way to pay for an annuity is in one lump sum amount. What is this type of annuity called?

A)A level premium annuity
B)A flexible premium annuity
C)A lump sum annuity
D)A single premium annuity

Question 43

Annuities fall into one of two categories based on when the payments are set to begin. When the income payments of the contract begin at some point into the future, this is called?

A)Immediate annuity
B)Single annuity
C)Deferred annuity
D)Flexible annuity

Question 44

If an individual dies before deferred annuity payments can begin, who receives the annuity payments?

A)The beneficiary
B)The bank
C)The insurance company
D)No one

Question 45

When an individual arranges to pay premiums into their annuity for several years prior to receiving their annuity income payments, t, they have a ______________ annuity.

A)Flexible premium
B)Single premium
C)Level premium
D)Payment premium

Question 46

Why is the annuitant's age important in the process of determining annuity payments?

A)To know how long payments will be made
B)To know how much the payments should be
C)To know interest rates for the annuity
D)To know how to make the payments

Question 47

If an investment performance is more than the contract guarantees, this excess money is paid to whom?

A)The annuitant
B)The beneficiary
C)The annuity
D)The insurance company

Question 48

Why is the Securities and Exchange Commission (SEC) involved in annuities?

A)Annuities are an investment risk; therefore the SEC considers them to be securities rather than life insurance.
B)Annuities are an investment risk, therefore the SEC considers them to be variable insurance rather than life insurance
C)Annuities are a security, therefore the SEC regulates the amount and payments made
D)Annuities are a security, therefore the SEC regulates taxing and payments to the contract owner.

Question 49

When an individual purchases an annuity they are actually purchasing accumulation units. What is the purpose of accumulation units?

A)Accumulation units are the same as buying shares of stock in a company
B)Accumulation units are used to cover the sales charges and taxes prior to payments
C)Accumulation units are used to show how strong the insurance company is
D)Accumulation units are an accounting measure to determine the contract holder's interest in the account.

Question 50

When the time comes for an annuity to start making payments to the annuitant, what determines the amount of each payout?

A)Annuity points
B)Annuity units
C)Accumulation units
D)Accumulation points

Question 51

Much like life insurance, annuity contracts have a variety of settlement options available. What does a life annuity - no refund offer mean to the annuitant?

A)Larger payouts, ends upon death; no beneficiary payments
B)Longer payouts, beneficiary receives payouts upon death of annuitant
C)Larger payouts, and beneficiary receives payouts upon death of annuitant
D)Longer payout, no beneficiary payments

Question 52

What is the main difference between a refund life annuity and a life annuity?

A)Refund life annuity guarantees more than the amount spent on the annuity purchase price
B)Life annuity guarantees more than the minimum amount spent on the annuity purchase price
C)Refund life annuity guarantees the annuitant will receive an amount at least equal to the purchase price.
D)Life annuity guarantees the annuitant will receive an amount at least equal to the purchase price on the annuity

Question 53

In a joint life and survivorship annuity, there is more than one annuitant. Both annuitants will receive payments until one dies. Upon the death of one annuitant, what happens to the survivor's payments?

A)The payment amount decreases by one third to the survivor
B)The payment amount remains the same for the survivor
C)The payment amount is the same or less for the survivor
D)The payment amount increases for the survivor

Question 54

If the owner of an annuity contract stops making premium payments prior to payout, the annuitant has non-forfeiture options available based on the cash value accumulation prior to stop payment of premiums. What is one of the more common options?

A)Permit the contract to become a paid up contract where the payments are based on the paid amount
B)Permit the contract to become paid and refund the premiums to the annuitant less any fees, costs, and penalties
C)Permit the contract to be in forbearance and allow the annuitant time to catch up on their payments
D)Permit the contract to be renegotiated for a better premium rate.

Question 55

If Jack and Jill both have $500,000 to fund the payment of a lifetime annuity payment, which of the following best explains differences that may occur in the determination of payouts?

A)Jack will receive lower payouts as he is 5 years older than Jill.
B)Jill will receive higher payouts as she is 5 years older than Jack
C)Jack will receive higher payouts as he is more likely to die before Jill
D)Jill will receive higher payouts as she is more likely to die before Jack

Question 56

Which of the following explains a two-tiered annuity?

A)Two values available upon maturity
B)Two interest rates available to the annuitant
C)Two annuitants or survivors
D)Two payments made each month to the annuitant

Question 57

Compared to a life annuity period certain, a temporary annuity certain varies to what degree?

A)Life annuity period certain pays out for a specified period of time
B)Life annuities pay out increasing payments for the life of the survivor
C)Temporary annuity certain pays out for a specified time
D)Temporary annuity certain pays out increasing payments for the life of the survivor

Question 58

If held to term, equity indexed annuities are considered which of the following?

A)Fixed
B)Variable
C)Flexible
D)Special

Question 59

What is the justification for the decreasing term life rider as part of the retirement income annuity?

A)If the annuitant dies before retirement, the beneficiary will receive annuity payments and the death insurance payments.
B)If the annuitant does before retirement, the premiums are refunded to the survivor
C)If the annuitant retires early, the premiums will pay for out of pocket expenses until benefits start
D)If the annuitant chooses not to retire, the annuity will expire.

Question 60

Fred owns a 10 year Market-Value Adjusted Annuity. If Fred decides to cash in his contract after four years and the market values decreased by 4% during that time, what would the market value adjustment be for the contract?

A)The market value adjustment would be positive and help offset the surrender charge.
B)The market value adjustment would be negative and increase the surrender charge.
C)The market value adjustment would be unchanged and the surrender charge constant.
D)The market value adjustment would be positive and eliminate the surrender charge.

Question 61

Bob purchases 500 accumulation units at $1.00 per unit. If the value of the accumulation units increases to $2.50 each, how many accumulation units will Bob own?

A)200 units
B)500 units
C)1250 units
D)The value has nothing to do with the number Bob purchased

Question 62

Sarah purchases a life annuity with period certain contract for 10 years. At age 70, Sarah retires and begins receiving her annuity payments. After her 76th birthday, Sarah dies. What will happen to Sarah's annuity payments?

A)The insurance company will receive them and apply them to surplus
B)The insurance company will apply a surrender charge and give the rest to her estate
C)The beneficiary will receive the payments less 50%
D)The beneficiary will receive the payments for the remaining 4 years.

Question 63

Jane purchases a 15-year temporary annuity certain contract. When she retires at age 75, she begins receiving her annuity payments. When Jane reaches 90 years of age, what will happen to her annuity?

A)She will continue to receive her payments until her death
B)She will no longer receive any more payments
C)She will receive payments at a decreased amount
D)She will receive payments at an amount determined by the market value.

Question 64

What type of insurance is designed to provide life insurance protection for a limited period of time?

A)Life Insurance
B)Flexible insurance
C)Term Insurance
D)Variable Insurance

Question 65

What type of policy may be renewed at the end of a specified period of time for another term period without evidence of insurability?

A)Level Term
B)Reentry Term
C)Increasing Term
D)Renewable Term

Question 66

What is the purpose of a reentry term?

A)To apply for lower premiums
B)To apply for a larger policy
C)To miss one premium without forfeiture
D)To apply for better coverage after the wait period

Question 67

If a level term is issued as renewable and convertible, what happens to the policy at the end of the term?

A)The policy is complete and nothing more can be done
B)The policy is automatically renewed and converted to permanent
C)The policy is automatically renewed and the premiums decrease
D)The policy is renewed with increased premiums

Question 68

What is one advantage of using term insurance?

A)Term insurance can be flexible for the insured
B)Term insurance is temporary protection
C)Term insurance is death protection
D)Term insurance is initially higher cost but decreases in time

Question 69

Whole life insurance policies are designed to provide protection for the whole life of the insured and have a variety of common characteristics. Which of the following are some of these common characteristics?

A)Non-forfeiture value and increased premiums
B)Level face amount and level premiums
C)Limited payment and single premiums
D)Continuous premiums and decreased premiums

Question 70

Whole life insurance can be used as a policy loan. What does this mean to the insured?

A)Cash can be loaned and repaid to the policy
B)Cash can be loaned and repaid with interest before the policy expires
C)Cash can be loaned and does not have to be repaid
D)Cash can be loaned and does not have to be repaid cancelling the policy

Question 71

If an individual wants to purchase $500,000 in whole life insurance but is only able to purchase $300,000, what option do they have to increase the value up to $500,000 of death insurance?

A)Purchase a limited payment policy to cover the extra $200,000
B)Wait until they can afford the full amount of the $500,000 policy
C)Increase the deductible to lower the premium amounts
D)Purchase term insurance for the remaining $200,000

Question 72

What is the purpose of a flexible policy?

A)Allows for flexible premiums during periods of economic downturn
B)Allows for flexible premiums during periods of unemployment
C)Allows policy owner the ability to change one or more components if needed
D)Allows the policy owner to change the policy premium payment date

Question 73

Janet's husband died leaving her the sole beneficiary of his life insurance policy to be paid out over the next 20 years. Once this period has ended, all the proceeds will be paid out. What type of option has Janet's husband placed on this policy?

A)Life income option
B)Fixed amount option
C)Interest only option
D)Fixed period option

Question 74

There are many factors that are considered when determining the amount a beneficiary will receive each time a payment is made under the fixed period option. Which of these factors is not considered?

A)The principal amount
B)The interest earned
C)The age of the beneficiary
D)The length of time payments will be made.

Question 75

When Alisa's mother died, she designated Alisa as the sole beneficiary of her settlement. Alisa has opted to receive interest only payments on the policy. Prior to the lump sum being paid to Alisa, she dies. What will happen to the balance of Alisa's mother's life insurance policy?

A)It will be paid to Alisa's estate
B)It will be paid to the primary beneficiary named in the original policy.
C)It is paid to contingent beneficiary from the original policy or it is paid to Alisa's estate if there is no contingent
D)It is retained by the insured and used as surplus

Question 76

When Sarah's mother died, Sarah elected to receive only payments of interest from her mother's life insurance policy. When Sarah dies, her children will receive the lump sum benefit of her mother's policy as well as the benefits of Sarah's personal life insurance policy. What option has Sarah selected for her children?

A)Life income option
B)Interest only option
C)Fixed period option
D)Fixed amount option

Question 77

Some policies come with a free look option. Although not required, most states offer a standard number of days for this free look. What is the standard length of time most states offer?

A)3 days
B)5 days
C)7 days
D)10 days

Question 78

When Eric and his wife divorced, Eric wanted to give the life insurance policy he has on his wife to their children, relinquishing all control of the policy. What type of assignment would Eric probably use to make this work?

A)Voluntary assignment
B)Collateral assignment
C)Conditional assignment
D)Partial assignment

Question 79

When a policy has an incontestable clause, this usually remains in effect for how long?

A)1 year
B)2 years
C)5 years
D)7 years

Question 80

Life insurance can provide protection over varying time frames. Which of the following is designed to provide protection for only a limited amount of time?

A)Term Life Insurance
B)Universal Life Insurance
C)Variable Life Insurance
D)Whole Life Insurance