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Sandra has a life insurance policy that states that her husband, Gerald, is to receive the full death benefit. If he predeceases her, their three children are to share the benefit equally. If her husband and all three children predecease her, the benefit is payable to the First Community Church. All of the following statements are correct EXCEPT
a) Gerald is the primary beneficiary
b) the three children are all secondary beneficiaries
c) the first community church is the tertiary beneficiary
d) the designation of the first community church can be contested by any of sandra's relatives who survive the children
If an irrevocable beneficiary dies before the policy owner, who of the following gains control of a life insurance policy with a reversionary irrevocable clause?
b) Irrevocable beneficiary's children
Mary names her husband, Rick, as primary beneficiary of her life insurance policy and her two children, Pam and Matt, as contingent beneficiaries. Rick dies in March. Pam and Matt are killed simultaneously in a car accident later that month. Hearing the news, Mary has a fatal heart attack. In this case, Mary's life insurance will be paid
a) one-half to Rick's estate and on-quarter each to Pam and Matt's estates
b) to Rick's estate
c) to Mary's estate
d) in equal shares to rick, pam and matt's estates
The method used today to change beneficiaries is known as the
a) recording method
b) beneficiary alteration method
c) assignment method
d) change of designation method
What is the beneficiary designation that can only be changed with the beneficiary's written agreement?
a) Revocable beneficiary
b) Wife of the insured
d) Irrevocable beneficiary
Kevin, the insured under a $200,000 life insurance policy, and his sole beneficiary, Lynda, are killed instantly in a car accident. Under the Uniform Simultaneous Death Act, to whose estate will the policy proceeds be paid?
a) Lynda's estate
b) Kevin's estate
c) Both Kevin's and Lynda's estate, equally
d) The proceeds will escheat to the state
All of the following statements about beneficiary designations are correct EXCEPT
a) when a charity is named beneficiary, the policyowner's heirs cannot contest the gift
b) minors cannot be named life insurance beneficiaries
c) a business may be designated a beneficiary
d) when a trust is named beneficiary, a trustee will manage the insurance proceeds
The beneficiary on Walter`s life insurance reads, "Children of the Insured." Which of the following phrases best describes this type of beneficiary designation?
a) Juvenile beneficiaries
b) Class beneficiaries
c) Generational beneficiaries
d) Attractive nuisance beneficiaries
All of the following statements about facility of payment provisions are correct EXCEPT
a) they are often found in group life policies
b) the permit an insurer to pay all or part of the proceeds to a party who is not named in the contract
c) they are typically found in industrial policies
d) they permit insurance proceeds to be paid to someone not named in the policy when the named beneficiary is a minor
When a policy owner cannot exercise his rights of ownership without the policy beneficiary's consent, the beneficiary is designated
Mr. Williams names his son John a beneficiary of his life insurance policy. What designation should he use if he wants to make sure that John's children would receive John's share of the life insurance policy proceeds should John predecease his father?
a) Per capita
b) All my children
c) Per stripes
Christine's policy has a clause that reads as follows, "Should the primary beneficiary and the insured die in the same accident and the primary beneficiary fails to survive the insured by 14 days, it will be assumed that the beneficiary predeceased the insured." Which of the following phrases best describes this clause?
a) Secondary beneficiary provision
b) Facility-of-payment provision
c) Uniform Simultaneous Death Act
d) Common disaster provision
A clause that states that policy distributions payable to the beneficiary after the insured dies are not assignable or transferable and may not be attached in any way is called a
b) debtors protection clause
c) spendthrift trust clause
d) assignment clause
All of the following statements concerning a common disaster provision are correct EXCEPT
a) the provision activates when the insured and primary beneficiary die as a result of the same accident
b) the provision stipulates that if the insured and the primary beneficiary die in the same accident, it is presumed that the insured died last
c) the provision gives a policyowner assurance that proceeds will be distributed according to his or her wishes
d) the provision stipulations that if the primary beneficiary outlives the insured by more than 48 hours, then the proceeds will be paid to his or her estate
Which of the following statements is CORRECT?
a) A per capita distribution is the most common method of distributing proceeds to beneficiaries.
b) If the policyowner designates a per stripes distribution of the proceeds, the designation becomes irrevocable once a beneficiary predeceases the policyowner.
c) A per stirpes distribution means that a beneficiary's share of a policy's proceeds will be passed down to his or her living child or children if the named beneficiary predeceases the insured
d) a per capita distribution ensures that the insured's surviving family will share in the insurance proceeds
Bill names his church as the beneficiary of his $300,000 life insurance policy. When Bill dies, who is responsible for the income taxes payable on the lump-sum proceeds received by the church?
a) His estate.
b) His church.
c) No income tax is payable on the death proceeds.
d) His estate and the beneficiary share the tax liability equally.
All of the following statements about the taxation of insurance proceeds are correct EXCEPT
a) accumulated policy dividends are exempt from income tax
b) a beneficiary will not be taxed on insurance proceeds paid as a lump sum death benefit
c) a policyowner who receives the cash value for a surrendered policy must pay capital gains tax on any gain
d) generally, no gain or loss is recognized when on insurance policy is exchanged for another
Which of the following factors is most important when computing basic premiums for life insurance?
Sarah, age 65, owner of a $150,000 whole life policy, decides to surrender the policy and take the $90,000 cash value in a lump sum. Over the years she has paid a total of $54,000 in premiums. How much, if any, of the payment will be taxed?
Life insurance premiums are typically based on what increment of the face value?
Which of the following statements pertaining to life insurance premiums is CORRECT?
a) Premium rates usually are lower for men than women.
b) Harold and Billy, both age 25, each buy a whole life policy from the same company. However, Harold has a participating policy, while Billy's policy is nonparticipating. Harold will pay a higher premium.
c) The most significant factor in premium rate calculation is interest.
d) lucy, who is substantially overweight, has applied for a life insurance policy, her weight may affect her insurability, but not the amount of premium on her policy
All of the following are primary premium factors EXCEPT
Art, the owner and insured under a $75,000 life policy, is killed in an accident. He had paid total premiums of $26,000. How much of the $75,000 death benefit that was paid to Art's wife in a lump sum is taxable income to her?
Assume the following persons buy identical life insurance policies from the same company. Generally speaking, who will pay the lowest premium, if all have standard ratings?
a) Linda, age 28
b) Thomas, age 28
c) Louise, age 40
d) Joe, age 45
Art, the owner and insured under a $75,000 life policy, is killed in an accident. He had paid total premiums of $26,000. How much of the death benefit will be included in the gross estate for estate tax purposes?
All of the following statements about accelerated death benefits and vatical settlements are correct EXCEPT
a) a terminally ill person receives accelerated death benefits tax-free
b) an insured who sells an insurance policy to a vatical company usually receives 100 percent of the policy's face value
c) the maximum amount of accelerated benefits that a chronically ill person can exclude from income is limited
d) accelerated benefit provisions are standard in most individual and group life insurance policies
Which of the following statements pertaining to life insurance policy settlement options is NOT correct?
a) By using the interest-only option, two or more settlement options can be combined for added flexibility.
b) Payments under the interest-only option may be made at a rate higher than the guaranteed minimum.
c) diane and rhonda each are receiving monthly income from their deceased husbands' identical life policies under the fixed period option. Diane's payments are to be made for 15 years and rhonda's for 20 years. Diane receives the larger monthly payments
d) under the fixed period option the payment of excess interest will lengthen the payment period
Which of the following statements pertaining to life insurance premiums is CORRECT?
a) The premiums for a policy that insures a spouse are tax deductible.
b) A company may purchase key-person life insurance and deduct the premiums as a business expense.
c) Premiums for group term insurance covering employees are tax deductible, assuming certain requirements are met.
d) Premiums for policies in which the insured is someone other than the policyowner are tax deductible.
Beth, age 50, the beneficiary of her late husband's life insurance policy, has elected to receive the proceeds in monthly installments over the next five years. Due to the insurer's interest earnings, Beth notices that the amount of the payments is often more than what she was guaranteed. What kind of settlement option did Beth select?
Under which option does the in insurer hold the death proceeds for a specified period of time and, at regular intervals, pay the beneficiary a guaranteed rate of interest on the proceeds?
Underwriting is a process of
a) selection and issue of policies
b)evaluation and classification of risks
c) selection, reporting, and rejection of risks
d) selection, classification and rating of risks
Generally, the party who delivers the insurance policy to the new policy owner is the
a) insurance company's home office
b) sales agent
c) state chief financial officer
If a medical report is required on an applicant, it is completed by
a) a home office underwriter
b) a paramedic or examining physician
c) the agent
d) the home office medical director
Which of the following statements regarding the Fair Credit Reporting Act (FCRA) is CORRECT?
a) Applicants must be notified within a short period of time that their credit report has been requested.
b) If an applicant for insurance is rejected based on a consumer report, the name of the reporting agency must be kept confidential.
c) If requested to do so, the insurance company must provide the actual consumer report to the applicant.
d) consumer reports are final in nature and cannot be disputed by an applicant
The primary distinction between the insurability and approval types of conditional receipts is when the
a) applicant pays the initial premium
b)coverage goes into effect
c) medical exam is given
d) applicant proves insurable
Which of the following statements about the Fair Credit Reporting Act is CORRECT?
a) It prohibits insurance companies from obtaining reports on applicants from outside investigative agencies.
b) It provides that consumers have the right to question reports made about them by investigating agencies.
c) It applies to reports about applicants that are made by insurance agents to their companies.
d) It prohibits insurance companies from rejecting an application based on a credit report.
All of the following statements about the classification of applicants are correct EXCEPT
a) a substandard applicant can never be rejected outright by the insurer
b) applicants who are preferred risks have premium rates that are generally lower than standard rate risks
c) an individual can be rated as a substandard risk because of a dangerous occupation
d) a standard applicant fits the insurer's guidelines for policy issue without special restrictions
Which of the following statements pertaining to a life insurance policy application is CORRECT?
a) The names of both the insured and the beneficiary are indicated on the application.
b) If an applicant's age is shown erroneously on a life insurance application as 28 instead of 29, the result may be a premium quote that is higher than it should be.
c) The size of the policy being applied for does not affect the underwriting process.
d) the agent's report in the application must be signed by the agent and the applicant
Elaine signs an application for a $50,000 non medical life policy, pays the first premium and receives a conditional insurability receipt. If Elaine were killed in a auto accident two days later
a) the company would reject the application on the basis that death was accidental
b) her beneficiary would receive $50,000, if Elaine qualified for the policy as applied for
c) the premium would be returned to Elaine's family because the policy had not been issued
d) the company could reject the death claim because the underwriting process was never complete
Which of the following statements pertaining to the Medical Information Bureau (MIB) is CORRECT?
a) The MIB is operated by a national network of hospitals.
b) Information obtained by the MIB is available to all physicians.
c) The MIB provides assistance in the underwriting of life insurance.
d) Applicants may request that MIB reports be attached to their policies.
With regard to group insurance plans, which of the following statements is CORRECT?
a) Employees generally pay for all of the premium.
b) The sponsoring employer of a group insurance plan is given a master certificate of insurance that lists the names of all employees covered by the plan.
c) Per unit of benefits, group insurance generally is available at rates lower than those for individual plans.
d) group insurance plans are a measn for employers to provide a benefit for their key employees, without having to include all employees
The type of insurance most frequently used in group life plans is
a) annually renewable term
b) ten-year renewable term
c) limited pay whole life
d) single-premium whole life
All of the following statements pertain to the conversion privilege of group term life insurance are correct EXCEPT
a) an insured employee typically has 31 days following termination of employment in which to convert the group insurance
b) an insured employee must convert to the same type of coverage as was provided under the group plan (that is, term)
c) insureds who convert their coverage to individual plans pay a premium rate according to their attained age
d) an insured employee may exercise the conversion privilege regardless of his or her insurability
Jackie has just signed up to participate in her employer's franchise life insurance program. Which of the following statements is CORRECT?
a) She may not continue the policy if she terminates employment.
b) As the sponsor of the program, her employer collects the premium from her and remits it to the insurance company
c) The employer is given a certificate of insurance.
d) Jackie is allowed to select the type and amount of insurance coverage.
Group insurance plans that require employees to pay a portion of the premium are called
All of the following statements regarding annuities are correct EXCEPT
a) generally, annuity contracts issued today require fixed, level funding payments
b) annuities are sold by life insurance agents
c) an annuity is a periodic payment
d) annuitants can pay the annuity premiums in lump sums
Joanna and her husband, Tom, have a $40,000 annuity that pays them $200 a month. Tom dies and Joanna continues receiving the $200 monthly check as long as she lives. When Joanna dies, the annuity payments cease. This is an example of a(n)
a) installment refund annuity
b) joint and full survivor annuity
c) life annuity
d) cash refund annuity
Which of the following statements describes equity index contracts?
a) Equity index contracts are always backed by investments in stocks.
b) Selling equity index contracts never requires a license for variable products.
c) Most of the investments backing equity index contracts are similar to those for non-index contracts.
d) Cash values of equity index contracts mirror all changes in stock market values.
James died after receiving $180 monthly for six years from a $25,000 installment refund annuity. His wife, Lucy, as beneficiary, now will receive the same monthly income until her payments total
All of the following statements about variable annuities are correct EXCEPT
a) individuals who sell variable annuities must be registered with the FINRA
b) the contract owner bears the investment risk rather than the insurance company
c) once a variable annuity has been annuitized, the amount of monthly annuity income cannot fluctuate
d) during the accumulation period, the contract owner's contributions to the annuity are converted to accumulation units and credited to his or account
What annuity payout option provides for lifetime payments to the annuitant but guarantees a certain minimum term of payments, whether or not the annuitant is living?
a) Installment refund option
b) Life with period certain
c) Joint and survivor
d) Straight life income
Which of the following statements regarding equity index contract factors is most CORRECT?
a) Equity index contracts usually follow all stock market changes exactly.
b) All equity index contracts guarantee that cash values will grow a minimum amount each year.
c) Most equity index contracts are backed by separate accounts and are variable products.
d) Cash values of equity index contracts usually grow at a minimum interest rate.
"Annuity payments are taxable to the extent that they represent interest earned rather than capital returned." What method is used to determine the taxable portion of each payment?
a) Exclusion ratio
b) Marginal tax formula
c) Surtax ratio
d) Annuitization ratio
When a cash value life insurance policy is converted into an annuity in a nontaxable transaction, that event is generally known as a
b) 1035 exchange
c) modified endowment
d) pension enhancement
Albert has purchased an annuity that will pay him a monthly income for the rest of his life. If Albert dies before the annuity has paid back as much as he put into it, the insurance company has agreed to pay the difference to Albert's daughter. What annuity payout option did Albert select?
a) straight life income
b) a life income with period certain
c) a cash refund
d) a fixed annuity
Which of the following statements regarding annuity payout options is NOT correct?
a) Under a straight life annuity option, all annuity payments stop when the annuitant dies.
b) In a cash refund annuity, the annuitant's beneficiary always receives an amount equal to the beginning annuity fund plus all interest.
c) A period certain annuity guarantees a definite number of payments.
d) Joint and survivor annuities guarantee payments for the duration of two lives.
Before he died, Gary received a total of $9,200 in monthly income payments from his $15,000 straight life annuity. He also was the insured under a $25,000 life insurance policy that named his wife, Darlene, as primary beneficiary. Considering the two contracts, Darlene would receive death benefits totaling
When annuitized, which of the following is true?
a) The number of annuity units stays the same.
b) The value of each annuity unit stays the same.
c) The dollar amount of monthly payments stays the same.
d) The value is adjusted to accommodate cost-of-living changes.
A variable annuity agent must notify the Department of Financial Services within 60 days of any of the following changes EXCEPT
a) change of the agent's name
b) change of the agent's company
c) change of the agent's residence address
d) change of the agent's mailing address
The value of one accumulation unit is found by
a) dividing the total value of the company's VA fund by the total number of accumulation units
b) dividing the VA account by the total number of policyholders
c) dividing the surplus of the company by the number of accumulation units outstanding
d) add VA account amounts to the company surplus and dividing by the number of policyholders
Are investment gains in the accumulation unit values subject to current income taxation?
a) Yes, but only to the extent of the gain.
b) No, they are not currently taxable.
c) Yes, but the gain is paid by the company.
d) Yes, but the gain can be offset by any losses.
Insurers selling variable annuities are subject to
a) state regulation
b) Federal Trade Commission regulation
c) bank examiners' scrutiny
d) municipal regulation
Common stocks are used in the investment portfolio underlying variable annuities because common stocks
a) usually provide a hedge against inflation
b) guarantee a minimum interest rate
c) are based on the full faith and credit of the insurer
d) are insured by the federal government
Florida law requires insurers to distribute to each policy owner an annual report that contains which of the following?
a) Dollar value of each unit
b) Anticipated increase in number of units by the next anniversary
c) Forecast of the value of the unit by the next anniversary
d) Amount of tax on each unit reported to the IRS
Before selling a variable annuity, the agent must furnish the prospect with a(n)
a) outline of coverage
c) consumer's buying guide
d) table of guaranteed values
A person deposits $10,000 in a variable annuity account. The cost of one accumulation unit at that time is $200. When he or she begins to receive payments the value of an accumulation unit is $225. What is the total value of the variable annuity?
Which of the following statements is(are) true?
a) Insurers selling VA are subject to regulation by the state Office of Insurance Regulation.
b) The annuity itself is regulated as a security.
c) The common stocks backing VA accounts fall under the purview of the Securities and Exchange Commission.
d) All of the above statements are true.
In 1956, jurisdiction over VA was asserted by the
a) Internal Revenue Service
b) Fair Trade Commission
c) Federal Banking Commission
d) Securities and Exchange Commission
Which of the following statements is true?
a) The company cannot guarantee a specific interest yield from investments.
b) Investment results are usually geared to a portfolio of common stocks.
c) The value of accumulation units fluctuates.
d) All of the above statements are true.
Which of the following is one of the basic types of variable annuity?
An application for a variable annuity contract must show which of the following on the first page?
a) Agent's name
b) Agent's license identification number
c) Name of the insurer
d) All of the above
The period of time from a variable annuity contract's issue date and the start of payments is known as the
a) deductible period
c) probationary period
d) funding period
The first page of an application for an annuity contract must display:
a)the insurer's name & state of domicile
b) the insurer's name & the agent's name
c) the agent's name & license number
d) the insurer's name, the agent's name, & the agent's license number
A fixed dollar annuity guarantees
a) a fixed minimum dollar amount per payment
b) the principal amount
c) the minimum interest rate
d) all of the above
Before VA benefits can be paid out, the accumulation units in a participant's account must be converted to
a) investment units
b) statistical units
c) annuity units
d) optional units
All of the following statements correctly describe the purpose of Social Security EXCEPT
a) it provides a source of income for a meaningful standard of living during retirement
b) it provides basic protection against financial problems accompanying death, disability and retirement
c) it augments a sound personal insurance plan
d) it provides retirement and survivor benefits to a worker and his or her family
Bill is self-employed. The FICA tax rate for Bill is
a) 6.2 percent
b) 7.65 percent
c) 15 percent
d) 15.3 percent
In determining Social Security retirement benefits, which of the following statements is CORRECT?
a) Average monthly wages (AMW) are adjusted for inflation.
b) The primary insurance amount (PIA) determines the worker's average indexed monthly earnings (AIME).
c) The PIA is a determination of the amount equal to the worker's full retirement benefit at his or her full retirement age.
d) Workers retiring past age 59 1/2 can receive 100 percent of their PIA.
Jan, a single, working mother, dies at age 40. Dave, her only son, would receive a one-time lump-sum benefit of
Ellen works part time to supplement her family's income. In 2009 she earned $3,759 and worked at least part of every month. With how many quarters of coverage will she be credited for 2008?
Which of the following statements regarding Social Security survivor benefits is NOT correct?
a) A surviving widow, age 66, will be entitled to a life income equal to her husband's PIA.
b) A healthy dependent child of a deceased worker will be entitled to an income benefit until age 18, or to age 22, if he or she attends college.
c) A surviving widower, age 47, has a 13-year-old child who was also a dependent of the deceased worker. The widower is entitled to monthly income until the child becomes 16, at which time benefits will cease to the widower until he reaches at least age 60
d) a deceased covered worker was providing one half of the support for a 62 year old parent who is confined to a nursing home. the parent is entitled to a survivor benefit
Rudy is eligible for full death, retirement and disability benefits under Social Security. His worker status is
a) completely insured
b) currently insured
c) fully insured
d) partially insured
Anne earned $110,000 in 2010. Assuming 2010 Social Security rates, how much did her employer deduct from her salary for FICA taxes that year?
Which of the following examples pertaining to Social Security benefits is CORRECT?
a) Simon has a Social Security PIA of $700 at the time of his death. His surviving spouse will receive a lump-sum death benefit of $2,250.
b) Lola, age 30, has a daughter, age 10. Her husband, who is covered under Social Security, died last month following surgery. Both Lola and her daughter are entitled to receive monthly survivor benefits until her daughter reaches age 18.
c) mason, who is married with one son, age 16 is a fully insured retired worker receiving social security benefits. In addition, his spose is eligible for benefits at age 62 and his son, is elegibile for ben until he is 18
d) arlene, the 30 yer old daughter of fully insured retired worker, becomes totally and permanently disabled from a car accident. Bc her disability occurred after age 16, arlene is not eligible for her fathers social security benefits
Which of the following statements about 401(k) plans is CORRECT?
a) All of a company's employees must participate in the plan.
b) An employees deferred contributions become nonforfeitable according to the plan's vesting schedule.
c) Employer contributions are included in the employee's income for the year.
d) As of 2010, the limit on employee deferrals to a 401(k) plan is $16,500 a year.
Which of the following statements correctly describes the tax advantage of a qualified retirement plan?
a) Employer contributions are not taxed when they are paid out to the employee.
b) Earnings of the plan are taxable to the employee only when he or she receives benefits.
c) Earnings of the plan are only taxable if the employee voluntarily terminates participation in the plan.
d) Employer contributions are deductible business expenses when the employee receives the benefits.
David is age 40 and single. In 2010 he earned $55,000 as an engineer with a company that has a group life plan but no employer-sponsored retirement plan. If David sets up a traditional IRA, what is the maximum contribution he can make and deduct from taxes in 2010?
Marvin, age 22, is single and earns $24,000 in 2010. The company where he is employed has a pension plan in which he participates. For that year, Marvin is eligible to set up an IRA and deduct a contribution of up to
All of the following should be eligible to establish a Keogh retirement plan EXCEPT
a) a dentist in private practice
b) partners in a furniture store
c) a sole proprietor of a jewelry store
d) a major stockholder-employee in a family corporation
Which of the following scenarios pertaining to IRAs is NOT correct?
a) June has accumulated $30,000 in her IRA. At age 53 she withdraws $2,500 to take a vacation. She will have to include the $2,500 in her taxable income for the year and pay a $250 penalty.
b) Bradly, age 72, is covered by an employer-sponsored retirement plan. He cannot establish a traditional IRA.
c) Peter inherits $15,000 in IRA benefits from his father, who died in 2008. Peter can set up a tax favored rollover IRA with the money and defer current income tax on the benefits received
d) walter is age 60. he may take his distribution from his IRA without having to worry about an early withdrawal period
All of the following types of plans are reserved for small employers EXCEPT
c) SIMPLE IRAs
d) SIMPLE 401(k)s
Herbert and Olga, both age 48, have been married for 10 years. They have not children, and each has a well-paying job. However, neither is covered by an employer retirement plan. What is the maximum amount they may set aside together in tax-deductible, traditional IRA funds in 2010?
A distribution received from an employer-sponsored retirement plan or from an IRA is eligible for a tax-free rollover if it is reinvested in an IRA within how many days after the distribution?
Bob, age 43, owns a traditional IRA and a Roth IRA. What is the maximum amount that he can contribute to both accounts in 2010 without being penalized?
All of the following statements regarding Roth IRAs are true EXCEPT
a) they provide for tax-free accumulation of funds
b) they limit contribution each year
c) they mandate distributions no later than age 70 1/2
d) they are not available to those in the upper-income tax brackets
All of the following statements about SIMPLE plans are correct EXCEPT
a) an employer may establish a SIMPLE plan if another qualified plan is not already in place
b) they can be structured as an IRA or as a 401(k) cash or deferred arrangement
c) an employer must make a nonelective contribution of 2 percent of compensation on behalf of each eligible employee
d) only employers with no more than 100 employees can establish SIMPLE plans
All of the following employed persons who have no employee-sponsored retirement plan would be eligible to set up and contribute to a traditional IRA EXCEPT
a) Miriam, age 26, secretary
b) Brent, age 40, medical technician
c) Edna, age 72, nurse
d) Jack, age 60, plumber
Which of the following phrases best describes vesting?
a) The time at which the worker meets the eligibility requirements for plan participation
b) The age at which an employee must begin to make withdrawals from retirement plans
c) The right of a worker's spouse to be considered in retirement income needs
d) The employee's right to funds or benefits, contributed by the employer, should he or she leave that employer
Which of the following statements about 401(k) plans is CORRECT?
a) All of a company's employees must participate in the plan.
b) An employees deferred contributions become nonforfeitable according to the plan's vesting schedule.
c) Employer contributions are included in the employee's income for the year.
d) As of 2010, the limit on employee deferrals to a 401(k) plan is $16,500 a year.
Which of the following concepts regarding ways to determine the proper amount of life insurance is CORRECT?
a) The most popular method today for determining the proper amount of life insurance is the human life approach.
b) When using the needs approach to determine the proper amount of life insurance to purchase, non-insurance-type assets, such as pension benefits and personal savings, are not factors in the calculation.
c) the needs approach considers only the most immediate financial concerns, without regard for family financial goals such as college education for children or retirement income for a surviving spouse
d) there are two basic approaches to determining the amount of life insruance that is needed: the human life value approach and the needs approach
A partnership owns, pays for and is the beneficiary of the life insurance policies on the lives of its individual partners. This is known as a(n)
a) entity buy-sell plan
b) stock redemption plan
c) cross-purchase plan
d) Keogh plan
Three business partners individually agree to acquire the interest of a deceased partner and own life insurance on each of the other partners in the amount of his or her share of the business's buyout value. What is described here is a(n)
a) entity buy-sell plan
b) stock redemption buy-sell plan
c) cross-purchase buy-sell plan
d) 401(k) plan
Which of the following statements regarding deferred compensation plans is CORRECT?
a) A deferred compensation plan must always be designed as a qualified plan.
b) Life insurance is not a permissible funding vehicle, but annuities are.
c) They permit a business to provide extra benefits to officers, executives and other highly paid employees.
d) A deferred compensation plan must be available to all employees who are at least 21 years old and have one year of service to the business.
Which of the following statements about key-person insurance is CORRECT?
a) The key employee's family is the beneficiary of the policy.
b) The death proceeds are taxable.
c) The business may take a tax deduction for premiums paid.
d) Because the business has complete control over the policy, it can be considered a business asset.
Robert and his employer agree on the purchase of split-dollar life insurance policy and the usual split-dollar approach to premium payments. Each year, the employer will contribute to the premium an amount equal to
a) one-half the premium
b) the annual dividend
c) the increase in the policy's cash value
d) two-thirds of the premium
With three partners in a business, how many life insurance policies would be required to insure a cross-purchase buy-sell plan?
All of the following statements regarding survivor financial needs are correct EXCEPT
a) the term "dependency period" refers to the 20-year period immediately following the insured's death during which the widowed spouse must depend on Social Security
b) the period for which there are no Social Security benefits for the surviving spouse is known as the blackout period
c) a final expense fund addresses a decreased breadwinners last illness and funeral costs, death taxes, outstanding debts and more
d) a houseing fund addresses a family's rental or home mortgage needs
Rolland is 45 years old and married. He has a son, age 19, a freshman at a local university and a daughter, age 8. Decreasing term insurance would be recommended for Rolland in order to accomplish which of the following reasons?
a) Supplement retirement income
b) Guarantee a college education for the son
c) Provide payment protection
d) Provide a college education fund for the daughter
Which of the following statements regarding key-person insurance is NOT correct?
a) Key-person life insurance indemnifies a business for financial loss caused by the death of a key employee or employee executive.
b) The business may borrow from the cash value of a permanent key-person life insurance policy.
c) The policy's death proceeds received by the business are not taxable.
d) Premiums for a key-person life insurance policy are a tax-deductible expense to the business.
Which of the following statements pertaining to health insurance policy premium factors is CORRECT?
a) A "policy fee" is another term for policy premium.
b) A policyowner has an individual health plan; therefore, the policy is most likely a participating policy.
c) Age and sex of the individual insureds would have the most influence on a group health insurance policy's experience rating refund credit.
d) pearl files a claim against her major medical policy for a $9,800 hospital bill. the claim will likely be paid out of the insurer's reserves
Assume a health insurance contract states that it will pay $350 a month to the insured, should he or she become totally disabled. Which term most aptly defines this kind of contract?
Which of the following premium factors is unique to health insurance (as opposed to life insurance)?
Which of the following statements regarding health insurance is CORRECT?
a) Once issued, health insurance policies cannot be cancelled by the insurer.
b) There are many premium-payment options available with health insurance policies.
c) Medical expense policies reimburse the insured for the cost of medical care.
d) Disability income policies are designed to pay the medical expenses associated with a disability.
All of the following are basic forms of health insurance coverage EXCEPT
a) medical expense
b) limited pay health
c) disability income
d) accidental death and dismemberment
Which of the following individuals would probably qualify for Social Security disability benefits?
a) George, a ski instructor who breaks his leg
b) Carl, who becomes ill with a viral infection and is not expected to be able to work for the next six months
c) Mike, a mechanic who loses his dominant hand in an accident
d) John, who experiences serious early-onset Alzheimer's & is unable to remember how to get to work
Marty just received his first Social Security disability payment. From this, we can assume
a) he had previously applied for Medicaid
b) he is at lease 65 years of age
c) his disability is expected to last 12 months
d) his disability commenced three months ago
Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?
a) Administrative-services-only plan
b) Commercial insurer
c) Preferred provider organization
d) Health maintenance organization
The waiting period before qualifying for Social Security disability benefits is how many months?
Which of the following statements pertaining to Medicaid is NOT correct?
a) It provides federal matching funds to states for medical public assistance plans.
b) Its purpose is to help eligible needy persons with medical assistance.
c) Medicaid benefits may be used to pay the deductible and coinsurance amounts of Medicare.
d) It limits financial assistance to persons age 65 or over who are in need of medical services they cannot afford.
Jerry is injured while working. Under state workers' compensation laws, we can assume that
a) His employer will not be liable for Jerry's work-related disabilities if the employer's negligence did not contribute to the injuries
b) Jerry will probably receive workers' compensation benefits on a monthly or weekly basis
c) Jerry must sue his employer to receive workers' compensation benefits
d) both jerry and his employer are required to contribute to the cost of workers compensation coverage
Which of the following statements pertaining to health maintenance organizations is CORRECT?
a) An insurance company that also markets group health insurance is known as a HMO.
b) If a person joins an HMO and undergoes a physical examination, he or she will be billed for the exam and each subsequent medical service as it is performed.
c) An insurance company may sponsor an HMO or assist an HMO by providing
d) like commercial insurers, HMOs generally assess deductibles
HMOs are known for stressing
a) preventive medicine and early treatment
b) state-sponsored health care plans
c) in-hospital care and services
d) health care services for government employees
The miscellaneous expense benefit in a basic hospital expense policy normally will cover
a) physicians' bedside visits
b) the administering of anesthesia
c) drugs and medicine administered in the hospital
d) hospital room and board
All of the following are types of deductible provisions associated with major medical policies EXCEPT
Which of the following statements about deductible provisions in medical insurance policies is NOT correct?
a) They help to eliminate small claims.
b) They provide that initial expenses up to a specified amount are to be paid by the insured.
c) They are most common in basic medical expense policies.
d) They help to hold down premium rates.
When a medical expense policy pays benefits on a fixed-rate basis, it pays
a) a certain percentage of whatever the hospital room charges are
b) for total hospital expenses, less a deductible
c) a flat amount per day for hospital room and board
d) only for surgery and miscellaneous hospital expenses
If the coinsurance feature in a major medical insurance policy is 75/25 with a $100 deductible, how much of a $2,100 bill would the insured pay?
Which of the following examples pertaining to major medical policy deductibles is CORRECT?
a) Eric's major medical policy has a $500 flat deductible provision. He incurs covered expenses totaling $350. He will pay nothing and his major medical expense policy will pay $350.
b) Sarah has a major medical expense policy with a $500 flat deductible and an 80/20 coinsurance provision. Her covered expenses total $1,800. Of that amount, she will pay $500 and her insurance will pay $1,300.
c) valerie incurs a hospital bill of 8300. her basic medial expense insurance pays 2400. valerie pays a 200 deductible and her major medial plan takes care of the balance of covered expenses. her deductible would be classified as a corridor deductiblexx
Wilbur`s basic medical expense policy limits the miscellaneous expense benefit to 20 times the $90 daily room and board benefit. During his recent hospital stay, miscellaneous expenses totaled $2,100. How much, if any, of this amount will Wilbur have to pay?
Clarence is to enter the hospital for a thyroidectomy. His basic medical expense policy includes a relative value schedule for surgical expense. The schedule lists 55 units for a thyroidectomy and a conversion factor of $8. How much will the policy pay?
Arthur incurs total hospital expenses of $9,500, all of which are covered by his major medical policy. The policy includes a $500 deductible and a 75/25 coinsurance feature. Of the total expense, how much will Arthur have to pay?
An insured has a basic hospital/surgical expense policy, which provides benefits of $50 per day for up to 30 days of hospitalization and $750 for miscellaneous charges. It bases its surgical benefits on a schedule approach. The insured is hospitalized for a severely broken leg that requires surgery. The surgical procedure has been assigned $500 by the policy, though the customary charge in the area is $600. The insured incurs the following covered expenses: 80 per day for seven days hopsital carge 675 for the surgical procedure 800 for misc expenses. the insured's policy will pay
Assume an insurer will issue a maximum monthly disability income benefit of $5,000, provided the total of such benefits payable by all companies does not exceed 60 percent of the insured's monthly income. Ted earns $4,500 per month and has no existing disability income policy. The maximum disability income benefit this insurer would issue Ted is
Sidney has a monthly benefit of $2,500 for total disability under a residual disability income policy. If Sidney suffers a 40 percent loss of his pre-disability income, how much will his benefit be?
Which of the following statements about elimination periods in disability income policies is NOT correct?
a) Elimination periods may apply to disabilities due to sickness and not accidents.
b) Benefits are not paid during an elimination period, but are paid retroactively to the beginning of the period if the insured remains disabled throughout the period.
c) An elimination period follows the start of a disability.
d) Elimination periods help keep premiums down.
Benefit periods for individual short-term disability policies typically vary from
a) 1 to 12 months
b) 3 months to 3 years
c) 6 months to 2 years
d) 1 to 5 years
What is the initial period of time specified in a disability income policy that must pass, after a policy is in force, before a loss due to sickness can be covered?
a) Preexisting term
b) Probationary period
c) Temporary interval
d) Elimination period
Which of the following terms relates to disability income insurance?
a) Service basis
c) Residual amount benefits
Which of the following statements about waiver of premium in health insurance policies is NOT correct?
a) It exempts an insured from paying premiums during periods of permanent and total disability.
b) It may apply retroactively.
c) It generally drops off after the insured reaches age 60 or 65.
d) It normally applies to both medical expenses and disability income policies.
Which of the following is NOT a basis for occupational suitability when determining total disability?
d) Job interest
Which defintion of total disability is more favorable to the insured?
a) "Own occupation" is more favorable
b) "Any occupation" is more favorable
c) They are the same in terms of benefits to the insured
d) There is no way to determine from the information provided
Which of the following riders provides for changes in the benefit payable based on changes in the consumer price index (CPI)?
a) guaranteed insurability rider
b) cost of living adjustment rider
c) Social Security rider
d) waiver of premium rider
Which of the following examples pertaining to accidental death and dismemberment insurance is CORRECT?
a) Merrill is the insured under a $50,000 AD&D policy and dies unexpectedly of a heart attack. His beneficiary will receive $50,000 as the death benefit.
b) Linda has a $40,000 AD&D policy that pays triple indemnity. If she should be killed in a train wreck, her beneficiary would receive $120,00
c) paul as an add policy that pays 15,000 for the loss of one hand or food or the sight of one eye. that benefit is called the principal sum
d) eric has an add policy. he is killed in an outo accident. The 30,000 his beneficiary receives as a death benefit is the policy's capital sum
Theodore received a $15,000 cash benefit from his $50,000 accidental death and dismemberment policy for the accidental loss of one eye. The amount he received could be identified as the policy's
a) principle sum
b) secondary sum
c) capital sum
d) contingent amount
The amount payable as a death benefit in an accidental death and dismemberment policy is known as the
a) primary amount
b) capital sum
c) indemnity amount
d) principal sum
Agnes purchases a round-trip travel accident policy at the airport before leaving on a business trip. Her policy would be which type of insurance?
a) Limited risk
b) Business overhead expense
c) Credit accidental death
d) Industrial health
Which of the following statements pertaining to Medicare is CORRECT?
a) Bob is covered under Medicare Part B. He submitted a total of $1,100 of approved medical charges to Medicare after paying the required deductible. Of that total, Bob must pay $880.
b) Each individual covered by Medicare Part A is allowed one 90-day benefit period per year.
c) for the first 90 days of hospitalization, medicare part a pays 100 percent of all covered services, except for a individual deductible
d) medicare part a is automatically provided when a qualified individual applies for SS benefits
Which of the following statements concerning workers' compensation is NOT correct?
a) Workers' compensation laws are designed to return injured persons to work.
b) Benefits include medical care costs and disability income.
c) A worker receives benefits only if the work-related injury was not his or her fault.
d) All states have workers' compensation laws.
Which of the following statements about Medicare Part B is NOT correct?
a) It is a compulsory program.
b) It covers services and supplies not covered by Part A.
c) It is financed by monthly premiums.
d) It is financed by tax revenues.
How many days of skilled nursing facility care will Medicare pay benefits?
Under Medicare Part B, the participant must pay all of the following EXCEPT
a) an annual deductible
b) a per benefit deductible
c) 20 percent of covered charges above the deductible
d) a monthly premium
The core policy (Plan A) developed by the NAIC as a standard Medicare supplement policy includes all of the following EXCEPT
a) the Medicare Part A deductible
b) Part A coinsurance amounts
c) the first three pints of blood each year
d) the 20 percent Part B coinsurance amounts for Medicare-approved services
Which of the following statements about long-term care insurance policies is NOT correct?
a) Maximum coverage periods generally extend from two to six years.
b) Long-term care policies sold today must be guaranteed renewable.
c) A long-term care policy with a long probationary period will have a lower premium than one with a shorter probationary period.
d) Premiums for a long-term care policy are based solely on the insured's age, health and the type of benefits provided.
Skilled nursing care differs from intermediate care in which of the following ways?
a) It must be performed by skilled medical professionals whereas intermediate care does not require medical training.
b) It must be available 24 hours a day while intermediate care is daily, but not 24-hour care.
c) It is typically given in a nursing home, while intermediate care is usually given at a home.
d) it encompasses rehab, while intermediate care is for meeting daily personal needs, such as bathing and dressing
All of the following conditions are typically covered in a long-term insurance policy EXCEPT
a) Alzheimer's disease
b) senile dementia
c) alcohol dependency
d) Parkinson's disease
Which of the following is a serious condition from which a patient can fully recover with proper medical attention?
a) Chronic illness
b) Long-term illness
c) Acute illness
d) Severe illness
A company may change the wording of a uniform policy provision in its health insurance policies only if the
a) company's board of directors approves the change
b) modified provision is not less favorable to the insurer
c) applicant directs that it be changed
d) modified provision is not less favorable to the insured
The conformity with state statutes provision in a health insurance policy stipulates that any policy provision that is in conflict with the statutes of the state where the insured resides is
a) to be submitted to the chief financial officer for approval
b) cause for the insured's policy to be voided
c) automatically amended to conform to the minimum requirements of the state's statutes
d) to be rewritten if the policy is returned to the company
Which of the following types of health insurance policies prevents the company from changing the premium rate or modifying the coverage in any way?
a) Optionally renewable
c) Guaranteed renewable
Which of the following is the usual grace period for a semi-annual premium policy?
a) 7 days
b) 20 days
c) 31 days
d) 60 days
Which section of a health insurance policy specifies the condition, times and circumstances under which the insured is NOT covered by the policy?
a) Coinsurance provision
c) Insuring clause
Children of the insured are eligible for health insurance coverage until they attain age 19 or, if they remain in school full time, age
According to the notice of claims provision in a health insurance policy, a claimant must normally notify the insurance company of loss within how many days after the loss occurs?
Diana, the beneficiary under her husband's AD&D policy, submits an accidental death claim May 1, 2009, following his death. However, the company denies the claim on the basis that death was due to natural causes. She decides to talk to her attorney. What is the earliest date for taking legal action against the insurer?
a) May 2
b) june 1
c) july 1
d) may 1
Under the misstatement of age provision in a health insurance policy, what can a company do if it discovers that an insured gave a wrong age at the time of application?
a) Cancel the policy
b) Increase the premiums
c) Adjust the benefit
d) Assess a penalty
Which kind of health insurance policy assures renewability up to a specific age of the insured, although the company reserves the right to change the premium rate on a class basis?
b) Guaranteed renewable
c) Optionally renewable
Which of the following statements pertaining to the grace period and reinstatement provisions in health insurance policies is NOT correct?
Under a health policy's reinstatement terms, insured losses from accidental injuries and sickness are covered immediately after reinstatement.
All of the following are required uniform provisions in individual health insurance policies EXCEPT
a) change of occupation
b) grace period
c) entire contract
Which of the following is the purpose of medical cost management?
a) To influence hospital charges and doctor's fees.
b) To discourage individuals from utilizing health care services.
c) To control health claims expenses.
d) To encourage individuals to seek medical help only as a last resort.
What kind of table reflects the average number of disabilities due to sickness or accidents at various ages?
c) Claims underwriting
Susan is covered under her employer-sponsored disability group plan. The premium is $50 a month: Susan pays $10 and the employer pays $40. Assuming Susan were to become disabled and receive monthly disability benefits of $700 from the plan, how much, if any, of the monthly benefit would be taxable income?
Which of the following statements most aptly describes health insurance benefits?
a) Each policy offers a single type of benefit.
b) Claims, not benefits, affect premium rates.
c) Policyowners who have policies with identical benefits pay the same premiums.
d) The greater the benefits, the higher the premium.
What is the effect of an impairment rider attached to a health insurance policy?
a) To increase the premium charged
b) To decrease the amount of benefits provided
c) To exclude from coverage losses resulting from specified conditions
d) To increase the policy's waiting period
All of the following factors would affect a health insurance policy's premium rate EXCEPT
a) age of the insured
b) occupation of the insured
c) type of benefit provided
d) residential address of the insured
Which of the following would probably NOT be considered in underwriting a health insurance risk?
a) Personal habits
b) Credit rating
c) Medical history
d) Marital status
Assume the following individuals are issued health insurance policies with varying renewability provisions. All other factors being equal, who would pay the highest premium?
a) Dan - cancellable
b) Jim - optionally renewable
c) Henry - conditionally renewable
d) Jack - noncancellable
Rick, who has no health insurance, experienced $3,000 in medical expenses this year. Assuming his adjusted gross income was $29,000, how much of those medical expenses can he deduct from his income taxes, if any?
All of the following are primary risk factors in underwriting individual health insurance policies EXCEPT
a) geographical location
b) moral hazard
d) physical condition
Which of the following statements about group health insurance is CORRECT?
a) A group health insurance contract is between the insurance company and the employee.
b) Group health plans provide more extensive benefits than individual health plans.
c) If a group plan provides medical expense benefits, it must be with a comprehensive policy.
d) COBRA requirements are directed at employers with 20 or fewer employees.
Which of the following statements regarding group disability income plans is NOT correct?
a) Benefits are specified in terms of a percentage of the participant's earnings.
b) Benefits paid under the group plan are supplemental to workers' compensation plans.
c) Employees covered under both a short-term and long-term plan collect benefits from each simultaneously.
d) A minimum length of service may be required before an employee is eligible to participate in the plan.
Which of the following can an individual include as qualifying expenses for purposes of determining a medical tax deduction?
a) Premium contributions paid by the employer to a group medical expense plan
b) Premium contributions paid by the employer to a group disability plan
c) Premium contributions paid by the employee to a group medical expense plan
d) Premium contributions paid by the individual to a group disability plan
Dan is participating in his company's group health plan. One of the plan's provisions specifies that, in the event he is eligible for benefits under another policy, his group plan will serve as the primary plan. What is this provision called?
a) Excess coverage provision
b) Coordination of benefits provision
c) Other insurance with this insurer provision
d) Double indemnity provision
Which of the following statements about COBRA is CORRECT?
a) The premium for continued group medical coverage may be up to 102 percent of the premium that would otherwise be charged.
b) The employer must pay the cost of the continued group coverage.
c) The schedule of benefit during the continuation period may be different than those provided under the group plan.
d) COBRA permits an employee to convert group certificate to an individual policy.
The purpose of COBRA requirements concerns
a) coordination of health benefits
b) continuation of health benefits
c) Medicare supplement coverage
d) nondiscrimination in group health plans
A vacation cruise line that wants group health coverage for its passengers would purchase what kind of insurance?
a) Franchise health insurance
b) Wholesale health insurance
c) Blanket health insurance
d) Credit health insurance
Which type of group health coverage typically does NOT contain a conversion privilege?
a) Basic medical expense
b) Comprehensive medical expense
c) Disability income
d) Accidental death and dismemberment
Sally is covered by her employer's noncontributory group disability income plan, the premium for which is $50 a month. If she were to become disabled and receive $1,000 a month, how much of each benefit payment would be taxable income to her?
An individual purchased group credit accident and health insurance to cover a car loan. Following an accident, the individual was disabled for eight months. Which of the following benefits were paid under the policy?
a) Monthly income benefits to the insured
b) An amount equal to eight months of the loan payment to the insured's creditor
c) An amount equal to 10 months of the loan payment to the insured's creditor
d) monthly income benefits to the insured and an amout equal to eight months of the loan payment oto the insured's creditory
All of the following are methods of keeping premium costs to a minimum in a health policy EXCEPT
a) modifying benefit amounts
b) increasing the deductible
c) waiving the right to receive benefit payments when due
d) extending the elimination period
With regard to health insurance policies, which of the following statements is CORRECT?
a) A major medical plan with a $100 deductible is less expensive than one with a $500 deductible.
b) More Americans are covered by an individual medical expense policy than a group policy.
c) The appropriate benefit payable under a disability income policy should equal the insured's monthly gross income.
d) a disability policy with a six month elimination period is less expensive than one with a sixty day elimination period, all other factors being equal
Which of the following characteristics is associated with disability buy-out plans?
a) A short elimination period
b) The option to elect a lump-sum payment
c) Provisions to cover the business overhead expenses
d) Irrevocable agreements
What is the income tax consequence if Marie's employer pays for her group disability income coverage?
a) Marie must pay taxes on the premium payments.
b) Marie can deduct the premium payments.
c) The employer receives the disability income benefits tax free.
d) The employer can deduct the premium payments.
Fred owns a small hardware store and is covered under a business overhead expense policy. If he becomes disabled, he can expect all of the following expenses to be covered EXCEPT
a) his employees' salaries
b) his salary
c) utility bills
d) property and liability insurance premiums
The general powers and duties of the Office of Insurance Regulation include all of the following EXCEPT
a) enforce the Florida Insurance Code
b) determine if an insurance company has violated the Insurance Code
c) enact statutes to govern the insurance industry
d) disseminate information regarding its activities
In insurance regulatory language, which of the following properly identifies a "foreign" insurance company?
a) Insurance company whose home office is in another country
b) Insurance company whose home office is in another state
c) Insurance company that has no local representative
d) Insurance company whose policies are in a foreign language
Which of the following penalties imposed upon the agent by the Chief Financial Officer does NOT match the offense?
a) Failure to answer a subpoena can result in a $1,000 fine.
b) Violation of the Insurance Code can result in suspension of license.
c) A fraudulent act can result in prosecution by the Attorney General.
d) Violation of a cease-and-desist order can result in a fine of no more than $2,500.
What two authorities can impose penalties for violation of state insurance laws?
a) Chief Financial Officer and the legislature
b) Chief Financial Officer and the courts
c) Legislature and the courts
d) Courts and the National Association of Insurance Commissioners
Sliding consists of all the following activities except:
a) telling an applicant that certain ancillary coverage is required by law when it is not
b) advising a client that certain ancillary coverage is included at no additional charge when such a charge is required
c) charging an applicant for ancillary coverage over the cost of coverage applied for without the applicant's consent
d) recommending that a client take cash value from one policy to make other investments
All of the following activities violate the Florida Insurance Code EXCEPT
a) dividing commission on a life insurance policy with any licensed agent
b) dividing commission on a life insurance policy with a licensed health agent
c) dividing commission on a life insurance policy with another agent who is licensed and appointed to sell the same line of insurance
d) dividing commission on a life insurance policy with a licensed life insurance broker who regularly transacts life insurance
Which of the following is correct about the Department of Financial Services' right to examine an agent's records?
a) An examination can be conducted at any time to discover any unfair trade practices.
b) An agent's records involving a premium transaction are confidential and not subject to examination.
c) The Chief Financial Officer may examine an agent's records only once per year, unless good cause is shown for more frequent examinations.
d) the statutes do not give the Department an absolute right to examine the affairs of insurance licensees to discover unfair trade practices
A fraternal life insurance organization can operate as any of the following EXCEPT
d) charitable trust
The definition of "transacting insurance" includes all of the following EXCEPT
a) soliciting a contract of insurance
b) negotiating a contract of insurance
c) underwriting a contract of insurance
d) effectuating a contract of insurance
The major areas of regulation by the Office of Insurance Regulation include which of the following?
a) Policing against unauthorized insurance activities
b) Proposing legislation to regulate the insurance industry
c) Enacting new insurance laws
d) Issuing certificates of authority to insurers
All of the following are characteristics of a mutual insurance company EXCEPT
a) management elects the board of directors
b) the policyowners are the owners of the company
c) dividends, if any, are paid to policyowners
d) it must be incorporated in order to operate
If an agent changes his or her residence address, he or she must notify the Department of Financial Services within
a) 15 days
b) 30 days
c) 60 days
d) A change of residence address does not require notification.
All of the following activities could result in the suspension of an agent's license EXCEPT
a) misrepresenting the financial condition of an insurance company
b) selling any replacement policy that causes an insured to lapse an existing policy
c) attaining a license for the sole purpose of handling controlled business
d) demonstrating incompetency to transact business as an insurance agent
Of the following terms, which best describes the act of replacing existing life insurance with a new life insurance policy based upon incomplete or incorrect representation?
Transacting insurance business does NOT include which of the following activities?
a) Soliciting the purchase of insurance
b) Negotiating an agent contract with an insurance company
c) Negotiating an insurance contract
d) Recommending specific types of insurance based on a policyowner's needs
Which of the following activities is NOT a violation of the Insurance Code?
a) Charging a fee that is more than the premium stated in the policy
b) Collecting premiums and depositing them in the agent's personal account
c) Writing as much non-controlled insurance business as controlled business
d) Offering a premium rebate if the insured contracts for other insurance business
Violation of the controlled business statute occurs if an agent sells most of his or her business to
a) employees of a business owned by his or her father
b) members of his or her civic club
c) city and county employees
d) members of the local medical society
All of the following are reasons the insurance industry is subject to governmental regulation EXCEPT the
a) public trust aspect of the business
b) financial impact of the business on the economy
c) need to monitor the premium payment practices of the public
d) duty to protect the public due to the technical nature of insurance contracts
Which of the following would be considered an unfair claim practice?
a) Implementing standards for proper investigation
b) Denying a claim after reasonable investigation of the facts
c) Misrepresenting insurance policy provisions affecting a loss
d) Acting promptly on claims communication
Which of the following is correct about the replacement rule?
a) The replacement rule applies only to health insurance policies.
b) The agent has 90 days from the effective date to deliver a Buyer's Guide.
c) Instructions regarding the rule are available from appointed life insurers.
d) Up to 30 days is allowed for a full refund of premium.
All of the following statements are correct about the law for conversion (change of plan) EXCEPT
a) It applies to the conversion of industrial life insurance policies
b) Conversion is permitted without evidence of insurability
c) The maximum amount of face value that can be converted is $2,000
d) An insured can convert several industrial life insurance policies into one ordinary life insurance policy
Which of the following applies to retirement plans in Florida?
a) They are regulated by the Chief Financial Officer
b) No plan may qualify for favorable tax treatment
c) Only funding and participation methods are regulated
d) Federal ERISA regulations override Florida law
All of the following statements are correct about policy loan interest rates EXCEPT
a) An insurance company can charge a fixed rate of interest up to a maximum of 10 percent, with some restrictions.
b) An adjustable interest rate can be used if the insurance company follows a national corporate bond index.
c) An adjustable interest rate can be used if the limit is based on the average monthly published interest rate set by Moody's.
d) policy loan interest rates were set by the office of insurance regulation in 1933 and may not be chaned
Which of the following rules would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
a) Conversion rule
b) Disclosure rule
c) Replacement rule
d) Reinstatement rule
In a typical family policy, coverage on the children is usually provided by which of the following?
a) Whole Life
b) Term Life
c) Endowment Plan
d) Fixed Annuity
Which of the following statements applies to the rights of a surviving spouse under a group insurance policy?
a) Coverage continues at the same rate and premium
b) Conversion privileges must be provided for dependents
c) Conversion privileges extend to the spouse, but not not the children.
d) Conversion rights of the surviving spouse are less than those which the insured employee possessed
Which of the following is NOT required when a group life insurance policy is canceled?
a) The insurance company must notify the group policyowner.
b) The insurance company must request that the policyowner notify the group members.
c) The insurance company must notify the group members.
d) The policyowner must notify the group members.
All of the following are correct about a family plan policy EXCEPT
a) Term insurance is provided for children
b) The named insured has a whole life policy
c) Only children living when the policy is issued are covered
d) The coverage for the spouse may be term or whole life
Which of the following applies when an insured wishes to convert industrial insurance policies for an ordinary policy?
a) This is not permitted under Florida law.
b) It is possible to convert $3,000 or more of industrial insurance.
c) Any such conversion requires a physical examination.
d) The multiple policies can only be reissued as one industrial policy.
An insurance policy dividend can be all of the following EXCEPT
a) Paid as a return of premium
b) Paid as a division of surplus
c) Paid by a nonparticipating policy
d) Applied to pay premium
Which of the following is a requirement that a professional association must meet to obtain group insurance?
a) It must have been in existence for at least two years
b) It must have at least 100 members that participate
c) It must be formed for the sole purpose of purchasing insurance
d) Its members must contribute premiums on a strictly voluntary basis
All of the following are correct about the policy loan interest rate EXCEPT
a) An adjustable rate of interest can be charged
b) An insurance company can charge a fixed rate of up to 10 percent
c) Adjustable interest rates are based on a published index
d) There are no restrictions or limitations on policy loan interest rates
Under group life insurance, which of the following statements is CORRECT?
a) If cancelled, the members must be notified
b) There must be at least 25 lives in the group
c) A group member cannot name a beneficiary
d) Any group of individuals is eligible for group life
All of the following statements about a participating policy are correct EXCEPT
a) Premiums may be higher than those for a nonparticipating policy
b) The surrender values are generally the same as a nonparticipating policy
c) Policy dividends may be paid in cash
d) Policy dividends paid in cash are taxable
All of the following statements are correct about a participating policy EXCEPT
a) Dividends are not considered in comparison
b) Dividends are paid to the policyowner
c) Dividends may be used to pay premiums
d) Dividends may be left with the insurer to accumulate interest
All of the following statements about life insurance benefits are correct EXCEPT
a) Benefits designated for a named beneficiary are protected from the insured's
b) Benefits payable to the insured's estate are protected from the creditor's
c) The cash surrender value of a life insurance policy is subject to garnishment if the policy was taken out for the creditor's benefit
d) Benefits designated for a named beneficiary are protected from the beneficiary's creditors
All of the following apply under the federal ERISA law EXCEPT
a) The Florida law on retirement plans supersedes ERISA.
b) qualified pension plans receive favorable tax treatment.
c) Fiduciary responsibility is required.
d) Funding, participation and vesting are addressed.
Which of the following is a requirement for a participating life insurance policy?
a) Pays dividends to stockholders
b) Assesses premiums against stockholders
c) Pays dividends to policyholders
d) May be converted to a term life policy
All of the following statements are correct about group life insurance EXCEPT
a) A member can assign his or her incidents of ownership
b) Certificate holders need not be notified if the policy expires
c) Rates are typically more favorable than individual policies
d) It is generally written as a one-year renewable term plan
Which of the following is the correct number of lives required in Florida for a group life insurance policy?
d) No minimum
Which of the following is NOT considered to be an element of replacement?
a) The agent knows a new policy will take the place of an existing policy.
b) An existing policy is subjected to a loan of 10 percent of its value.
c) An existing policy is allowed to lapse.
d) An existing policy is reissued with a reduced cash value.
All of the following groups are eligible for group life insurance EXCEPT
a) employer and employee groups
b) labor unions
c) trustee groups
d) social clubs
During what period is a new life insurance policy owner entitled to review a policy and return it for a full refund?
a) During the 14 days prior to its effective date
b) Within 14 days after delivery of the policy
c) Within 30 days of purchase
d) After receipt, but only with the prior approval of the agent
Variable life insurance policies involve all of the following EXCEPT
a) an approach to counter the effects of inflation
b) compliance with the Securities and Exchange Commission
c) benefits that vary with investment experience
d) a traditional approach to term life insurance
In which of the following ways is a beneficiary protected from the creditors of the deceased insured?
a) The proceeds of an insurance policy can always be claimed by the deceased insured's creditors.
b) When the policy is made payable to the estate, the proceeds are protected from the creditors.
c) If the policy is made payable to a named beneficiary, then the creditors can make no claim to the proceeds.
d) the cash surrender value of a life insurance policy can be attached by an ordinary creditor
A trusteeship group insurance policy
a) covers all full-time employees of a single employer
b) insures the debtors of one lender
c) covers students participating in sports
d) insures employees of two or more employers
Which of the following statements is correct about group life insurance?
a) It is written with a master policy for members of qualified groups
b) A group member is prohibited from assigning incidents of ownership
c) Group life rates are generally higher than those for individual policies
d) Only the group member can pay the premiums for the group policy
All of the following are eligible groups under Florida law EXCEPT
a) associations of licensed professionals
b) debtors of a single creditor
c) members of a credit union
d) groups established to buy insurance
All of the following apply to a universal life insurance policy EXCEPT
a) The coverage includes an annual renewable term policy.
b) There are no restrictions on it as far as receiving favorable tax treatment.
c) There can be a flexible premium and an adjustable benefit.
d) The accumulations in the policy grow on a tax-sheltered basis.
Which of the following is NOT provided in a proof-of-loss form?
a) A statement of the occurrence of accident of sickness
b) The extent of the loss for which the claim is made
c) A statement from the attending physician
d) Information that identifies the claimant
All of the provisions are required by Florida law for group health insurance policies EXCEPT
a) Coverage for mental and nervous disorders must be available to the group policyholder
b) A newborn child is to be provided coverage from the moment of birth
c) Coverage must continue until age 25 for a handicapped child that is a family member
d) A newborn child of a covered family member is to be provided coverage for 18 months
Under HIPAA requirements, how many months of "credible coverage" are required in order for a person who does not have access to other health insurance to be given the opportunity to purchase an individual health insurance policy?
a) 6 months
b) 12 months
c) 18 months
d) 24 months
Which of the following statements is correct about a group health insurance policy?
a) It cannot exclude coverage from an occupational accident
b) It can exclude newborn children from coverage
c) It cannot exclude coverage for VA hospital treatment
d) It can provide coverage for handicapped children
All of the following statements regarding maternity benefits are correct EXCEPT
a) Hospital expenses are usually covered up to ten times the room and board benefit
b) Individual health insurance policies can be written to include maternity benefits
c) Maternity benefits are optional to the policyholder of group insurance
d) All health insurance policies must provide maternity benefits
All of the following provisions are required by the Florida Employee Health Care Access Act EXCEPT
a) Coverage must always be renewed by carriers
b) Carriers must use a "modified community rating" methodology
c) All small group health benefit plans must be issued on a "guarantee-issue" basis
d) Preexisting exclusions are limited to 12 months for conditions manifested during the previous six months for small employers with 2-50 employees
In which of the following situations is a group health insurance policy NOT required to provide coverage?
a) Qualified services performed in an ambulatory surgical center
b) Outpatient services that would have been paid if rendered for an inpatient
c) Specified services by a licensed podiatrist
d) Treatment for an occupational illness or injury
A health insurance company can refuse coverage solely for which of the following reasons?
a) Applicant's past medical history
b) Sickle-cell trait in applicant
c) Sex of applicant
d) Marital status of applicant
Which of the following applies to the 14-day free-look privilege?
a) It permits the insured to reject the policy with a full refund.
b) It allows the insured 14 days to pay the initial premium.
c) It can be waived only by the insurance company.
d) It is granted only at the option of the agent.
Individual and group health insurance policies and HMO contracts can be canceled for all of the following reasons EXCEPT
a) Failure to pay premiums
b) The insured develops a serious illness
c) The insurer ceases to offer coverage in the market
d) Fraud or intentional misrepresentation of a material fact
All of the following statements regarding group health insurance are correct EXCEPT
a) Coordination of benefits is required between group policies and Medicare supplements
b) Coordination of benefits helps to reduce costs
c) Duplication of benefits result in overpayment
d) Coordination of benefits is permitted so long as the insured is completely reimbursed for covered expenses
Which of the following statements is correct about coverage for a handicapped family member who reaches adulthood?
a) Coverage ceases for the family member at the limiting age in the policy
b) Coverage continues if the member is chiefly dependent on the policyholder
c) Group health policies must continue coverage unlike individual policies
d) Coverage automatically ceases when the family member obtains employment
All of the following extensions of benefits apply when a group health insurance policy is discontinued EXCEPT
a) Continuation of maternity expense benefits
b) Continuation of disability benefits
c) Continuation of dental expense benefits
d) Continuation of treatment for an existing illness
Which of the following practitioners is NOT defined as a "physician" under Florida law?
a) Surgeon in an ambulatory surgical center
b) Dentist performing surgery in a office
c) Optometrist rendering services at an eye clinic
d) Sports therapist performing services in a health club
All of the following are correct about the required provisions of a health insurance policy EXCEPT
a) A grace period of 31 days is found in an annual pay policy
b) The entire contract clause means the policy, endorsements and attachments constitute the entire contract
c) A reinstated policy provides immediate coverage for an illness
d) Proof-of-loss forms must be sent to the insured within 15 days of claim
If a health insurance policy owner changes jobs to a more hazardous occupation, which of the following could apply?
a) Benefits could be reduced if the policy so provides
b) Coverage would not change if all insureds are charged the same rate
c) Coverage would not change if the insured has given notice and paid a higher premium
d) All of the above could apply
A health maintenance organization provides which of the following?
a) Free health care for Medicare patients
b) Preventive health care for its members
c) A program of "pay as you go" medicine
d) An extension of VA hospital treatment for veterans
All of the following statements about health insurance application are correct EXCEPT
a) the application may request health history
b) the application becomes a part of the insurance contract
c) the agent can correct and sign an application form for the client
d) the insurer can contest the application only when it is attached to the policy
All of the following provisions are mandatory in health insurance policies EXCEPT
a) Time limit on certain defenses
b) Grace period
c) Misstatement of age
d) Time of payment of claims
At what point in time can a policyholder file suit against a health insurance company for failure to pay a claim?
a) 60 days from date of loss
b) 120 days from date of loss
c) 60 days after filing proof of loss
d) 120 days after filing proof of loss
Group health insurance policies are required to provide all of the following EXCEPT
a) Coverage for hospitalization during disability
b) Coverage for a newborn child of a family member
c) Coverage for a newborn child from the moment of birth
d) Coverage for dental expenses
The notice to the insurance company of a health insurance claim must include all of the following EXCEPT
a) Name of the policyowner
b) Estimated amount of claim
c) Nature of sickness or injury
d) Name of the person receiving treatment
Which of the following is considered a "cost containment" measure of health policies?
a) Coordination of benefits
b) Duplication of benefits
c) Full coverage for inpatient treatment
d) Elimination of all deductibles
All of the following statements about the Outline of Coverage for health insurance policies are correct EXCEPT
a) it must be provided at the time of application or delivery of policy
b) principal benefits also shown on the policy need not be included
c) it is to include a summary statement of principal exclusions
d) it must include any right the insurer reserves to change premiums
All of the following are eligible for group health insurance EXCEPT
a) Any group eligible for group life insurance
b) Employees of members under an association plan
c) Group established by labor unions and associations
d) The employees of one employer and their dependents
The term copayment means
a) a fixed amount per visit or per service the subscriber must pay
b) the amount the HMO pays the subscriber if he or she secures service outside the service area
c) the amount the physician receives from the HMO for each patient treated
d) the premium the subscriber pays
If an agent signs up an HMO subscriber who is eligible for Medicare
a) Medicare will pay what the HMO does not
b) the subscriber is disenrolled from Medicare
c) the subscriber becomes eligible for Medicare
d) the subscriber can decide whether or not to keep both HMO and Medicare coverage
All of the following are considered unfair trade practices with regard to HMOs EXCEPT
Savings of the HMO system are based on all of the following EXCEPT
a) keeping the premium high enough to net a profit
b) volume discounts with hospitals
c) capitation arrangements with physicians
d) encouraging members to see their doctors early
An HMO contract must contain all of the following EXCEPT
a) a listing of the surgical schedules by which surgeons are paid
b) the premium, since it is subject to change
c) the length of the grace period
d) procedures to be followed for emergencies
The grace period for paying premiums on an HMO is
a) 10 days
b) 30 days
c) 60 days
d) There is no grace period for HMO contracts.
An individual who buys a membership in a prepaid health clinic because the premium is less than the HMO should be aware that the clinic cannot provide
a) outpatient service
b) emergency care
d) ambulatory diagnostic services
How often must HMOs file a report of their activities to the Office of Insurance Regulation?
a) Every three years
b) Every three months
c) Within three months after the close of a fiscal year
d) At the end of each calendar year
HMOs offering group coverage must have an open enrollment at least
a) once a year
b) for 18 days every 30 months
c) for 1 month every 3 years
d) for 30 days every 18 months
The written agreement between the subscriber and the HMO is called a
a) health care contract
b) health insurance policy
c) health maintenance agreement
d) health maintenance contract
The term capitation means
a) premium for the HMO coverage
b) amount paid to the physician for each member
c) amount of capital the HMO possesses
d) value of the HMO capital improvements and buildings
The Office of Insurance Regulation will NOT issue a Certificate of Authority to an HMO until it has
a) 500 prospective members
b) deposited capital and surplus in the amount of $1 million
c) received a valid Heath Care Provider Certificate from the Department of Health and Rehabilitative Services
d) been inspected and approved by the Florida Medical Association
In what way must the "Notice to Buyer" be conveyed to an HMO subscriber who is eligible for Medicare?
a) Printing, typing or stamping the notice on the first page of the HMO contract
b) Stamping the notice to the application
c) Typing the notice on the first page of the application and the contract
d) Reading the notice to the subscriber and having the subscriber sign an acknowledgment form
The Florida HMO Consumer Assistance Plan serves to
a) help low income families secure HMO coverage
b) assist consumers in understanding their HMO coverage
c) adjudicate contested claims by subscribers against HMOs
d) provide coverage for subscribers to HMOs that become insolvent
In order to sell HMO contracts, an agent must do all of the following EXCEPT
a) keep and renew his or her appointment
b) maintain a bond not less than $10,000
c) abide by the Unfair Trade Practices Act
d) obey all regulations of the Department of Financial Services
Which of the following persons may solicit applications for HMO coverage?
a) Licensed health agent
b) Consulting actuary
c) Company attorney
d) Financial adviser
The Legislature stated that the purpose of HMOs is to do all of the following EXCEPT
a) deliver high-quality health care
b) provide an alternative method of health care
c) replace the existing system of health care delivery
d) control the escalating cost of health care
HMOs are known for stressing
a) preventive care and early intervention
b) state-=sponsored health plans
c) outpatient care and services
d) coverage of government employees
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