CA LIFE STATE PRACTICE EXAM PT 2(FROM EXAM FX ONLINE TEST)

Life insurance death proceeds are

Generally not taxed as income.

A policyowner surrendered a non-participating whole life policy for $10,000 cash value. The policyowner had at that time paid premiums totaling $8,000. The federal income tax effect would be

$2,000 taxable, $8,000 tax free.

If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?

It is only taxable if the cash value exceeds the amount paid for premiums.

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

Interest only

What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?

Section 1035 Policy Exchange

An immediate annuity purchased with the face amount at death or with the cash value at surrender can be referred as which one of the following?

Settlement option

An immediate annuity purchased with the face amount at death or with the cash value at surrender can be referred as which one of the following?

Settlement option

What is the main purpose of the Seven-pay Test?

It determines if the insurance policy is an MEC.

Which of the following would qualify as a Section 1035 exchange?

Cash Value Life Insurance Policy to a Cash Value Life Insurance Policy

Which of the following statements is INCORRECT with regard to a 1035 exchange?

a. A whole life insurance policy can be exchanged for a Universal life insurance policy. b. On a trustee-to-trustee exchange where the policyowner exchanges a life insurance policy for another life insurance policy on the same life, there will be no income tax on the transaction. c. A life insurance policy can be exchanged for an annuity. **d. A whole life insurance policy can be exchanged for a term insurance policy.

If a life insurance policy is deemed to be a Modified Endowment Contract, the policy loans

Will be taxed on a last-in-first-out basis.

When the owner of a $250,000 life insurance policy died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected the Interest Settlement Option. If at the time of withdrawal the interest paid was $11,000, the beneficiary would be required to pay income tax on

$11,000.

Which of the following is true regarding dividend-related taxation?

Dividends are not taxable.

Death benefits payable to a beneficiary under a life insurance policy are generally

Not subject to income taxation by the Federal Government.

The cash value under a MEC accumulates

On a tax-deferred basis.

If there is a material change in an MEC contract,

A new 7-pay test is required.

Which of the following is taxable as income?

Benefits paid to the employee at retirement.

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

Interest only

Which of the following would be tax-free?

Death benefit received in a lump-sum settlement

An insured decides to surrender his Whole Life insurance policy which he had purchased 30 years ago. He had paid annual premiums of $500 while the policy was in force (which added up to $15,000). When he surrendered the policy, the cash surrender value was $18,000. What part of the surrender value would be income taxable?

$3,000

If taken as a lump sum, life insurance proceeds to beneficiaries are passed

Free of federal income taxation.

In life insurance policies, cash value increases

Grow tax deferred.

An employee quits his job on May 15 and doesn’t convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?

The insurer will pay the full Death Benefit to the beneficiary.

In a single employer group plan, what is the name of the policy issued to the employer?

Master contract

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years

Which of the following are generally not considered when underwriting group insurance?

The group’s medical history

In a group life insurance policy, the employer may select all of the following EXCEPT

a. The amount of insurance. b. The premium payor. **c. The beneficiary. d. The type of insurance.

All of the following statements concerning an employer sponsored non-qualified retirement plan are true EXCEPT

**a. The employer can receive a current tax deduction for any contributions made to the plan. b. The plan is a legal method of accumulating money for retirement needs. c. The plan can discriminate as to who may participate. d. The plan is not approved for favorable tax treatment by the IRS.

All of the following could own group life insurance EXCEPT

A group needing low cost life insurance.

Within how many days of termination of employment must an employer give notice of the employee’s right to convert the group policy to an individual policy?

15 days

Which of the following is NOT a potential advantage of a fully-funded retirement pension plan?

The Employer manages the investments for the employees, thus picking investments best suited to the employees’ risk tolerances.

What percentage of a company’s employees must take part in a non-contributory group life plan?

100%

All of the following are requirements for retirement plans EXCEPT

Being contributory

Norma Jean is joining a group insurance plan. In order to avoid proving insurability, what must Norma Jean do?

Join during the enrollment period

All of the following statements concerning an employer sponsored non-qualified retirement plan are true EXCEPT

**a. The employer can receive a current tax deduction for any contributions made to the plan. b. The plan is a legal method of accumulating money for retirement needs. c. The plan can discriminate as to who may participate. d. The plan is not approved for favorable tax treatment by the IRS.

All of the following are characteristics of group life insurance, EXCEPT

a. Individuals covered under the policy receive a certificate of insurance. b. Certificate holders may convert coverage to an individual policy without evidence of insurability. **c. Premiums are determined by the age, sex and occupation of each individual certificate holder. d. Amount of coverage is determined according to nondiscriminatory rules.

Which of the following is true about a defined benefit plan?

High-salaried employees with only a few years until retirement would benefit the most.

Within how many days of termination of employment must an employer give notice of the employee’s right to convert the group policy to an individual policy?

15 days

According to the requirements for employee benefit plans, which of the following is NOT true?

Employer can be the beneficiary of an employee’s group life insurance plan.

In a defined contribution plan,

The contribution is known and the benefit is unknown.

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

The president and employee of one’s family’s corporation.

All of the following could own group life insurance EXCEPT

**a. A group needing low cost life insurance. b. An employer group. c. An alumni group. d. A debtor group

Which of the following are generally not considered when underwriting group insurance?

The group’s medical history

All of the following employees may use a 403(b) plan (TSA) for their retirement EXCEPT

CEO of private corporation.

When an employee terminates coverage under a group insurance policy, coverage continues in force

For 31 days.

In a single employer group plan, what is the name of the policy issued to the employer?

Master contract

All of the following could own group life insurance EXCEPT

A group needing low cost life insurance.

Which of the following describes cost basis in an annuity?

The money that has been taxed before being paid into an annuity

All of the following would be different between qualified and non-qualified retirement plans EXCEPT

a. IRS approval requirements **b. Taxation on accumulation c. Taxation of withdrawals d. Taxation of contributions

Upon reaching the end of a vesting schedule, what percent of employer contributions to a qualified retirement plan are vested to the employee?

100%

When Barkley started work for the Ace Company, he was told he could participate in a Simplified Employee Pension Plan. This plan is

A defined contribution plan for a small business.

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?

100% participation of members is required in noncontributory plans.

What is a primary difference between an IRA and an SEP?

Much more money can be contributed to a SEP.

Under a seven-year vesting schedule, to what percentage of the employer’s contributions would the employee be entitled at the end of the seven-year period?

100%

Norma Jean is joining a group insurance plan. In order to avoid proving insurability, what must Norma Jean do

Join during the enrollment period

According to the requirements for employee benefit plans, which of the following is NOT true?

Employer can be the beneficiary of an employee’s group life insurance plan.

An employee quits his job on May 15 and doesn’t convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?

The insurer will pay the full Death Benefit to the beneficiary.

In a defined contribution plan,

The contribution is known and the benefit is unknown.

An employee has group life insurance through her employer. After five years, she decides to leave the company and work independently. How can she obtain an individual policy?

She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan.

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

The president and employee of one’s family’s corporation.

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?

a. SEPs offer ease of plan administration with minimal reporting requirements. **b. SEPs limit participation to members of closely held corporations. c. SEPs allow the employer to make annual tax deductible contributions up to 25% of an employee’s earned income, not to exceed $49,000. d. SEPs have a higher tax deductible contribution limit than an IRA.

Within how many days of termination of employment must an employer give notice of the employee’s right to convert the group policy to an individual policy?

15 days

How are funds contributed to a tax-sheltered annuity treated for taxation?

The contributions are not included as income for the employee, but are taxable upon distribution.

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years

Richard is the Vice-President of a major toy company. The President of the company has offered him a special individual annuity plan that is unavailable to lower-echelon employees. This plan would involve using before-tax corporate dollars to fund, and it does not meet government approval standards. This annuity plan is

A non-qualified annuity plan.

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

Require evidence of insurability.

Which of the following is true about a defined benefit plan?

High-salaried employees with only a few years until retirement would benefit the most.

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

Profit sharing plan

Vision, Inc. employs 500 people. The company offers group life insurance to its employees after 90 days of service. Who is considered the policyholder of the life insurance policies Vision, Inc. offers?

Vision, Inc.

When Barkley started work for the Ace Company, he was told he could participate in a Simplified Employee Pension Plan. This plan is

A defined contribution plan for a small business.

All of the following are characteristics of group life insurance, EXCEPT

a. Individuals covered under the policy receive a certificate of insurance. b. Certificate holders may convert coverage to an individual policy without evidence of insurability. **c. Premiums are determined by the age, sex and occupation of each individual certificate holder. d. Amount of coverage is determined according to nondiscriminatory rules.

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

Profit sharing plan

Which of the following is an IRS qualified retirement program for the self-employed?

Keogh

Which of the following does NOT describe a defined benefit plan?

Contributions are tied to the company profits.

The Medical Information Bureau (MIB) helps insurers compare medical information they have collected on a potential insured with the information received from

Other insurers.

When an insurance company agrees to automatically assume a portion of the risk written by another insurance company, it is known as a(n)

Reinsurance treaty.

The likelihood of sickness is

Morbidity.

A individual delays buying life insurance for himself. As time passes, which factor is likely to raise the cost of his life insurance when he finally purchases it?

He is 3 years older than he was when he first considered buying insurance.

Insurer X charges the premium from its insured customers, passing on operating expenses for the company. The operating expenses plus the premium equals the "gross" premium. What is another name for the operating costs for Insurer X?

Expense loading

What are the members of the Medical Information Bureau required to report?

Adverse medical information about individuals

What is the advantage of using the Interest Adjusted Cost method for comparing the cost of life insurance policie

Time value of money is taken into consideration.

An underwriter for a life insurance company is examining an applicant’s health history and demographic information. Which tool can be used to best determine the client’s insurability?

Mortality Table

What method do insurers use to protect themselves against catastrophic losses?

Reinsurance

Insurers like to keep the same clients for as long as possible. For insurers, a high retention rate has all of the following advantages EXCEPT

Guaranteed annual returns.

Bob applies for an insurance policy and, because of his medical history, is required to submit an attending physician’s statement. He receives the evaluation, and the report is submitted. The underwriting department still has further questions but is unable to get further information from the physician. What will the insurer most likely do?

The insurer can require the insured to visit a different physician at the insurer’s expense.

The insurer can require the insured to visit a different physician at the insurer’s expense.

An individual who was previously covered by group health insurance for 6 months is eligible

Which of the following best describes the MIB?

It’s a nonprofit organization that maintains underwriting information on applicants for life and health insurance.

All of the following are disadvantages of using Traditional Net Cost method for comparing the cost of life insurance policies EXCEPT

a. It assumes the policy will be kept for the number of years used in calculation. **b. Dividends are not considered in determining the cost of the policy. c. It does not consider the time value of money. d. The dividends and cash values are projections only.

What is the advantage of using the Interest Adjusted Cost method for comparing the cost of life insurance policies?

Time value of money is taken into consideration.

When an insurance company agrees to automatically assume a portion of the risk written by another insurance company, it is known as a(n)

Reinsurance treaty.

Under HIPAA, which of the following is INCORRECT regarding eligibility requirements for conversion to an individual policy?

**a. An individual who was previously covered by group health insurance for 6 months is eligible. b. An individual who was previously covered by group health insurance is eligible. c. An individual who doesn’t qualify for Medicare may be eligible. d. The gap of coverage for eligibility is a period of 63 or less days.

Which of the following is INCORRECT regarding HIPAA’s creditable coverage?

a. The 12 months of creditable coverage may come from different employers as long as the total is 12 months of coverage, with no gaps over 63 days. b. There would be no pre-existing conditions limitation under a new plan as long as more than 12 months of coverage existed immediately prior to joining the new group. c. When a person leaves employment, they will be issued a certificate of creditable coverage for the number of months they were covered under the employer’s group health insurance plan. **d. The 12 months of creditable coverage must all come from the same employer.

The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called

Expenses.

An insurer invests the money it receives from premiums paid by its insureds. Which of the following is true regarding the interest earned on these investments?

It is used to lower premiums.

Bob applies for an insurance policy and, because of his medical history, is required to submit an attending physician’s statement. He receives the evaluation, and the report is submitted. The underwriting department still has further questions but is unable to get further information from the physician. What will the insurer most likely do?

The insurer can require the insured to visit a different physician at the insurer’s expense.

Andrea wants to apply for an individual life insurance policy. She has a nearly flawless health history and wants only limited coverage. Which type of information is the least that would probably be required?

Application for insurance

What are the members of the Medical Information Bureau required to report?

Adverse medical information about individuals

To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan?

18 months

An insurance company is trying to grow while keeping its running costs low and keeping its customer base satisfied. On which of the following tasks should it focus?

Retaining its current clients

Under HIPAA, how many months of creditable coverage must a new employee have earned to not have a pre-existing condition exclusion in the new plan?

12 months

A pre-existing condition is a condition for which the employee has sought medical advice, diagnosis, or treatment within the previous

6 months.

Concerning AIDS and HIV risks, all of the following acts may subject an insurer to liability claims or fines EXCEPT

a. Disclosing test results to third party without applicant’s consent. b. Requiring applicant to pay for HIV test in order to be underwritten. **c. Declining applicant for a positive HIV test result. d. Not providing counseling contacts and educational information about HIV and AIDS.

Which of the following best describes what policy dividends are?

Distribution of excess funds

All of the following statements are true regarding policy dividends EXCEPT

They are guaranteed.

Your client wants to buy a par policy to supplement his retirement savings program. Which of the following does your client need to understand about insurance policy dividends?

Your client wants to buy a par policy to supplement his retirement savings program. Which of the following does your client need to understand about insurance policy dividends?

When can earned surplus be returned to the policyholder?

Whenever it exists and is not needed for other expenses

Insurers are required to file various financial reports with appropriate government agencies. Which of the following choices is TRUE?

a. By March 1st of each year, every admitted insurer in California must file a thorough financial report outlining its financial conditions and affairs as of December 31st of the previous year. b. In addition to other taxes due, insurers file a Premium Tax Return to the State Dept. of Insurance each year for the amount of premium taxes owed. **c. Both are true. d. Neither is true.

Which of the following best defines earned surplus?

Insurer’s unassigned funds.

All of the following must be included in annual financial reports submitted by admitted insurers to the California Department of Insurance EXCEPT

**a. The number of policies paid by list bill. b. The financial condition of the company. c. Changes that occurred in the company’s financial condition. d. Company liabilities, income and expenses.

What is the deadline for admitted insurers in California to file their annual financial reports?

March 1st.

Which of the following is a TRUE statement concerning an insurer’s Earned Surplus?

Earned Surplus are unassigned funds that are required to be reported on the insurer’s annual statement.

When can earned surplus be returned to the policyholder?

Whenever it exists and is not needed for other expenses

Your client wants to buy a par policy to supplement his retirement savings program. Which of the following does your client need to understand about insurance policy dividends?

Dividends are considered a refund of unused premiums.

Which of the following best describes what policy dividends are?

Distribution of excess funds

Your client wants to buy a par policy to supplement his retirement savings program. Which of the following does your client need to understand about insurance policy dividends?

Dividends are considered a refund of unused premiums.

On the way home from work, a man is involved in a car accident that damages his cervical vertebrae and surrounding nerves. He becomes quadriplegic as a result of the accident. What describes the insurance premiums that he will pay for the rest of his life if his policy contains an optional Waiver of Premium rider?

He will have to pay his regular premiums for 6 months. He will then be reimbursed for those premiums, and subsequent premiums will be waived.

At the time Molly Francis purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called

Guaranteed insurability option.

An insured is involved in an accident. He is informed by his insurance company that he will receive the principal amount due to his accidental death and dismemberment rider on his life insurance policy. For what losses could the insured generally receive the principal amount of the policy?

Loss of vision in both eyes

Every long-term care insurer in California must submit to the Commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least

Semiannually

Z falls from the roof of his house while fixing it and damages his spinal column enough to render him disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will Z receive?

Monthly premium waiver and monthly income

All of the following are true regarding the guaranteed insurability rider EXCEPT:

a. The insured may purchase additional coverage at the attained age. b. The insured may purchase additional insurance up to the amount specified in the base policy. c. It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. **d. This rider is available to all insured.

The rider that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium.

Which of the following annuity riders ensures that the annuity value will appreciate over time?

Guaranteed Minimum Accumulation

All of the following statements concerning Waiver of Premium riders are correct EXCEPT

An insured who has recovered from a disabling injury will be required to repay the insurer for any premiums that were waived.

Z falls from the roof of his house while fixing it and damages his spinal column enough to render him disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will Z receive?

Monthly premium waiver and monthly income

Every long-term care insurer in California must submit to the Commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least

Semiannually

Which of the following best describes the Guaranteed Minimum Accumulation for annuities?

The annuity’s original investment is secure, and will appreciate over time.

Which of the following annuity riders ensures that the annuity value will appreciate over time?

Guaranteed Minimum Accumulation

Which of the following annuity riders ensures that the owner will receive from an annuity at least the amount paid for the annuity?

Guaranteed Lifetime Withdrawal

The rider that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium.

Which of the below statements does NOT describe a Blue Cross and Blue Shield Plan?

Services are paid for at the time of use.

When an insured incurs medical expenses during the last 90 days of a calendar year, the Carry-Over Provision allows them to

Apply such expenses to the new year’s deductible.

Which of the following describes the client which will benefit from Extension of Benefits?

The client who was disabled prior to a policy discontinuance and remains disabled.

In a relative value system of determining coverage for a given procedure, what term describes the total amount payable per point?

Conversion factor

"A physical or mental impairment which substantially limits one or more major life activities; or a record of such impairment; or being considered as having such an impairment," is the definition of a disability according to

ADA

Which statement accurately describes group disability income insurance?

The extent of benefits offered is determined by the insured’s income.

In a group health policy, a probationary period is intended for people

Who joined the group after the effective date.

Which of the following options best depicts how the eligibility of members for group health insurance is determined?

By conditions of employment

One of HMO’s distinguishing features is that it

Provides for both medical services and the method of financing of medical services.

Issuance of health policies to insureds with chronic or ongoing conditions could result in all of the following EXCEPT:

**a. Lower overall costs and premiums. b. A very high claim within a short period of time. c. Adverse selection and consequently higher overall costs and premiums. d. An immediate claim.

Which of the below statements does NOT describe a Blue Cross and Blue Shield Plan?

Services are paid for at the time of use.

Which of the following are characteristics of a successful self-funded plan?

a. A group large enough to reasonably predict future loss experience b. A stop-loss contract to assume losses beyond the insured’s retention c. A third party administrator who services claims **d. All of the above

Though the purpose of health insurance, as with all insurance, is to "indemnify" or restore the client to his/her pre-loss condition, there is a possibility that the insured will not be paid back the entire amount of the health-care expense. This occurs if the amount of the loss exceeds what?

Policy limits

Which of the following groups would probably be covered by blanket insurance?

A university’s sports team

Teresa pays a monthly premium of $100 for her health insurance. What would be the duration of the grace period under her policy?

10 days

Benefit periods for individual short-term disability policies will usually continue from

Six months to two years.

All the factors are FALSE when used to provide data and statistics to an insurer in order to project losses and the subsequent cost of insuring risks in a group disability policy, EXCEPT

a. The number of group carriers. **b. Stability, Price, Longevity with a particular carrier. c. Experience, Expenses and Interest of a particular carrier’s premiums. d. The number of eligible participants in the group.

You have a Major Medical policy that calls for a $1,000 deductible and 80/20 participation. If you incur covered medical expenses of $5,000, you would have to pay

$1,800 (deductible + 20% of the remaining bill of $4,000).

Why do employer group health plans usually require a certain amount of participation by eligible employees?

To guard against adverse selection and reduce cost

The law requires that employers with ____ or more employees provide for the continuation of the employer’s group health benefits and group premium rates, to qualified beneficiaries.

20

Which of the following are characteristics of a successful self-funded plan?

a. A group large enough to reasonably predict future loss experience b. A stop-loss contract to assume losses beyond the insured’s retention c. A third party administrator who services claims **d. All of the above

Which of the following statements concerning group health insurance is CORRECT?

The employer is the policyholder.

In which of the following cases would a credit disability policy be issued?

If an individual is in debt to a specific creditor, payments will be made for him/her until the return to work.

Which of the following would be a qualifying event as it relates to the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

Termination of employment for "downsizing".

What would an Accidental Death and Dismemberment policy pay the principal amount for, other than accidental death?

The loss of 2 or more limbs

The federal act which mandates that "all personnel actions must be unrelated to either the existence or consequence of disability to include recruitment and selection of employees, compensation of employees, training, and all terms, conditions and privileges of employment" is known as

Americans with Disabilities Act.

Which of the following is true regarding METs?

They allow small employers an opportunity to band together to purchase less expensive insurance.

A hospital indemnity policy will pay

A benefit for each day the insured is in a hospital.

What is the purpose of COBRA?

To provide continuation of coverage for terminated employees

Which of the following is NOT a feature of a guaranteed renewable provision?

The insurer can increase the policy premium on an individual policy.

Which of the following is provided by an HMO?

a. Financing b. Patient care c. Life insurance **d. A & B

Which of the following is NOT allowed under the no-loss/no-gain provision?

Pre-existing Condition exclusion

"A physical or mental impairment which substantially limits one or more major life activities; or a record of such impairment; or being considered as having such an impairment," is the definition of a disability according to

ADA

The underwriting unit, when considering risk factors for individual and group disability insurance, will review the "carrier history" of the group. Which factors might the underwriters consider?

a. Stability b. Longevity c. Price Shopping **d. All the above

Because of the history of cancer in her family, Julie purchased a policy that specifically covers the expense of treating cancer. Her policy would be classified as what type of policy?

Dread Disease Policy

Which of the following options best depicts how the eligibility of members for group health insurance is determined?

By conditions of employment

A typical Accidental Death & Dismemberment policy covers all of the following losses EXCEPT

a. Limb. b. Life. **c. Income. d. Eyesight.

Which statement accurately describes group disability income insurance?

The extent of benefits offered is determined by the insured’s income.

Marsha pays her Major Medical Insurance annually on March 1, each year. Last March she forgot to mail her premium to the company. On March 19, Marsha had an accident and broke her leg. Her insurance company would

Pay the claim.

Which of the following dental insurance categories would cover the filling of cavities?

Routine and major restorative care

Which of the following is NOT provided by an HMO?

Reimbursement

An underwriter may reject an application for health insurance if the rejection is based upon which of the following?

Prescription usage.

Which of the following options best depicts how the eligibility of members for group health insurance is determined?

By conditions of employment

A woman misstated her age on an application for an individual health insurance policy. The insurance company found the mistake after the contestable period had expired. The insurance company will take which of the following actions regarding any claim that has been issued?

Adjust the claim benefit to reflect the woman’s true age

Three time periods are common in medical expense policies. Which of the following is the normal chronological order of their occurrence?

Probationary period – Waiting Period – Benefit Period

Hospital indemnity/hospital confinement indemnity policy will provide payment based on

The number of days confined in a hospital.

First Dollar Coverage refers to a type of insurance which

Has no deductible.

In a group prescription drug plan, the insured typically pays what amount of the drug cost?

Co-payment

Hospital indemnity/hospital confinement indemnity policy will provide payment based on

The number of days confined in a hospital.

When health care insurers negotiate contracts with health care providers or physicians to provide health care services for subscribers at a favorable cost, it is called

Preferred Provider Organization (PPO).

If a policy has a 3-year pre-existing condition clause, this indicates that an insured will not be covered for all of the following EXCEPT

A congenital condition of which the client was not aware.

Which of the below statements does NOT describe a Blue Cross and Blue Shield Plan?

Services are paid for at the time of use.

If a policy has a 3-year pre-existing condition clause, this indicates that an insured will not be covered for all of the following EXCEPT

A congenital condition of which the client was not aware.

Jack was treated for hypertension prior to applying for a major medical policy. If Jack incurs medical expenses related to hypertension, the insurer will likely exclude coverage because the hypertension represents a/an

Pre-existing condition.

In franchise insurance, premiums are usually

Lower than individual policies, but higher than group policies.

All of the following would fall under the definition of Durable Medical Equipment EXCEPT

Hospital blankets.

Who does HICAP serve?

Seniors receiving Social Security

Who will be affected by the share of cost requirement for Medi-Cal?

Individuals whose income exceed the Medi-Cal limit

Which of the following must be present in all Medicare supplement plans?

Plan A

Charges for services provided through a HICAP agency are

Never made to the client.

HICAP offers services in the following areas EXCEPT

**a. Sales of LTC policies. b. Consumer counseling. c. Consumer advocacy. d. Legal assistance.

If a person receives benefits for long term care from Medi-Cal, when that recipient dies, the state may

Pursue asset recovery against the estate of the recipient.

The goals of HICAP are to provide

a. Information through community forums about the myths and realities of Medicare and private health insurance. b. Counseling and advocacy to assist individuals with long-term care planning and insurance policies, billing, or claims. c. Legal representation and advice when necessary and appropriate. **d. All of the above.

All of the following qualify for Medicare Part A EXCEPT

Anyone who is willing to pay a premium.

Anyone who is willing to pay a premium.

Trained and registered volunteers..

If a person receives benefits for long term care from Medi-Cal, when that recipient dies, the state may

Pursue asset recovery against the estate of the recipient.

What is the main purpose of Medi-Cal?

To provide coverage for medical services for individuals with limited income

When a client replaces an existing LTC or Medicare Supplement insurance policy with another from the same company, California law requires that

The agent must advise the client about HICAP and its services.

A 63-year-old man is planning to be employed until age 68. When will he be eligible for Medicare?

Age 65, regardless of his employment status

The Health Insurance Counseling and Advocacy Program is administered by

The California Department of Aging.

Medi-Cal may be available to persons over age 65 if

They have medical or long term care claims not paid by Medicare.

HICAP counselors are primarily

Trained and registered volunteers.

The Health Insurance Counseling and Advocacy Program is administered by

The California Department of Aging.

What is a share of cost?

The amount an individual has to pay for medical expenses before Medi-Cal will cover the rest

When a client replaces an existing LTC or Medicare Supplement insurance policy with another from the same company, California law requires that

The agent must advise the client about HICAP and its services.

What is Medi-Cal?

California’s Medicaid health care program

A man purchases a Medicare supplement policy in March and decides to replace it with another in May. His history of coronary artery disease is considered to be a pre-existing condition. Which of the following is true?

The pre-existing condition waiting period that the man served on the old policy will be transferred to the new policy, the new one picking up where the old one left off.

If a person receives benefits for long term care from Medi-Cal, when that recipient dies, the state may

Pursue asset recovery against the estate of the recipient.

All of the following statements about Medicare Part B are correct EXCEPT

It is a compulsory program.

An insured replaced an existing policy with a Medicare Supplement policy. He subsequently decided to cancel the policy, but is unsure whether or not a free look provision applies. He could find this information

In the "Notice Regarding Replacement."

Which of the following is NOT among the goals of a Medicare Supplement application?

Presuming the applicant is eligible for Medicaid, based on the nature of the policy

Which of the following is NOT covered under a "core" policy, Plan A in Medigap insurance?

a. The first three pints of blood each year. **b. The Medicare Part A deductible. c. Approved hospital costs for 365 additional days after Medicare benefits end. d. The 20% Part B coinsurance amounts for Medicare approved services.

When a client replaces an existing LTC or Medicare Supplement insurance policy with another from the same company, California law requires that

The agent must advise the client about HICAP and its services.

Who will be affected by the share of cost requirement for Medi-Cal?

Individuals whose income exceed the Medi-Cal limit

HICAP counselors are primarily

Trained and registered volunteers.

Regarding Medicare SELECT policies, what are restricted network provisions?

They condition the payment of benefits.

HICAP counselors are primarily

Trained and registered volunteers.

If a person receives benefits for long term care from Medi-Cal, when that recipient dies, the state may

Pursue asset recovery against the estate of the recipient.

HICAP offers services in the following areas EXCEPT

Sales of LTC policies.

Which of the following would automatically qualify for Medi-Cal benefits?

A person receiving Supplementary Security Income assistance

First year commission on a Medicare supplement policy may not exceed

200% of the second year commission on the same policy.

A Medicare Part D enrollee meets his deductible. Now the plan will pay for what percentage of his prescription drug costs?

75%

Which of the following must be present in all Medicare supplement plans?

Plan A

Medicare Part D provides

Prescription drug benefit.

What is a share of cost?

The amount an individual has to pay for medical expenses before Medi-Cal will cover the rest

The Health Insurance Counseling and Advocacy Program is administered by

The California Department of Aging.

All of the following are advantages of an HMO or PPO for a Medicare recipient EXCEPT

Cosmetic surgery is available.

You did not enroll in Medicare Part B when you first became eligible. Which of the following would allow you another opportunity to enroll?

General enrollment period

HICAP offers services in the following areas EXCEPT

Sales of LTC policies.

Medicare Part A services do not include which of the following?

Outpatient Hospital Treatment

When John died, his survivors were eligible for limited benefits under his Social Security account. His insured status was

Partially insured.

What is another name for social security benefits?

Old Age, Survivors, and Disability Insurance

In which of the following situations would Social Security Disability benefits NOT cease?

The individual’s son gets a part-time job to help support the family

The minimum number of credits required for partially insured status is

6

Which of the following individuals related to the deceased worker would be eligible for survivor benefits under the Social Security?

The disabled widow age 52

All of the following are characteristics of social insurance EXCEPT

**a. Benefits are provided under a contract. b. Involuntary participation in social insurance is required of all eligible taxpayers. c. Social insurance is not equitable. d. Government is the only insurance provider.

All of the following individuals would qualify to receive disability benefits EXCEPT

a. An unmarried 17-year-old child of the disabled worker. **b. The disabled worker’s spouse at age 60. c. The disabled worker. d. A disabled 50-year-old widow of the disabled worker.

Social Security disability definition includes all of the following EXCEPT

a. A physical impairment expected to result in death. **b. Disability expected to last for at least 6 months. c. The inability to engage in any gainful work. d. Disability resulting from a medically determinable mental impairment.

The minimum number of credits required for partially insured status is

6

Which statement regarding qualifications for Social Security disability benefits is NOT true?

The individual must be at least 65 years old.

Once the person meets the stringent requirements for disability benefits, how long is the waiting period under Social Security before any benefits will be paid?

5 months

Bob qualifies for Medicare Part A, but neglected to sign up for Medicare Part B. While retired, he develops medical challenges. Which of the following WILL NOT be covered by his Medicare benefits?

Inpatient Surgeon services

Which of the following individuals related to the deceased worker would be eligible for survivor benefits under the Social Security?

The disabled widow age 52

Of the following statements, which is FALSE concerning Social Security Disability Benefits?

The individual must be unable to perform the duties of any occupation for which he/she is reasonably suited or trained.

All of the following individuals would qualify to receive disability benefits EXCEPT

The disabled worker’s spouse at age 60.

Social Security disability definition includes all of the following EXCEPT

**a. Disability expected to last for at least 6 months. b. The inability to engage in any gainful work. c. Disability resulting from a medically determinable mental impairment. d. A physical impairment expected to result in death.

All of the following statements are true EXCEPT

a. Social Insurance is prescribed by law, making individual policies unnecessary. b. Social Insurance seeks to cover the needs of those who cannot afford or cannot qualify for private insurance. c. Social Insurance, like Private Insurance, has requirements in order to qualify for benefits. **d. Social Insurance seeks to be equitable.

Which of the following statements is CORRECT about Social Security?

To be eligible, one must meet certain requirements.

Bob qualifies for Medicare Part A, but neglected to sign up for Medicare Part B. While retired, he develops medical challenges. Which of the following WILL NOT be covered by his Medicare benefits?

Inpatient Surgeon services

Considering Social Security restrictions, to fall under the definition of disability a disability must last at least

1 year.

Which statement regarding qualifications for Social Security disability benefits is NOT true?

The individual must be at least 65 years old.

Which of the following individuals related to the deceased worker would be eligible for survivor benefits under the Social Security?

The disabled widow age 52

All of the following are characteristics of social insurance EXCEPT

a. Social insurance is not equitable. b. Government is the only insurance provider. **c. Benefits are provided under a contract. d. Involuntary participation in social insurance is required of all eligible taxpayers.

Social Security disability definition includes all of the following EXCEPT

**a. Disability expected to last for at least 6 months. b. The inability to engage in any gainful work. c. Disability resulting from a medically determinable mental impairment. d. A physical impairment expected to result in death.

Considering Social Security restrictions, to fall under the definition of disability a disability must last at least

1 year.

In which of the following situations would Social Security Disability benefits NOT cease?

The individual’s son gets a part-time job to help support the family

Which of the following is NOT a factor in determining qualifications for Social Security disability benefits?

Worker’s occupation

The minimum number of credits required for partially insured status is

6

Of the following statements, which is FALSE concerning Social Security Disability Benefits?

The individual must be unable to perform the duties of any occupation for which he/she is reasonably suited or trained.

What is another name for social security benefits?

Old Age, Survivors, and Disability Insurance

All of the following statements are true EXCEPT

a. Social Insurance, like Private Insurance, has requirements in order to qualify for benefits. **b. Social Insurance seeks to be equitable. c. Social Insurance is prescribed by law, making individual policies unnecessary. d. Social Insurance seeks to cover the needs of those who cannot afford or cannot qualify for private insurance.

All of the following are characteristics of social insurance EXCEPT

a. Social insurance is not equitable. b. Government is the only insurance provider. **c. Benefits are provided under a contract. d. Involuntary participation in social insurance is required of all eligible taxpayers.

Which of the following is true regarding the gender of the applicants in disability income insurance?

Women, as they age, present a higher health risk and are more prone to disability.

What is the dollar limitation for workers compensation benefits in the state of California?

2/3 of a worker’s weekly wage or a state-specified maximum payment.

Under which of the following circumstances would Workers Compensation provide coverage?

a. The injury was caused by the injured worker’s intoxication. b. The injury was intentionally self-inflicted. c. The injury was caused by an altercation where the injured worker was the initial physical aggressor. **d. None of the above.

What does the Employers Liability coverage part of a Workers Compensation insurance policy protect the employer against?

a. Common law claims by workers not covered by Workers Compensation **b. Common law claims by third parties c. Criminal Negligence charges filed by the DA d. All of the above.

All of the following choices are legal methods for employers to finance their liability for Workers Compensation benefits in California EXCEPT

a. Private Insurance. b. State Insurance. **c. Employee Insurance. d. Self Insurance.

How can insurers obtain information on an applicant’s avocations and the way they will affect a risk?

Through the use of a questionnaire.

The Workers Compensation permanent disability benefit pays benefits for

Permanent total disabilities and permanent partial disabilities.

Brandon owns a small hardware store. He is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability

Business Overhead Expense Policy

What is the dollar limitation for workers compensation benefits in the state of California?

2/3 of a worker’s weekly wage or a state-specified maximum payment.

An insured has a Social Insurance Supplement (SIS) rider in her disability income plan. After the insured becomes disabled, she begins receiving benefit payments from her insurer. She then begins receiving Social Security benefits that are smaller than the SIS benefit payments. At that point, her insurer ends the SIS benefit payments. Which of the following best describes the situation?

The insured should contact the insurer to confirm her actual Social Security benefit amount. The SIS rider should pay the difference between the rider amount and the actual benefit.

All of the following are basic types of Workers Compensation benefits EXCEPT

a. Rehabilitation. **b. Unemployment compensation. c. Medical expenses. d. Disability income.

How can insurers obtain information on an applicant’s avocations and the way they will affect a risk?

Through the use of a questionnaire.

Anna’s policy includes an Additional Monthly Benefit rider. How long can she expect to receive payment from her insurer before Social Security benefits begin?

1 year

In order to collect Social Security disability benefits, the claimant must be able to demonstrate that the disability will last at least

12 months.

In which of the following will the benefit be taxable?

Employer purchases an individual disability income policy for a key person.

Garrett is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits?

No benefits

Under which of the following circumstances would Workers Compensation provide coverage?

a. The injury was caused by the injured worker’s intoxication. b. The injury was intentionally self-inflicted. c. The injury was caused by an altercation where the injured worker was the initial physical aggressor. **d. None of the above.

Which of the following statements regarding Business Overhead Expense policies is NOT true?

**a. Benefits are usually limited to six months. b. Premiums paid for BOE are tax-deductible. c. Any benefits received are taxable to the business. d. Leased equipment expenses are covered by the plan.

In a situation when an employer purchases an individual disability income policy for a key person in the business, which of the following is NOT true?

**a. Employee can deduct the cost of premium. b. Employer pays 100% of premium. c. Benefit goes to the employee. d. 100% of benefit is taxable to the employee.

Davis Industrial provides its employees with a group nonoccupational disability insurance policy that provides 60% of their pre-tax wage in the event of total disability. Because Davis Industrial pays the full cost of the policy,

Any benefits received will be taxed as ordinary income.

All of the following are true in regards to 24 Hour Coverage EXCEPT

a. It reduces litigation concerning cause of injury or disease. b. Gaps in coverage are reduced as employees get coverage for both occupational and nonoccupational injuries and diseases. **c. It can be distributed through a life insurance policy. d. Employees are covered around the clock.

All of the following choices are legal methods for employers to finance their liability for Workers Compensation benefits in California EXCEPT

a. Private Insurance. b. State Insurance. **c. Employee Insurance. d. Self Insurance.

The premium for Andrea’s group disability income policy is $250 per month. Her employer contributes $125 of the premium. If Andrea becomes disabled and receives $350 per week in benefits, she will pay income tax on what amount of her benefit?

$175

What types of services may not be provided under LTC’s Assisted Living?

Visits by a registered nurse

What do living benefit riders do?

They pay part of the policy death benefit to insureds in order to help them fund long-term care or nursing home care.

What provisions may be included in a long-term care policy issued to an individual?

Noncancelable and guaranteed renewable

Greg’s long term care policy is due for renewal. During the last policy period, he was placed in hospice care and remains there today. What, if anything, may the insurer do in regard to Greg’s LTC policy?

The insurer must continue the policy but may limit the extension of benefits.

What is the "elimination period" under a long term care policy?

The amount of time during which no benefits will be paid.

Which of the following types of LTC care is not provided in an institutional setting?

Home health care

Which of the following is NOT an activity of daily living (ADL)?

Talking

Which of the following are considered standard levels of care?

a. Skilled nursing care b. Intermediate nursing care c. Home health care **d. All of these

For which of the following reasons could an insurer terminate a long-term care insurance policy?

Nonpayment of premium

What do living benefit riders do?

They pay part of the policy death benefit to insureds in order to help them fund long-term care or nursing home care.

When does Medicare cover nursing home care?

Only if it is part of treatment for a covered illness or injury

Regarding LTC policies, which of the following would NOT be included in activities of daily living?

Sleeping

The inflation protection feature in a long-term care policy

May be rejected by the policyholder.

How many long term care policies can be sold to an insured within a 12-month period before the number of policies is considered to be unnecessary?

2

Which of the following levels of care in long-term care policies specifically includes assistance with activities of daily living?

Personal care

All of the following are types of care provided under LTC’s home health care EXCEPT

a. Occasional visits by licensed practical nurses. b. Occasional visits by licensed vocational nurses. **c. Occasional visits by pediatric nurses. b. Occasional visits by registered nurses.

For which of the following reasons could an insurer terminate a long-term care insurance policy?

Nonpayment of premium

What do long-term care policies offer to policyholders to account for inflation?

They offer the option of purchasing coverage that raises benefit levels accordingly.

Which of the following levels of care in long-term care policies specifically includes assistance with activities of daily living?

Personal care

The inflation protection feature in a long-term care policy

May be rejected by the policyholder.

Which of the following categories of benefits are not covered by an LTC policy?

Care given in an acute care unit of a hospital

When a long term care policy is replaced after it has been in effect for at least six months, the new policy may

Not exclude pre-existing conditions that would have been covered by the original contract.

Regarding LTC benefit periods, as the benefit period lengthens, the premium

Rises.