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Michigan Insurance

Health and Life from THE EXAM SIMULATOR

QuestionAnswer
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? Unilateral
The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as Utmost good faith
Which of the following is not an essential element of an insurance contract? Consideration, Agreement, Legal Purpose, Incompetent parties Incompetent parties
Which provision states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? Indemnity
Representations are written or oral statements made by the applicant which Are considered true to the best of the applicant's knowledge.
An insurance contract must contain all of the following to be considered legally binding EXCEPT: Consideration.Competent parties.Beneficiary's consent.Offer and Acceptance. Beneficiary's consent.
Statements made by an applicant for a life insurance policy which are true to the best of the applicant's knowledge are referred to as Representations
When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. What is this act called? Concealment
when a person withholds a material fact that is crucial to making a decision. In insurance, this involves withholding information that would be crucial to underwriting decisions Concealment
In insurance policies where contract ambiguities are automatically ruled in the favor of the insured, what privilege does the insurer have in order to balance this? The right to determine the wording of a policy
Because an insurance policy is a contract between the insurer and the insured, it must conform to the state laws governing contracts which require all of the following elements EXCEPT. Conditions. Competent parties. Legal purpose. Offer and acceptance. Conditions
An insured modifies his insurance claims, illegally adjusting them to display a lower amount. What insurance concept does this violate? Utmost Good Faith
entails that the insured and insurer must be able to rely on one another for valid critical information. Utmost Good Faith
Which of the following is a statement that is guaranteed to be true, and if untrue may breach an insurance contract? Concealment, Indemnity, Representation, Warranty Warranty
An insurance agent sells an insurance policy over the phone and collects a commission. Which of the following best describes this act? Direct response marketing
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying The policy will not be affected.
ABC insurance company receives an incomplete application and issues the policy anyway. Six months later ABC realizes the missing information. What term is used that prevents ABC from forcing the policyowner to answer further questions? Estoppel, ABC had waived its right to receive answers to the missing information once the policy was issued; therefore, they are estopped from enforcing those waived rights.
The First Street Church plans to sponsor a summer camp for the youth of their congregation. They would like to purchase insurance that would pay benefits should one of the youth get injured while participating in the camp activities. The type of policy th Blanket.
A policy that covers all of the participants without naming them individually blanket policy.
Thurow Insurance Company wants to obtain the insurance history of an applicant. Which source releases coded information to insurers regarding information included on previous insurance applications? Medical Information Bureau
receives information that an applicant provides in insurance applications and issues it in a coded format to insurers who request these reports. Medical Information Bureau
All of the following are utilized by an underwriter in order to underwrite an applicant EXCEPT Agent's report. Attending physician report. Investigative consumer report. Birth certificate. Birth certificate.
reports utilized by the underwriter MIB report, medical exam, Agent's report, Attending physician report, Investigative consumer report.
Tyler applied for an individual health insurance policy. While completing the application, his agent told him that all of the following statements would be underwriting factors EXCEPT His avocations include scuba diving, Three years ago, he was convicted His job requires that he flies regularly on a commercial airline.
Which term describes the phenomenon that people who are the most likely to have claims are also the most likely to seek insurance? Adverse Selection
Which of the following is NOT true? * State Life and Health Guaranty Association was created to protect policyowners financially if their insurers become insolvent. * The Life and Health Guaranty Association is comprised of representatives from the DOIs The Life and Health Guaranty Association is comprised of representatives from the DOIs of every state.
What is an important feature of a dental expense insurance plan that is not typically found in a medical expense insurance plan? The inclusion of diagnostic and preventive care
Under a credit disability policy, payments to the creditor will be made for the insured until what point? Until the period of disability ends or until debt is satisfied.
Which document is used to assess risk associated with an applicant’s lifestyle and character? Investigative Consumer Report
Anna loses her left arm in an accident that is covered by her Accidental Death and Dismemberment policy. What kind of benefit will Anna most likely receive from this policy? The capital amount in a lump sum
for the loss of 1 limb or loss of sight in 1 eye policies pay a capital amount in lump sum
for death or, often, for the loss of 2 limbs or loss of sight in both eyes. The principal amount is paid in lump sum
All of the following statements concerning Accidental Death and Dismemberment coverage are correct EXCEPT *Accidental death and dismemberment insurance is considered to be limited coverage. *Death benefits are paid only if death occurs within 24 hours o Death benefits are paid only if death occurs within 24 hours of an accident.
Under an Accidental Death and Dismemberment insurance policy, the death benefit will be paid if the accidental death occurs within 90 days of the accident.
Which of the following best details the underwriting process for life insurance? Selection and issuance of policies
Jack was treated for hypertension prior to applying for a major medical policy. As the producer who is writing the replacing policy, what should you tell Jack? His hypertension may be considered a preexisting condition, and may not be covered under his new policy.
Jacob’s insurance policy only pays for medical costs related to accidents. Which of the following types of policies does he have? accident-only
Which of the following would NOT be considered a primary risk factor in underwriting individual health insurance policies? Marital status, Physical condition of the applicant, Occupation of the applicant, Moral hazard Marital status
Rose bought three policies from the same insurer. Her benefits have exceeded the maximum allowed by the insurer. Which of the following will happen? Pro rata benefit reduction
A guaranteed renewable health insurance policy allows the Policyholder to renew the policy to a stated age, with the company having the right to increase premiums on the entire class.
Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within 90 days of a loss.
Roger writes his company and notifies them that he has become disabled. What provision states that claims must be paid immediately upon written proof of loss? Time of Payment of Claims
Which renewability provision are you most likely to see on a travel accident policy? Period of time
the policy will only last a certain period of time and cannot be renewed. Period of Time
All of the following are correct about the required provisions of a health insurance policy EXCEPT *Proof-of-loss forms must be sent to the insured within 15 days of notice of claim. *A grace period of 31 days is found in an annual pay policy. *The ent A reinstated policy provides immediate coverage for an illness.
Which of the following is NOT a feature of a guaranteed renewable provision? *Coverage is not renewable beyond the insured's age 65. *The insured's benefits cannot be reduced. *The insurer can increase the policy premium on an individual policy. *Th The insurer can increase the policy premium on an individual policy.
Which of the following is true regarding a term health policy? It is conditionally renewable. It is guaranteed renewable. It is noncancelable. it is nonrenewable. It is nonrenewable.
Jake carries health insurance with two different providers and is covered on an expense-incurred basis. He has an appendectomy and files the claims to both insurers. Neither company is notified in advance that Jake has other coverage. What should each ins A proportionate amount
Which renewal option does not guarantee renewal and allows the insurance company to refuse renewal of a policy at any premium due date? Optionally renewable
Which renewability provision allows an insurer to terminate a health insurance policy on any date specified in the policy, for any reason, and to increase the premiums for any class of insureds? Optionally renewable
An insured owes his insurer a premium payment. Since then, he incurs medical expenses. The insurer deducts the unpaid premium amount from the claim amount and pays the insured the difference. What is the name of this provision? Unpaid Premium
Which of the following statements is most correct concerning the changing of an irrevocable beneficiary? They can be changed only with the written consent of that beneficiary.
Dusty has medical insurance coverage through 2 different providers, who cover the same expenses on an expense-incurred basis. Neither company knows in advance that Dusty has coverage through any other insurers. Dusty submits a claim to the insurers, and e The correct payment was made.
The provision which prevents the insured from bringing any legal action against the company for at least 60 days after proof of loss is known as Legal Actions
Underwriting for disability insurance is unique due to the type of risk involved. Which of the following situations illustrates this? A construction worker pays a higher premium and receives a poorer classification of disability.
Which rider, when added to a disability income policy, provides for changes in the benefits payable based on changes in the consumer price index? Cost of living adjustment rider
Manny has been injured in an accident. Although she is still receiving benefits from her policy, she does not have to pay premiums. Her policy includes Waiver of Premium feature.
allows the insured, when disabled, to forego paying the premiums. Generally the insured must be disabled a specific number of days (could be 90 or 180 days) before the premium is waived. Once the insured meets the 90 or 180 waiting period, generally the p Waiver of premium benefit
Income benefits or monthly indemnity benefits are characterized by all of the following statements EXCEPT *The income benefit can be paid monthly or weekly. *The amount to be paid is stated in the policy. *The amount to be paid is unlimited. *The am The amount to be paid is unlimited.
If a policy is rated-up, what is true? The premium increases.
Any occupation disability typically means that an individual is unable to perform the duties of the occupation for which he/she is suited by all of these EXCEPT Experience. Preference. Education. Training. Preference.
Benefit periods for individual short-term disability policies will usually continue from Six months to two years.
When a group disability insurance policy is paid entirely by the employer, benefits paid to disabled employees are Taxable income to the employee.
A business wants to make sure that if a key employee becomes disabled, the business will be protected from any resulting loss. Which kind of insurance will protect the business? Business Disability
Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives? None
All of the following benefits are available under Social Security EXCEPT Old-age and retirement benefits. Disability benefits. Death benefits. Welfare benefits. Welfare benefits.
Under a disability income policy, the insurer does not pay a monthly benefit that is equal to the insured's previous income. The reason for paying a benefit amount that is less than the insured's income is to Prevent over utilization and malingering.
Dan is the sole breadwinner in his family of four. He wants to make sure that if he becomes totally disabled, his family will be protected against financial loss. Which plan would best serve Dan’s needs? Basic Total Disability
If an employer provides long-term group disability insurance for its employees, what percentage of monthly wages are lower-paid employees eligible to collect? 66 2/3%
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
Which entities are responsible for making premium payments? Subscribers
people in whose name the contract is issued. They would be responsible for making premium payments. Subscribers
The HMO provides the member with inpatient hospital care, in or out of the service area for at least ________ per year for treatment of injury or illness. For treatment of mental, emotional or nervous disorders, including alcohol or drug rehabilitation or 90 days; 30 days
Which of the following hospice expenses would NOT be covered in a cost-containment setting? Special hospital bed, Antibiotics, Tylenol, Morphine Antibiotics
daily needs and pain relief are provided for hospice patients, but curative measures are not. cost-containment setting
Regarding a PPO, which of the following is correct when selecting a primary care physician? *The insured may choose medical providers not found on the preferred list and still retain coverage. *The insured is allowed to receive care from any provider, b All of the above are correct
HIPAA applies to groups of ____________ . 2 or more
A medical expense policy that establishes the amount of benefit paid based upon the prevailing charges which fall within the standard range of fees normally charged for a specific procedure by a doctor of similar training and experience in that geographic Usual, customary and reasonable.
A __ is a specific dollar amount of the cost of care that must be paid by the member. Co-Payment
All of the following are ways in which a Major Medical policy premium is determined EXCEPT -The coinsurance percentage. -The stop-loss amount. -The average age of the group. -The amount of the deductible. The average age of the group.
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 of creditable coverage
Under HIPAA, group health plans cannot impose more than a 12 month pre-existing conditions exclusion for a person who sought medical advice, treatment, or diagnosis within the last 6 months.
Which of the following limitations would not usually apply to a hospital and surgical expense policy? Dollar amount, Illness basis, Multiple of daily hospital benefit, Percentage of participation Illness basis
Which of the following is a specific dollar amount of the cost of care that must be paid by an HMO member? Co-Payment
Under which provision can a physician submit claim information prior to providing treatment? Prospective Review
When an insurer offers services like preadmission testing, second opinions regarding surgery, and preventative care, which term would best apply? Case management provision
To be eligible under HIPAA regulations, for how long should an individual converting to a new group plan have been covered under the previous group plan? 12 months
Which of the following provisions give an employee the right to exchange group insurance for an individual policy within 31 days from termination of employment? Conversion provision
An association could buy group insurance for its members if it meets all of the following requirements EXCEPT -The group is contributory. -The group has at least 50 members. -The group has a constitution and by-laws. -The group holds semiannual meetin The group has at least 50 members.
The per capita administrative cost in group health insurance is _______ the administrative cost found in individual coverage. Less than
As it pertains to group health insurance, COBRA stipulates that Group coverage must be extended for terminated employees up to a certain period of time at the employee's expense.
True or False under COBRA? By law, the new, individual policy must provide the same benefits as the group insurance policy. false
True or False under COBRA? The employee can convert from group to individual insurance within 31 days of termination. true
True or False under COBRA? The premium of the individual health insurance policy can be higher than the original policy. true
True or False under COBRA? Continuation of group coverage need not include dental, vision, or prescription drug benefits. true
Employees actively at work on the date coverage is transferred to another insurance carrier are Automatically covered and exempt from any probationary period.
Why would an underwriter take persistency into consideration when writing a group policy for a group that changes insurance companies on a yearly basis? They do not represent a good risk.
When employees are actively at work on the date coverage can be transferred to another insurance carrier, what happens to coinsurance and deductibles? They carry over from the old plan to the new plan.
Which of the following factors would be an underwriting consideration for a small employer carrier? Health status, Medical history, Percentage of participation by the employees, Claims experience. Percentage of participation by the employees
How many eligible employees must be included in a contributory plan? 75%
In order to be eligible for group health insurance, all of these are conditions an employee must meet EXCEPT Must be actively at work. Must be a full-time employee. Must have dependents. Must be working in a covered classification. Must have dependents.
Is a difference between individual and group health? In individual policies, the individual selects coverage options, while in a group plan all employees are covered for the same coverage which is chosen by the employer. yes
Is a difference between individual and group health? Individual coverage can be written on an occupational or nonoccupational basis, while group plans cover only nonoccupational. yes
Is a difference between individual and group health? Individual policies are renewable at the option of the insured, while group usually terminates when the individual leaves the group. yes
Is a difference between individual and group health? Individual insurance does not require medical examinations, while group insurance does require medical examinations. no
What is the benefit of experience rating? Experience rating helps employers with low claims experience because they get lower premiums.
Kevin and Nancy are married; Kevin is the primary breadwinner and has a health insurance policy that covers both him and his wife. Nancy has an illness that requires significant medical attention. Kevin and Nancy decide to legally separate, which means th COBRA
Why do employer group health plans usually require a certain amount of participation by eligible employees? To guard against adverse selection and reduce cost
Under which plan does preventative dental treatment not apply toward the deductible? Nonscheduled
A patient has severe gingivitis and is seeking treatment from his dentist. Which type of dental treatment is this? Periodontics
In order for costs to be covered under a dental plan, what is the minimum interval that must pass between routine dental exams? 6 months
Max needs to have his wisdom teeth removed. Which dental treatment would cover the costs of the extraction? Oral surgery
Most scheduled plans provide first-dollar benefits without Co-insurance and Deductibles.
If a dental plan is integrated, it is combined with what type of plan? Medical
Dennis has a cavity filled. His insurer covers his claim up to a predetermined amount, which is indicated by a fee schedule. Which type of plan does he have? Scheduled
All of the following are usually provided under an employer group dental insurance plan EXCEPT -Preventive care for up to two visits per year. -The dental plan is typically written in conjunction with group health insurance. -The dental plan places lim Coverage for cosmetic treatment.
Which type of dental treatment involves the replacement of natural teeth with artificial devices? Prosthodontics
a combination of the scheduled and nonscheduled plan. The combination plan covers diagnostic and preventive services on the usual, customary and reasonable basis but uses a fee schedule for other dental services. A combination plan
Which type of care re-establishes functional use to natural teeth? Restorative
Which type of dental care would cover the cost of fillings? Restorative
A patient is being fitted for dentures. Which type of dental treatment is this? Prosthodontics
Julie must have orthodontic work performed on her incisors. Which type of service would this be called, under a nonscheduled plan? Major service
two types of services under nonscheduled plans: basic and major
include treatments such as fillings, oral surgery, periodontics, and endodontics. Basic
include treatments such as inlays, crowns, dentures and orthodontics. Major
Under most dental plans, what limitations are posed for denture replacement? Once every 5 years
Prior to issuance of a Long-Term Care policy to an applicant age 80 or older, the insurer must obtain all of the following Copies of medical records. Report of a physical examination or assessment of functional capacity. Attending physician's report.
Which characteristics need to be met in order for a long-term care policy to be considered tax qualified? contract must be guaranteed renewable in order to be qualified, as well as satisfy certain consumer protection provisions concerning model regulation and model act provisions, disclosure, and nonforfeitability.
A person buys an individual long-term care policy and is not satisfied with the provisions. Within how many days will the insured be able to return the policy for a full premium refund? 30 days
When an employee is still employed upon reaching age 65, is Medicare enrollment an option? Federal laws require the company to keep the employee on the group health insurance rolls and defer their eligibility for Medicare until retirement.
All of the following statements about Medicare supplement insurance policies are correct EXCEPT -Medigap policies cover the cost of extended nursing home care. -Medigap policies pay most, if not all, Medicare deductibles and copayments. -Medigap polici Medigap policies cover the cost of extended nursing home care.
True or False? Care needed because of aging is covered by Medicare but not by Medicare supplements. false
True or False? Care needed because of aging is covered by Medicare. false
true or false? Medicare does not pay for nursing home care in any case. false
true or false? Medicare will cover nursing home care if it is part of the treatment for a covered illness. true
True or False? For the first 90 days of hospitalization, Medicare Part A pays 100% of all covered services, except for the initial deductible. false
true or false? George purchased Medicare Part B when he retired. Following an illness, he submitted a total of $1,100 of approved medical charges to Medicare after paying the required deductible. Of that total, George must pay $880 (or 20%). false
true or false? Each individual covered by Medicare Part A is allowed one 90-day benefit period per year. false
true or false? Medicare Part A is automatically provided when an individual qualifies for Social Security benefits at age 65. true
For how many days of skilled nursing facility care will Medicare pay benefits? 100
under medicare, Treatment in a skilled nursing facility is covered in full for the first 20 days
Bob has Medicare Part D coverage. He has reached his initial benefit limit and must now pay 100% of his prescription drug costs. What is the term for this gap in coverage? Doughnut hole
Once the initial benefit limit is reached, a gap called a doughnut hole occurs, in which the beneficiary is responsible for 100% of prescription drug costs. Doughnut hole
True or False, Medicare Part A services cover Post hospital Skilled Nursing Facility Care. true
True or False, Medicare Part A services cover Hospitalization. true
True or False, Medicare Part A services cover Hospice Care. true
True or False, Medicare Part A services cover Outpatient Hospital Treatment. false
What medicare part is outpatient hospital treatment covered? B
Which of the following LTC Coverages would not encourage an insured to receive care at home? Respite care, Home health care,Custodial Care Facility and Adult day care Custodial Care Facility
Who must sign the Notice Regarding Replacement? Both the applicant and agent
True or false medicaid, It provides medical assistance to low-income people who cannot otherwise provide for themselves. true
True or false medicaid,It pays for hospital care, outpatient care, laboratory and x-ray services. true
True or false medicaid, It helps pay Medicare deductibles and coinsurance for those over age 65 who qualify. true
True or false medicaid, It is solely a federally administered program. false
Which of the following programs expands individual public assistance programs for people with insufficient income and resources? Medicaid
All of the following are advantages of an HMO or PPO for a Medicare recipient EXCEPT -Prescriptions might be covered, unlike Medicare. -Health care costs can be budgeted. -There are no claims forms required. -Cosmetic surgery is available. Cosmetic surgery is available.
Under a Key Person disability income policy, premium payments Are made by the business and are not tax-deductible.
Mr. Raines is the recipient of an Accidental Death and Dismemberment (AD&D) policy purchased by his employer. The policy pays triple indemnity in case of accidental death. If Mr. Raines died 2 months after an accident, as a result of an accident stipulate Benefits received are considered income tax free.
Regarding taxes, Group disability income premiums are... Deductible to the employer as an ordinary business expense.
With group long-term care insurance, under which condition would an employee’s premium payments be tax deductible? When the premiums and other unreimbursed medical expenses exceed 7.5% of the employee’s adjusted gross income
Sole proprietors and partners may deduct ____ of the cost of a medical expense plan provided to them and their families because they are considered self-employed individuals, not employees. 100%
True or false regarding benefits paid to disabled employees? Tax withholding is required for the first 6 months. true
True or false regarding benefits paid to disabled employees? The benefits are attributable to the employer’s contribution true
True or false regarding benefits paid to disabled employees? They are subject to FICA withholding for Social Security. true
True or false regarding benefits paid to disabled employees? They are exempt from the Social Security tax after 12 months. false
For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense? 100%
True or false of medical expense coverage for sole proprietors and partners? The deduction may not exceed the taxpayer's earned income for the tax year. true
True or false of medical expense coverage for sole proprietors and partners? The 100% deduction is a deduction in arriving at an individual's adjusted gross income, and as such, may not be used to satisfy the 7.5% threshold for itemized medical expenses. true
True or false of medical expense coverage for sole proprietors and partners? The deduction is permitted if the sole proprietor or partner is covered under another medical expense plan. false
True or false of medical expense coverage for sole proprietors and partners? Sole proprietors and partners may deduct 100% of the cost of a medical expense plan provided to them and their families under a plan carried by the sole proprietor or partnership true
Lisa and Lena own a shop together. They are partners in their business of 2 years. Lisa is a designer; Lena is a seamstress. Lisa worries Lena will become disabled and be unable to sew, so she inquires about purchasing insurance to be able to buy out Lena A disability buy-sell plan protects the insured in case of disability. It allows the policyowner to buy out the partner's interest in the business, and the benefits are tax free.
Which of the following determines whether insurance benefits are taxed? If the premiums were or were not taxed
Long-term care premium payments are deductible as a medical expense to the extent that when added to all other unreimbursed medical expenses, the total exceeds _______ of the taxpayer's adjusted gross income if the taxpayer itemizes his/her deductions. 7.5%
True or false concerning taxation of disability income benefits? If the employer paid the premiums, income benefits are taxable to the insured as ordinary income. true
True or false concerning taxation of disability income benefits? If the insured paid the premiums, any disability income benefits are tax-free. true
True or false concerning taxation of disability income benefits? If the benefits are for a permanent loss, the benefits are not subject to income taxation no matter who paid the premium. true
True or false concerning taxation of disability income benefits? If paid by the individual, the premiums are tax deductible. false
What percentage of individually-owned disability income is taxable? 0%
Medical expense premiums are deductible as medical expenses, provided that when the premiums are added to all of the other unreimbursed medical expenses, the total exceeds __% of the adjusted gross income. 7.5
Lilly is covered by a group major medical plan that is provided through her employer. Her employer contributes 75% of the premium and Lilly contributes the remaining 25%. If Lilly received a benefit from this policy in the amount of $1,000, how much of th $0
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? Illegal
Bill the banker is ready to close on Mrs. Quinn's loan. Bill's bank is prepared to offer the loan but only if Mrs. Quinn purchases a life insurance policy from the bank in the amount of the loan. This is an example of Coercion.
Benefits must be paid within ___ days of receiving satisfactory proof of loss. 60
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? They obtain customer information through interviews with associates, friends and neighbors.
Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another? Twisting
Which of the following is the most precise synonym for an "authorized" insurer? Admitted
Insurance companies selling exclusively term life policies must comply with the standards set forth by the USA PATRIOT Act false
Insurance companies selling whole life, term and health insurance must comply with the standards set forth by the USA PATRIOT Act true
Insurance companies selling variable universal life insurance must comply with the standards set forth by the USA PATRIOT Act true
Insurance companies selling annuity products must comply with the standards set forth by the USA PATRIOT Act true
What is the penalty for violations of the insurance code that are NOT willful? $500 for each violation, not to exceed $5,000
In order to get a non-resident license is this state, producers must Apply and pay a fee to a non-resident state that reciprocates.
To be a Managing General Agent a person MUST Be a producer and be appointed by the company that plans to appoint him/her as an MGA.
To be a Managing General Agent a person MUST NOT be an employee of that company, an underwriting manager for the company's insurance operations, or compensated based on the volume of premiums written.
Act as an attorney-in-fact for a reciprocal or inter-insurance exchange IS a duty of a Managing General Agent. true
Act as a free agent for the company who produces and underwrites an amount of gross direct written premium of not less than 5% of the policyholder surplus IS a duty of a Managing General Agent. false
Manage all or part of the insurance business of a company IS a duty of a Managing General Agent. false
Negotiate or bind reinsurance contracts on behalf of a company IS a duty of a Managing General Agent. false
When Producer A was reviewing Bruce's insurance that is written by another company, she made several oral statements that were maliciously critical of that other insurer. Producer A could be found guilty of Defamation
Benefits must be paid within how many days after the insurer receives proof of loss? 60
How much is an agent’s appointment fee? $5
Applicant must be 18 years old is required of an applicant for an insurance license in Michigan? true
A Certificate of Completion from the required pre-licensing study course is required of an applicant for an insurance license in Michigan? true
Two letters of recommendation attesting to trustworthiness, reliability, and good reputation is required of an applicant for an insurance license in Michigan? false
The passing of a written examination is required of an applicant for an insurance license in Michigan? true
Who may complete a paramedical report? Either a paramedic or a registered nurse
What kind of policy issues certificates of insurance to insureds? Group Insurance
True or False? State Life and Health Guaranty Association was created to protect policyowners financially if their insurers become insolvent. true
True or False? The Life and Health Guaranty Association is comprised of representatives from the DOIs of every state. false
True or False? The Association’s liability is generally limited to that of the impaired insurance company. true
True or False? It is illegal for an insurer to advertise that policies are covered by the Life and Health Guaranty Association. true
is Travel expenses for family to come to the funeral a legitimate need that would be paid by insurance proceeds? yes
is Debt cancellation a legitimate need that would be paid by insurance proceeds? yes
is Day care a legitimate need that would be paid by insurance proceeds? yes
is Vacation travel expenses a legitimate need that would be paid by insurance proceeds? no
When Jeremiah applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by A paramedic or examining physician at the insurer's expense.
does Variable universal life require proof of insurability? yes
does Term insurance require proof of insurability? yes
does Individual insurance require proof of insurability? yes
does Group insurance require proof of insurability? no
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then The amount received is tax-free.
If an insured changes his payment plan from monthly to annually, what happens to the total premium? Decreases
A projection of insurance needs that is based upon the capitalization of an applicant's future earnings is Human life value approach.
How many policies are necessary to cover a cross purchase (buy/sell agreement) between 3 people? 6, Since each person would have a policy on each of the other people, among the 3 owners, the total number of policies would be six.
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 medical report is the least that would probably be required? Paramedical report
Why would you purchase life insurance rather than annuities? To create an estate
The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called expenses or Loading
An insurer is helping a married couple determine their children's needs, assets, and liabilities, in the event that one or both of the spouses should die. What is the term most closely associated with this? Survivor protection
Which of the following statements is correct about a Standard risk classification in the same age group and with similar lifestyles? Standard risk is representative of the majority of people.
All other factors being equal, the least expensive first year premium payment is found in Annual Renewable Term.
The insurance company reserves the right to adjust the mortality charges and/or interest rate.is a characteristic of a Universal Life policy. true
The policy is a cash value account at a guaranteed interest rate and endowment insurance.is a characteristic of a Universal Life policy. true
In effect, Universal Life is a combination of term insurance and a separate savings account joined in a single contract.is a characteristic of a Universal Life policy. true
The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner. is a characteristic of a Universal Life policy. false
Which of the following distinguishes a Group Life Policy from an Individual Life Insurance Policy? Reduced Adverse selection
Norm and Vera own a permanent policy which covers both of their lives and pays the face amount of the policy only upon the death of the first. Norm and Vera own a Joint Life Policy.
An Adjustable Life policy owner can increase or decrease the premium; changing the premium-paying period; increase or decrease the face amount of coverage; or change the period of protection.
Annually renewable term policies provide a level death benefit for a premium that Increases annually.
Graded-Premium Whole Life policy premiums are typically lower initially, but gradually increase for a period. After the increase period, the premiums will Be level thereafter.
true or false regarding a Straight Life policy? It has the lowest annual premium of the three types of Whole Life policies. true
true or false regarding a Straight Life policy? Its premium steadily decreases over time, in response to its growing cash value. false
true or false regarding a Straight Life policy? The face value of the policy is paid to the insured at age 100. true
true or false regarding a Straight Life policy? It usually develops cash value by the end of the third policy year. true
charge a level annual premium throughout the insured’s lifetime and provide a level, guaranteed death benefit. Straight Life policies
true or false about Group Life? The premiums are typically higher than in an individual policy because there is no medical exam true
true or false about Group Life? The group sponsor will receive a "Certificate of Insurance" and participants get a master contract. true
true or false about Group Life? The policy can be converted to an individual Term insurance policy. true
true or false about Group Life? The policy cannot be attached, garnished, seized, or given to any debtor. false
Which is the correct comparison between survivorship life and a traditional joint life policy? Joint life pays a death benefit on the first death, while Survivorship Life pays on the last death.
Ed decided to purchase a $100,000 Annual Renewable Term Life Policy to provide additional protection until his children finished college. Ed discovered that his policy Required a premium increase each renewal.
Which of the following is an example of a limited-pay life policy? Life Paid-Up at Age 65
Benefits are paid to the borrower's beneficiary is a component of a Credit Life program. no
The amount of insurance permissible is limited per borrower is a component of a Credit Life program. yes
Premiums are usually paid by the borrower is a component of a Credit Life program. yes
Benefits are paid directly to the creditor is a component of a Credit Life program. yes
Alan and Shawn, twin brothers, are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and s Joint Life policy
Creditor requiring that a debtor buys insurance from a certain insurer is allowed in credit life insurance? no
Creditor having a collateral assignment on the policy is allowed in credit life insurance? yes
Creditor requiring that a debtor has a life insurance is allowed in credit life insurance? yes
Creditor becoming a policy beneficiary is allowed in credit life insurance? yes
What is the advantage of reinstating a policy instead of applying for a new one? The original age is used for premium determination
A policy owner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? Automatic Premium Loan
What is true about Spouse Term Riders? allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. This is a level-term rider.
What is true about cash surrender? surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.
What provision in a life insurance policy would allow the insurer, after the death of the insured, to pay benefits to a person not named in the policy as beneficiary? Facility of payment clause
What limits the amount that a policyowner may borrow from a whole life insurance policy? Cash value plus the loan interest
The amount available to the policyowner for a loan is the cash value minus any outstanding and unpaid policy loans, plus interest.
What is true regarding the taxation of accelerated benefits? are paid when insureds endure financial hardship due to severe illness. They may request immediate payment of some portion of the policy's death benefit, usually 50-100%, depending on the insurer. Benefits are not taxable.
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? It is reduced to the amount of what the cash value would buy as a single premium
Mary, the primary beneficiary of her husband's life policy, found that no settlement option was stated in the policy on the date of her husband's death. Who will select the settlement option to be used? Mary
True or False concerning Waiver of Premium riders? Waiver of Premium riders require that disablement needs to last for a certain period of time. true
True or False concerning Waiver of Premium riders? There is a maximum age limit for the Waiver of Premium rider to activate. true
True or False concerning Waiver of Premium riders? Once activated, the Waiver of Premium will continue until the insured's recovery or the maturity of the policy, whichever occurs first. true
True or False concerning Waiver of Premium riders? An insured who has recovered from a disabling injury will be required to repay the insurer for any premiums that were waived. false
True or False concerning Waiver of Premium riders? Premiums which are waived under the rider do not require repayment upon the insured's recovery. true
Michigan insurance policies can specify a time limit on the number of years that an insured can wait before taking legal action against the insurer. This time limit, however, has to be ___ years or greater. 6
To meet the “entire contract” provision of the Code, a policy must contain A declarations page with a summary of insureds, a copy of the original application.
If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured’s death? 0%
True or false regarding life insurance benefits for minors? The guardian must also be the trustee false
True or false regarding life insurance benefits for minors? The guardian and trustee cannot be the same person false
True or false regarding life insurance benefits for minors? The trustee is not accountable for assets false
True or false regarding life insurance benefits for minors? The guardian may or may not be accountable for assets true
True or false regarding life insurance benefits for minors? The guardian and trustee may be the same person or different people. The primary difference in function is that the trustee is accountable for assets, whereas the guardian may or may not be accou true
An absolute assignment is a Transfer of all ownership rights in a policy.
true or false about a group annuity? The annuity must be purchased by a group, but could be owned by an individual. false
true or false about a group annuity? The annuity could be obtained through a group of people identified by their relationship to a single entity buying a contract. true
true or false about a group annuity? Group annuity could be considered qualified. true
true or false about a group annuity? The employer may be the owner of the contract. true
true or false about a group annuity? There are two main types of annuities arrangements: group and individual. Group contracts can be obtained through an employer or through a group of people identified by their relationship to a single entity buying th true
features of a single premium immediate annuity is paid in a single lump sum. The annuity payments begin within a year of the date of purchase. A deferred annuity can be purchased with either a lump sum or through periodic payments, but the benefit is not paid until after one year or more has lapsed
Which of the following best describes what the "annuity period" is? The period of time during which accumulated money is converted into income payments
An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase? Payments for 15 years
Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a
What characteristic must an annuity have if it is used to accumulate funds in an IRA? Tax-qualified
A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following? Nonforfeiture option guarantees that the owner will receive a surrender value of the contract.
What type of annuity can be purchased with a single premium and provides benefit payments immediately? immediate, distribution starts within 1 year of purchase.
Which of the following is another term for the accumulation period of an annuity? Pay-in period
the period of time over which the annuitant makes payments (premiums) into an annuity. accumulation period/Pay-in period
When an annuity is written, whose life expectancy is taken into account? Annuitant
An insurance company forwards fixed annuity premiums to their general account, where the money is invested conservatively. The guaranteed minimum interest is set at 3%. During an economic downswing, the investments only drew 2.5%. How much will the insure The insurance company pays 3% regardless of what the investment draws. Whether it is 2.5% or 5.5%, the payment will be 3%.
Your client’s employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain? Individual
The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called Life income with period certain.
If an annuitant chooses a lump-sum settlement at annuitization, which of the following taxes would be imposed in all cases? Taxes on interest earned during the accumulation period
The equity in an equity index annuity is linked to An index like Standard & Poors 500.
In life insurance policies, cash value increases Grow tax deferred.
True or false of Section 1035 Policy Exchanges? It requires an absolute assignment of the existing policy to the replacing company who surrenders the contract and issues a replacement policy. true
True or false of Section 1035 Policy Exchanges? It is an IRS Code which permits like kind exchanges of property. true
True or false of Section 1035 Policy Exchanges? It is typically used when exchanging or replacing a less competitive life policy with a more competitive life policy. true
True or false of Section 1035 Policy Exchanges? Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days. false
True or false of Section 1035 Policy Exchanges? Section 1035 of the Internal Revenue Code does not give a specific time limit to complete such an exchange. true
When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions? must begin no later than age 70½ in order for the annuitant to avoid penalties. The penalty is 50% of the shortfall from the required annual amount.
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
Which concept is associated with “exclusion ratio”? Annuities payments
Melanie pays only part of her total number of IRA premiums before she dies. Her daughter wants to know what effect this will have on Melanie's estate. what will happen? Only the premiums paid will be included in Melanie’s estate.
Who can make a fully deductible contribution to their IRA? An individual covered by an employer-sponsored plan whose earned income is below a required limit
What is the main purpose of the Seven-pay Test? It determines if the insurance policy is an MEC.
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollove $8000, 60 days
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax conseque $10,000, no tax consequence
After what age could a Roth IRA distribution be classified as "qualified"? 59½
During the accumulation period in a non-qualified annuity, what are the tax consequences of a withdrawal? Taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59 ½.
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? $3000
The cash value under a MEC accumulates On a tax-deferred basis.
Taxation occurs only when any of the cash value is distributed to the policyowner (i.e., withdrawals and surrenders). tax-deferred basis
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
Cinderella divorces Prince Charming at age 35 and collects distributions on their retirement plan as a result. What penalties will she have to pay? none
Which of the following scenarios will incur a 10% tax penalty on distributions? Distributions are made on a policy before age 59½.
the tax advantage of a qualified retirement plan? Contributions and earnings of the plan are exempt from the employee’s taxable income.
If a retirement plan or annuity is "qualified", this means It satisfies all requirements of the Internal Revenue Service for favorable tax treatment.
qualified plan approved by the IRS, who then gives both the employer and employee benefits in deductibility of contributions and tax deferral of growth.
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
Employer contributions made to a qualified plan are subject to vesting requirements.
The advantage of qualified plans to employers is Tax deductible contributions.
Which of the following is an IRS qualified retirement program for the self-employed? Keogh or HR-10 plan
Participant's disability is considered exceptions to the early distribution rule and, therefore, are not subject to the penalty tax? yes
Death of participant is considered exceptions to the early distribution rule and, therefore, are not subject to the penalty tax? yes
A loan from the plan is considered exceptions to the early distribution rule and, therefore, are not subject to the penalty tax? yes
Participant's debt is considered exceptions to the early distribution rule and, therefore, are not subject to the penalty tax? no
The following are considered exceptions to the early distribution rule Death of the participant, the participant's disability, a divorce decree, as a series of equal payments (at least annually) over the participant's life expectancy, a loan from the plan, as part of a qualified rollover.
to be eligible for a Keogh Plan A person must have worked at least 1000 hours per year
general requirements of a qualified plan The plan must be permanent, written and legally binding. The plan must be communicated to all employees. The plan must be for the exclusive benefits of the employees and their beneficiaries. Plans must meet the general requirements established by IRS.
What is the primary purpose of a 401(k) plan? Retirement
example of a non-qualified retirement plan Executive bonus plan
example of a qualified retirement plan IRAs, profit sharing and Keogh plans
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.
Created by: marissam06