California Life, Accident and Health Cram Course Exam 1-3 Questions & Answers(SCORED A+)

Question #90476 Carol is injured driving a company car at work. Her Health insurance coverage: AProvides excess or supplementary coverage BWill provide coverage on a pro-rata basis with Workers Compensation CWill cover her injuries DWill not cover her since this is an occupational injury -ANSWER D Explanation: Most Health insurance provides 'non-occupational' (off the job) coverage for sickness or injury, meaning that occupational coverage is excluded. However, if a person is not required to be covered by Workers Compensation, some Health policies will cover both on and off the job, which is known as 'occupational' coverage. Question #90486 The minimum participation percentage for large group insurance under the California code is: A50% B40% C75% D25% -ANSWER C Explanation: The California Insurance Code requires a 75% minimum participation percentage for large group Life insurance. Question #90409 All of the following are classified as Life insurance EXCEPT: AWhole life BTerm CEndowment DAccidental Death & Dismemberment (AD&D) -ANSWER D Explanation: AD&D is a type of Disability (Health) insurance, not Life. Question #90464 A client invests $50,000 in after-tax dollars into a deferred annuity over a period of time. When he annuitizes, he will receive $4,000 a year over his projected life span. If his total return is expected to be $100,000, how much of the client's $4,000 annual annuity pay-out will be taxable each year for the first 10 years: A$800 BNone C$4,000 D$2,000 -ANSWER D Explanation: The client has $100,000 in his account, of which $50,000 is his own money, which was contributed with after-tax dollars. Since his contributions will be returned tax free and since they make up half of his account value, only half of his annual pay-out (the earnings portion) will be taxable as ordinary income. Further, you can find his projected life span by dividing the $100,000 total by his $4,000 annual pay-out, which would be 25 years. After 25 years, he will have recovered all of his own contributions, so the entire $4,000 would be taxable. Remember, annuity payouts are for life. Question #90470 Which of the following is true regarding 'speculative' risk: AThere is no chance for gain BIt has a chance for gain or loss CIt is insurable DIt has a chance for loss only -ANSWER B Explanation: Speculative risk has the chance for gain or loss and is not insurable. For example, if you buy a lottery ticket you might gain, but you will probably lose. It is 'pure' risk that is insurable, which has the chance for loss only, with no chance for gain. On Life insurance, you might die. On Health insurance, your might become sick or injured. On Fire insurance, your house could burn down. These are 'pure' risks. Question #90425 Part A of Medicare provides basic hospital benefits including coverage for the care and counseling of the terminally ill, which is known as: ALong term care BHome health care CSkilled nursing facility care DHospice care -ANSWER D Explanation: Medicare is a federal health insurance program for people 65 or older who qualify for Social Security, people of any age with permanent kidney failure, and those who are permanently and totally disabled. An individual is automatically eligible for Medicare Part A with no monthly premium at age 65, which includes coverage for hospitalization, skilled nursing, home health care and hospice care. Question #90441 Medical Information Bureau (MIB) members must report which of the following: ALife insurance death claims BHealth conditions discovered during the underwriting process CInsurance company actions taken DAdverse underwriting decisions -ANSWER B Explanation: The MIB is a non-profit information agency formed to assist health insurers uncover misrepresentations or fraudulent actions by applicants for insurance. MIB members that find an impairment in underwriting report such findings, as well as situations which applicants have previously been involved in and information received from physicians or other persons commenting on the status of a proposed insured. Question #90460 If a $100,000 Whole Life insurance policy with a cash value of $10,500 lapsed and the insured selected the reduced paid-up non-forfeiture option, all of the following would be true EXCEPT: AThe new policy would have a cash value BThe new policy would have a face amount of $100,000 CThe new policy would not require proof of insurability DThe new policy would provide coverage to age 100 -ANSWER B Explanation: If the insured selects the reduced-paid up non-forfeiture option, the insurer will use the cash value in the lapsed policy to buy the insured a new Whole life policy at the insured's current age without evidence of insurability. The new policy will be paid-up until age 100 or the insured's death, whichever comes first, and will have an immediate cash value. However, $10,500 would not be enough to buy the insured a $100,000 policy, so coverage will be reduced. Question #90495 Under the Women's Health and Cancer Rights Act all health insurance plans which cover mastectomies must also cover which of the following: ARehabilitation BReconstructive surgery CHome health care DPrescription drug coverage -ANSWER B Explanation: Under WHCRA, group health plans, insurance companies and health maintenance organizations (HMOs) offering mastectomy coverage also must provide coverage for certain services relating to the mastectomy in a manner determined in consultation with a attending physician. This required coverage includes all stages of reconstruction of the breast on which the mastectomy was performed, surgery and reconstruction of the other breast to produce a symmetrical appearance, and prostheses and treatment of physical complications of the mastectomy. Question #90423 Medical Information Bureau (MIB) members consist of: ALife & Health insurers BWorkers Compensation insurers CAll answer options are incorrect DFire & Casualty insurers -ANSWER A Explanation: The MIB is a nonprofit information agency supported by Life & Health insurance companies, in order to help insurers uncover misrepresentations or fraudulent actions by applicants. MIB member companies that find health impairments in underwriting report their findings to the MIB in the form of a code number. The MIB discloses to underwriters the applicants prior health history, including information received from doctors. However, insurance company underwriting actions are not recorded anywhere in MIB files. Question #90471 A Comprehensive Major Medical Expense policy generally includes all of the following EXCEPT: AFirst dollar coverage with high lifetime limits BA deductible CA capitation fee DCo-insurance -ANSWER c Explanation: 'Capitation' fees are a characteristic of HMOs, not policies written by insurance companies. A 'capitation' fee is a per person fee that an HMO pays a doctor based upon the number of patients they see during a specified period of time. Comprehensive Major Medical Expense insurance is a combination of a Basic plan and a Major Medical plan, which is generally the best coverage you can obtain from an insurance company. Question #90400 When an Agent pleads 'nolo contendere' to a violation of the insurance code, it means: AHe is pleading guilty to a violation of the insurance code BHe is pleading not guilty to a violation of the insurance code CHe is leaving the determination of guilt up to the opinion of the Commissioner DHe has been convicted of a violation of the insurance code -ANSWER c Explanation: A plea of 'nolo contendere' means that the agent neither admits or disputes the charges against him, and is an alternative to pleading guilty or not guilty. It is also called a plea of 'no contest'. The Commissioner can use his or her own judgment as to whether or not a violation has occurred, and if so, what the penalties should be. Question #90366 Twelve months ago, a 39 year tourist broke his neck in a swimming pool accident while on vacation and suffered paralysis, from which he is not expected to recover. He may be eligible to receive disability income benefits from: AMedicare BSocial Security CLong Term Care (LTC) DWorkers Compensation -ANSWER b Explanation: After a 5 month waiting period, Social Security provides disability income benefits for those whose disability is expected to last at least 12 months or result in their death and are incapable of performing the duties of any occupation. Medicare covers medical expenses, not disability income. LTC covers custodial care in a nursing home. Workers Compensation only covers occupational, job-related injury or sickness. Question #90367 An insurance company 'admitted' to do business in California is also known as an: AForeign insurer BAlien insurer CDomestic insurer DAuthorized insurer -ANSWER d Explanation: All insurers, except for Surplus Lines insurers, must be 'admitted' or 'authorized' by the Insurance Commissioner before they can transact business in this state, whether they are domiciled in this state (domestic), another state (foreign) or in another country (alien). Question #90412 Which of the following is not a Life insurance non-forfeiture option: APaid-up additions BCash surrender CExtended term DReduced paid-up -ANSWER a Explanation: Paid-up additions is a dividend option, not a non-forfeiture option. If a mutual insurer pays a dividend, the policy owner may use that dividend as a single premium to buy additional Whole Life insurance, which is paid-up until the insured's age 100 or prior death. Dividends may never be guaranteed. Question #90391 Who does the Social Security 'black-out' period affect: ADeceased spouse BChildren CSurviving spouse DEmployer -ANSWER c Explanation: Widows or Widowers will receive Social Security Benefits until their youngest child turns age 16, at which time benefits will sto