ALABAMA INSURANCE TEST QUESTIONS CORRECTLY ANSWERED TO PASS!!

ALABAMA INSURANCE TEST QUESTIONS CORRECTLY ANSWERED TO PASS!! Which welfare program provides assistance to the needy? Medicaid Barbara has the right to change the beneficiary designation on her life insurance policy. Barbara's beneficiary is a(n): revocable beneficiary Within how many calendar days must all clean electronic health insurance claims be paid in Alabama? 30 Which type of term policy allows the policyowner to switch to permanent insurance? Convertible term What does renewable term guarantee? The insured's insurability If an insured commits suicide, a life insurance policy's face amount will be paid only after the policy has been in force for at least: two years Which of the following statements concerning a life insurance policy is TRUE? An issued policy can never be changed by a producer The proceeds of a life insurance policy can be paid in a form other than a lump-sum payment. These forms of payment are called: settlement options The withholding of facts in an insurance application is called: concealment A licensed Alabama insurance producer would NOT be disciplined by the Commissioner of Insurance for: being convicted of a misdemeanor The option to convert term life insurance to a permanent form of coverage can normally be executed: without proof of insurability Which type of life insurance rider allows a policyowner to increase the level of coverage to keep up with inflation? cost of living rider What is the minimum age requirement for a minor in Alabama to purchase a life insurance policy? 15 Which of the following best describes a Health Maintenance Organization (HMO)? Provides full medical services that stress preventative medicine Medicare Advantage (Medicare Part C) allows the utilization of benefits through a(n): HMO, PPO, or traditional insurer Pat the producer just sold an insurance policy to a client, explaining that he has authority to issue the policy. Pat was not specifically granted this power from the insurance company. Pat is exercising: implied authority A disability policy that must be renewed, cannot be cancelled until age 65, and may not have an increase in premium for any reason is called a(n): noncancellable policy Benefits under a health insurance policy may (with the insured's written request) be payable to: a hospital, physician, or surgeon Bart is injured and provides notice of a health claim to his insurer. He later receives the required claims forms. Within how many days of the loss must Bart file proof of loss with the insurance company? 90 Which of these statements regarding an insurance application is true? A representation is valid as long as it is true An insurance company licensed to solicit insurance in a specific state is called: an admitted company John purchases insurance because he expects to experience a loss. This is known as: adverse selection Who would most likely own a Medicare Supplement policy? 69-year old female covered by Medicare Amy owns a disability income policy with a noncancellable renewal provision. Which of the following is guaranteed in her policy? The coverage and premium rate are guaranteed According to Required Provision 4, when an insured applies for reinstatement of a health policy and receives a conditional receipt, how long does the insurer have to approve or deny? within 45 days of the date of application Policy dividends for life insurance are: not guaranteed What is a certificate of insurance? A certificate issued to each individual covered by the group life insurance Which is NOT true regarding Medicare Supplement policies? Must include a minimum 20-day Free-Look provision In Alabama, all Health Maintenance Organizations must: have a complaint system to resolve written complaints from enrollees Rick owns a $100,000 life insurance policy with a cash value of $10,000. How much can he borrow up to? The accumulated cash value ($10,000 less interest) Susan owns a life insurance policy that has accumulated $10,000 in cash value in which she can no longer pay its premiums. If she elects to take the extended term option, which of these actions would she take? Uses the $10,000 to buy term insurance of the same face amount as her original policy Jackie took out a Medicare supplement insurance policy and also has a preexisting condition. In this situation, a preexisting condition is defined as a condition for which medical advice was given or received within _____ of the effective date of coverage. 6 months Rodney applies for an insurance policy and pays the first premium. The receipt given for the first premium is called a(n): conditional receipt A policy owner with an automatic premium loan provision must: pay back the loan amount to keep the policy's cash value at its maximum Which of the following is NOT an example of insurable interest? An airline insuring the lives of its passengers With key employee life insurance, the company is the owner of the policy A Cross Purchase Buy-Sell Agreement is in place for ABC Company's four founding partners. What would this agreement require if the agreement is funded with individual life insurance? Each partner must own a policy on the other partners The Notice of Claim Provision states that the insured notify the insurance company within __ days of a claim. 20 Which of the following is NOT a factor typically used by insurers to classify risk? Education level The agreement between a producer and the insurance company specifies the authority given to a producer to act on behalf of the insurer. This is called: expressed authority Under a Health Maintenance Organization (HMO), service providers are paid a fixed monthly fee for each member. This concept is called: capitation The Commissioner of Insurance may NOT do which of the following? Change insurance laws Within how many days of a written demand must the Commissioner of Insurance hold a hearing? 30 The life and health insurance marketing system utilizing non-employee agents that represent just one insurance company and are often paid an allowance to cover office expense and staffing is the: general agency system Which provision allows a disability income policy to remain in force without further payments when the insured has become totally and permanently disabled? Waiver of premium Which of the following is considered the "automatic" Nonforfeiture Option that most insurers will use? Extended term An insurance premium can be defined as: money paid to an insurance company for benefits provided in the policy Which of these statements accurately portray a whole life policy? Endows at age 100 and paid up at a stated time John is an annuitant who has surrendered his annuity at age 55. What will he pay? Tax on the interest earned A Preferred Provider Organization (PPO) contract typically uses which payment arrangement? Negotiated fee-for-service Which entity is responsible for the majority of regulations imposed on the insurance industry? State government A husband and wife purchases a life insurance policy that covers both of them. The policy paid nothing when the husband died. Two years later, the wife dies and a death benefit is paid to the beneficiary. Which type of policy is this? Survivorship life policy An insurance producer must have which of the following in order to sell variable life insurance policies? All of these Total disability can be defined as "the insured's inability to perform the occupation for which he/she is reasonably qualified by education, training, or experience." For disability income insurance purposes, this definition is known as: the "own occupation" definition Which of the following limits an insurance company's total exposure under a major medical policy? Maximum lifetime benefit and a coinsurance provision In regards to insurance applications, which of the following statements is true? Changes on the application must be consented to in writing Shawn has a waiver of premium rider on his life insurance policy. He becomes disabled for 3 years, during which the insurance company waives $3,000 in premiums. When Shawn recovers, he must: resume paying premiums again Which of these is NOT considered a form of advertisement in Alabama? A producer sending a Christmas card to a client The exclusions and conditions in an insurance contract are required to be conspicuous, plain, and clearly stated. There should be no surprise when an insurance company denies a claim for a hidden clause. This is called the: doctrine of reasonable expectations An accidental death rider claim is usually paid if the insured: dies within 90 days of the accident Which of the following is an example of a "nonforfeiture value"? After a policyowner cancels his/her permanent policy, the cash value accumulation must be made available to the policyowner The number of an insurance company's health insureds that is expected to become sick or injured is called: morbidity experience Wayne is covered under a nonoccupational group health policy. He is hurt while traveling for business and requires a lengthy hospital stay. His group health policy refuses to pay for hospital expenses because this is considered a job-related accident Who does a disability income policy normally cover? Wage earners How are employer-paid premiums for employee group health insurance normally treated for tax purposes? Tax deductible to the employer/Nontaxable to the employee Which of the following life insurance policies will build up cash value the fastest? Single premiums Which of the following provisions may NOT be adjusted in an adjustable life policy? The insured Who does the insurance agent legally represent? The insurance company Pat applies for insurance, pays the initial premium, and receives a document from the agent. This document indicates that if the policy is issued, coverage begins on the date of the document. This document is called a(n): conditional receipt A waiver of premium: waives the premiums when the policyowner becomes totally disabled When an estate is named beneficiary to a life insurance policy, the policy proceeds are: distributed according to state law A husband and wife are receiving annuity payments. When the husband dies, the wife still receives annuity payments for life. What kind of annuity is this? Joint and survivor life annuity Kris is receiving annuity payments that has not yet paid an amount which is equal to the purchase price of the annuity. If she were to die, her beneficiary would continue receiving annuity payments until this amount has been reached. What type of annuity is this? Refund life annuity An insurance contract is said to be a(n) _____ because there is a mutual reliance of truthfulness on both parties. contract of utmost good faith All of these statements concerning the coordination of benefits are true, EXCEPT: The secondary insurer does NOT pay benefits What describes a level term policy? The premium and the protection remain constant for the term of the policy An example of a life insurance beneficiary is a(n): all of these Jan is named irrevocable beneficiary of Jim's life insurance policy. Which of the following statements is correct? Jim needs Jan's permission to borrow the policy's loan value Which of these will NOT result in an increase in life insurance policy dividends? Higher reserves Which of these statements concerning COBRA is correct? Under COBRA, dependents of employees covered by group plans have the same extension and conversion privileges available to them as the employee A life insurance beneficiary has chosen a settlement option in which the principal never decreases unless the beneficiary makes a withdrawal. This settlement option is called the: interest only option Which of these is NOT a reason the insurance application is important? When attached to the policy, the application becomes part of the insurance clause At certain ages or dates, an insured can increase the stated benefit (within limits) under their disability income policy, regardless of health. Which policy rider BEST describes this? Future income option A Long Term Care (LTC) policy has a minimum renewability level of: guaranteed renewable An insurance company licensed to do business in Alabama, but incorporated in another state, is called: a foreign company A policyowner can collect the face amount on what type of policy? endowment policy Extended residence in a nursing home is covered by a(n): long-term care policy Nick has a Major Medical insurance policy with a $1,000 deductible, an 80% coinsurance clause, and a $1,500 stop-loss feature. He is hospitalized and incurs the following covered expenses: $10,000 hospital room and board, $2,500 surgeon's fee. What is Nick responsible for paying? $1,500 What is a certificate of insurance? A certificate issued to each individual covered by the group life insurance A disability policy in Alabama that is paid on a monthly basis is required to have a grace period of: 10 The monthly benefit of an Annuity Certain is determined by: the annuitant's payout period selection What percentage of eligible employees must be covered by noncontributory group insurance plans? 100% Alabama's annuity disclosure regulation: requires the delivery of a buyer's guide and a disclosure document to an annuity applicant Kim has purchased a straight life annuity. What will this type of annuity provide her with? A periodic income to the annuitant for life An insured owns a policy which includes a disability income rider. The disability benefit amount paid to the insured is based on the: face amount of the policy John has recently died and it was discovered that he was actually ten years older than what was listed on his life insurance policy. What will the insurer pay his beneficiary? The amount of insurance that his premiums would have purchased at his correct age An insured should be restored to the approximate financial condition occupied before the loss occurred. This is called the: principle of indemnity Which of the following statements about a noncancellable policy is FALSE? The premium rate CAN be increased over time A life insurance policy owned by a third party: is used largely in estate-planning as well as business situations Which of the following does NOT describe a life income settlement option? Income is paid until the principal amount decreases to zero Bert purchased an immediate annuity with quarterly payments. When will this annuity start making payments? 3 months after the annuity is bought Which of these is a correct statement? Policy dividends cannot be guaranteed Which of these statements regarding an insurance application is true? A representation is valid as long as it is true Which type of life insurance policy combines insurance protection with an accumulation of cash value? permanent insurance XYZ Insurance Company issued a new life policy to an insured that replaced an existing policy. XYZ Insurance Company is considered to be the: replacing insurer The objective of insurance is: the transfer of risk Insurance policies issued by companies which allow their policyowners to participate in the favorable experience of the company through payment of dividends are known as: participating policies In Alabama, an insurer who violates state laws for the payment of insurance commissions may be fined up to: three times the amount of the commissions paid Ed has an insurance policy with an insurance company. Before Ed's policy will pay a claim, certain events must occur. Because of this, an insurance policy is considered to be: conditional Which type of assignment transfers a portion of the policyowner's right to another party in order to secure a debt to that party? Collateral assignment Ann is an employee covered by a Group Life plan through her employer. When Ann is terminated, her employer fails to inform her about the plan's conversion option. Two weeks later, Ann dies in an automobile accident. How will this situation be handled? Full benefits must be paid by the insurer An insurance company may cancel a life insurance policy under which of the following conditions? The outstanding policy loan exceeds the cash value of the policy When does "adverse selection" exist? When the risks accepted for insurance has a HIGHER likelihood of experiencing loss than an average group The aviation exclusion: excludes coverage when the insured is riding in certain kinds of air travel Which dividend option allows a policyowner to use his/her dividends to buy life insurance on a single premium basis? Paid-up additions option Ron turned over all rights in his policy over to an assignee. This is called: an absolute assignment Beginning at what age can an IRA owner start making withdrawals and NOT be subjected to a tax penalty? 59 1/2 Mary and Paul have individual disability income policies that both pay a $5,000/month benefit. Mary's policy has a 30-day elimination period, and Paul's policy has a five month elimination period. Which of the following statements is true? Paul's premium is probably less than Mary's A Long Term Care insured must be unable to perform a minimum of __ Activities of Daily Living (ADLs) to receive benefits. 2 If an insured under a Major Medical insurance policy with a $200 deductible and an 80% coinsurance clause incurred the following covered expenses: Hospital room and board $2,000; Surgeon's fee $1,500. How much would the policy pay? $2,640 (2,000 + 1,500 = 3,500 - 200 = 3,300 x .8) In which of the following ways does term life insurance and whole life insurance differ? Term insurance does not build cash value A retirement plan that can be started by an employee, even if another plan is in existence, is called a(n): Individual Retirement Account (IRA) How frequently does a disability income policy typically pay benefits? monthly Which of the following is a true statement? The withholding of information that should have been provided to an insurer is called concealment All of these statements concerning a Key Employee Life policy is true, EXCEPT: The key employee names the beneficiary An insurance company that cedes a portion of an insured's coverage to another insurer is said to be engaged in: reinsurance Don and Marie are married and each have a Major Medical plan provided by their employers. Don was born in August of 1969 and Marie was born in March of 1976. For their two dependent children, Marie's plan is primary and Don's is secondary A retirement plan intended for a sole proprietor and his/her employees would be a(n): Keogh Plan Any individual who has failed two Alabama insurance licensing examinations must wait how long before retaking it a third time? three months Risk is best defined as the: uncertainty of loss According to Alabama law, agents of a Health Maintenance Organization (HMO): must be licensed as insurance producers The maximum amount of coverage placed on a disability income policy is based on the insured's: earned income from the previous year All of these are correct concerning group life insurance, EXCEPT: Whole life insurance is the form of insurance typically used in group life insurance Under Alabama's annuity disclosure regulation, the disclosures must be mailed to the applicant within __ business days if the application is taken over the telephone. 5 An individual unable to perform two or more Activities of Daily Living (ADLs) will trigger coverage from a _____ policy. Long Term Care (LTC) An insurance producer represents the: the insurance company Julio, the insurance producer, has allowed his license to lapse. He would like to reinstate his license without retaking a prelicense course or passing a written examination. To do this, Julio must reinstate the license within ___ months from the renewal date. 12 An insurance producer who offers a potential client something of value as an incentive to purchase insurance is engaging in: rebating Carol is a life insurance policyowner who has transferred her ownership to a third party in exchange for a percentage of the death benefit. What is this called? Viatical settlement agreement In Alabama, when are newborns covered under a health policy? The moment of birth Which of the following is a TRUE statement regarding dental insurance? Comprehensive dental care policies usually cover a percentage of reasonable and customary charges for non-routine treatment What use does a business have for a key employee disability insurance policy? Temporarily replace a disabled key employee The period of time during which a surviving spouse does not qualify for Social Security survivor or retirement benefits is called: The Blackout Period Required Provision 3 states that the minimum grace period for all policies (except those with monthly or weekly premium modes) is: 31 days Which statement concerning Alabama's life insurance solicitation regulations is true? All of these Which of the following dividend options allows the continuation of cash value accumulation? Reduced paid-up insurance Medicare eligibility is typically based on: age What is vesting? The employee's right to the employer's contributions in a retirement plan if employment terminates prior to retirement Katherine is a retiree and was recently hospitalized for 10 days. Which type of insurance policy would best cover her for excess hospital expenses? What kind of risk are amateur pilots normally classified as? Special class risks What does Disability Buy-Sell insurance provide? lump-sum benefits When medical expenses reach a certain dollar amount, the insured is no longer responsible for sharing the cost of expenses. The insurance company then pays 100% of the covered expenses. This major medical policy provision is called a(n): stop-loss limit Which of the following statements is NOT correct? Agents are allowed to waive certain policy provisions Individual disability income policies normally have a premium that: adjusts annually If a Long Term Care (LTC) policy in Alabama has been in effect for more than ___, the insurer CANNOT contest any material representation on the application. 2 years What is a disability income policy designed to do? Pay benefits to maintain the insured's current standard of living A substandard or special class risk typically results in: a premium that is higher than for a normal risk What do Major Medical policies typically cover? Usual, customary, and necessary expenses Paula has an insurance policy that has a guaranteed minimum cash value, a guaranteed death benefit, fixed premiums, and grows at a rate reflected by a selected fund index. Which type of life policy fits this description? Equity indexed life Tim has a Universal Life policy. The cash value growth in his policy is: interest sensitive A written agreement that involves two or more parties and consideration is: a contract According to Alabama law, a minor: age 18 can begin receiving life insurance death benefits of up to $3,000 per year In regards to a life insurance policy or an annuity contract, all statements made on the application are considered to be: representations