Health & Life Insurance Exam Questions and Answers Rated A+

What is the advantage of reinstating a life insurance policy as opposed to applying for a new one? Policy premium in a reinstated policy will be set according to the insured's original age - When can an insurance company use suicide as a defense against paying a death claim? When a suicide is committed within a specified period of time after the policy is purchased (usually 2 years) - With the interest only settlement option, what happens to the policy's death benefit? Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary - In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments? The longer the period selected, the smaller each installment will be - What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death? Settlement options - An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit? Pay a reduced death benefit - A policyowner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary? The amount of the loan will be subtracted from the death benefit. - What are the dividend options in life insurance policies? Cash, reduced premium, accumulation at interest, paid-up additions, paid-up option, one-year term, and acceleration of endowment - What is the purpose of the Automatic Premium Loan provision? To prevent the unintentional lapse of a policy because of nonpayment of the premium - What nonforfeiture option is automatically selected by the company if not chosen by the policyowner? Extended term - With the reduction of premium dividend option, how is the dividend used? The dividend is applied to the next year's premium (it reduces the next year's premium). - What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled? Waiver of premium - What are the most common exclusions in life insurance policies? War and military service, hazardous occupation, and aviation - What dividend option can increase the death benefit of the existing life policy? Paid-up additions - What is the purpose of settlement options in life insurance policies? To determine how the death benefit will be paid to the beneficiary - To meet the requirement of the entire contract policy provision, an insurance policy must contain what? A copy of the original insurance application - What are policy dividends? Return of unused premiums - What is the name for a life insurance policy rider that provides coverage on the insured's family members? Other-insured rider - What are the three nonforfeiture options in life insurance policies? Cash surrender, reduced paid-up, and extended term - What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time? Incontestability - What nonforfeiture option provides coverage for the longest period of time? Reduced paid-up - Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party? Absolute assignment - An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit? The death benefit will be adjusted to the amount that the insured could obtain for her correct age. - Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner? Cash surrender - What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer? Entire contract - What type of beneficiary is next in line after the primary beneficiary? Contingent beneficiary - What beneficiary designation has first claim to the death proceeds of a life insurance policy? Primary beneficiary - An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit? Pay a reduced death benefit - What required provision protects against unintentional policy lapse? Grace period - What type of beneficiary can be changed at any point by the policyowner? Revocable - When will a contingent beneficiary receive death benefits from a life insurance policy? When the primary beneficiary dies before the insured - What type of assignment is used to secure the payment of a debt with an existing life insurance policy? Collateral assignment - Is the beneficiary required to have insurable interest in the insured? No. Beneficiaries do not have insurable interest in the insured. - The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit? It will be paid to the insured's estate. - What provision in a life insurance policy extends coverage beyond the premium due date? Grace period - What happens to the proceeds of a life insurance policy if there is no named beneficiary? The proceeds are paid to the insured's estate. - Who has the right to the cash value of a life insurance policy? Policyowner - Who controls changes in premium payments, face values, and loans in a life insurance policy? Policyowner - The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the Entire contract. - According to the entire contract provision, what document must be made part of the insurance policy? Copy of the original application. - The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following Projected interest rates. Face amount of the policy. The beneficiary's life expectancy. - An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? Pay the death benefit. - When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? Fixed amount. - Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members? Term rider. - When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? Equal to the original policy for as long as the cash values will purchase - An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive - Which nonforfeiture option provides coverage for the longest period of time? Reduced paid-up - What is the purpose of a free-look period? To allow the insured to return the policy with a full refund - What settlement options are available in life insurance policies? Lump-sum/cash, fixed period, fixed amount, life income, interest only - If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer? Lump-sum payment - What dividend option is automatically selected by the company if not chosen by the policyowner? Paid-up additions - What happens to a policy's cash value under an extended term nonforfeiture option? The cash value is converted to the same face amount as in the whole life policy. - What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability? Reinstatement - In a group policy, who is issued a certificate of insurance? The individual insured - Most HMOs operate through what type of system? A group enrollment system either at their place of employment or as a member of an association - HMOs that contract with outside physicians to provide health care service to their subscribers compensate those providers on a Capitation basis - All of the following are required provisions in all individual health insurance policies delivered in this state EXCEPT Misstatement of age. - Reinstatement. Entire contract. Grace period. A group blanket health policy is best suited for which of the following? A summer camp - Within how many days of the termination of the insured's group coverage must the insured notify the insurer of the decision to convert to individual coverage? 31 days - When can a Long-Term Care policy deny a claim for losses incurred because of a pre-existing condition? Within 6 months of the effective date of coverage - The Florida Employee Health Care Access Act serves which of the following purposes? It regulates group health insurance provisions provided by insurers or HMOs to small employers. - When must an insurance company present an outline of coverage to an applicant for a Medicare supplement policy? At the time of application - When are HMOs required to file a report of their activities with the Department of Financial Services? Within 3 months of the end of each fiscal year - Which types of insurance companies marketing long-term care insurance coverage must establish procedures to assure that any comparison of policies by its agents will be fair and accurate? Every company is required to establish marketing procedures. - Who must sign the notice regarding replacement? Both the applicant and agent - Any policy of health insurance that provides coverage for maternity care must also cover the services of all of the following EXCEPT None of the above. All are true. Midwives Licensed birth centers Nurse-midwives - The inflation protection feature in long-term care policies issued in this state must provide protection for inflation at what percent annually? 5% - When an HMO knowingly makes any misleading representations, incomplete or fraudulent comparisons for the purpose of inducing any person to lapse, forfeit, terminate, surrender or convert any insurance policy or contract with another insurance company or HMO, they are in violation of the unfair trade practice of Twisting. - Which of the following factors would be an underwriting consideration for a small employer carrier? Percentage of participation by the employees - Which of the following groups would most likely be covered under a blanket accident policy? Students at a public school - In the case of producer solicitation, at what point must a long-term care Shopper's Guide must be presented to the applicant? Prior to the time of application - When may an insurer require an insured to provide genetic information? Never - What is the statute of limitation on lawsuits for health insurance policies? 5 years - A group blanket health policy is best suited for which of the following? A summer camp - Which of the following groups would probably be covered by blanket insurance? A university's sports team - A child is dependent upon her parents for support because of a physical disability. Coverage may be continued beyond the normal limiting age when the child Is incapable of self-sustaining employment. - All of the following must be presented on a small group health insurance identification card EXCEPT The insured's address. The name of the certificateholder. The member identification number. Contact numbers for physicians. - A long-term care insurance shopper's guide must be provided in the format developed by which of the following? NAIC - When can a Long-Term Care policy deny a claim for losses incurred because of a pre-existing condition? Within 6 months of the effective date of coverage - An insurer offers a policy very similar to Medicare. An agent tells an applicant that the policy is Medicare, since the policies are similar anyway. Which of the following is true? This practice is illegal. - When are HMOs required to file a report of their activities with the Department of Financial Services? Within 3 months of the end of each fiscal year - Who does the secondary notice provision protect? Elderly insureds - If a claim is made on a policy during the grace period, an insurer is allowed to deduct the overdue premium and to charge interest. What is the maximum allowed interest rate? 8% - Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? Replacement rule - What are the three types of risk rating classifications in life insurance? Standard, substandard and preferred - What is the name of the process that insurance companies use to determine whether or not an applicant is insurable? Underwriting - What is insurance underwriting? The process of risk selection and classification - What report is used to assess risk associated with a health insurance applicant's lifestyle and character? Investigative Consumer Report - During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks? Underwriting - Health insurance contracts are unilateral. What does that mean? Only one party makes a legally enforceable promise - What is the purpose of the agent's report during the application process? The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process. - What law protects consumers from the circulation of inaccurate or obsolete information? The Fair Credit Reporting Act - What risk classification would typically qualify for lower premiums? Preferred risk - What is adverse selection? People who are more likely to submit insurance claims are seeking insurance more often than preferred risks. - How can health insurance policies be delivered to the insured? Personally delivered by the agent or mailed - Health contracts are prepared by insurers and must be accepted by the insured on an as is basis. This describes what aspect of a health insurance contract? Contract of adhesion - How is the information obtained for an investigative consumer report? Through interviews with the applicant's associates, friends and neighbors - When must insurable interest exist in a life insurance policy? At the time of application - What is a warranty in an insurance contract? An absolutely true statement upon which the validity of the insurance contract is based - In health insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe? Unilateral - What term describes the fee a person pays an insurance company to receive coverage? Premium - If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do? Provide the applicant a Disclosure Authorization Notice - What entities make up the Medical Information Bureau? Insurers - What is the best way to handle incomplete insurance applications? Return the application to the applicant for completion - If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern? The existence of insurable interest between the applicant and the insured - At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy? Either on the date of the application or the date of the medical exam (whichever occurs last) - If an applicant does not receive a copy of the new insurance policy, who would be held responsible? The agent - If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do? Send the application back to the applicant for signature - When must the policy summary for a life insurance policy be delivered to the policyowner? At the time of policy delivery - Who must have insurable interest in the insured? The policyowner - What are the four elements of an insurance contract? Agreement (offer and acceptance), consideration, competent parties, and legal purpose - What are the three main instances when insurable interest exists in life insurance? Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner - When a change needs to be made on the application for insurance, which is the best method for correcting the information? Complete a new application or ask the applicant to initial the correction on the original application - Insurance is a contract that protects the insured from what? Loss - What is the main responsibility of a company's underwriting unit? Risk selection - In forming an insurance contract, when does an acceptance usually occur? When the insurer approves a prepaid application - Whose responsibility is it to determine that all the questions on an insurance application are answered? The agent's - What document describes the specific information about a policy? Policy summary - When would a misrepresentation be considered material? When it may alter the underwriting decision - What type of report provides information about the applicant's hobbies, habits and financial status? Investigative consumer report - Who is a field underwriter? Agent/Producer - What two elements are necessary for a life insurance contract to have a legal purpose? Insurable interest and consent - When would a misrepresentation on an insurance application be considered fraud? When it is intentional and material -