Life & Health Final Exam
Which provision in a health insurance plan is used to avoid over-insurance when a person is covered by
more than one plan?
A
Schedule of Benefits
B
Coordination of Benefits
C
Extension of Benefits
D
Primary Care Coverage ANS: B
The purpose of the Coordination of Benefits provision is to prevent over-insurance. The 'COB' provision
appears in both group and individual health policies.
A permanent policy is surrendered for its cash value, and that sum is greater than the amount of
premiums paid in. How is the excess taxed?
A
Taxed as a short term capital gain
B
No tax is due
C
Taxed as long term capital gain
D
Taxed as ordinary income ANS: D
Taxed as ordinary income
,Upon surrender, any equity (i.e., amount above total premiums paid) is taxed as ordinary income. The
premiums paid are also referred to as 'cost basis.'
A limited pay life policy:
A
Start off with small premium payments and then they increase, but only up to a specified limit
B
Can only be purchased by individuals on a specified limited income
C
Is offered in limited face amounts only
D
Requires premium payments for a specified number of years or until a specified age is reached ANS: D
Requires premium payments for a specified number of years or until a specified age is reached
In a limited pay life policy the insured policyowner pays premiums for a specified time period or until a
specified age, and the insurance protection continues throughout his or her life or until endowment at
age 100, whichever comes first.
Small employer plan preexisting conditions may not be excluded for any longer than _____ months.
A
18
B
36
C
29
D
,12 ANS: D. 12
Preexisting conditions may not be excluded for any longer than 1 year.
When rating health insurance risk:
A
The underwriters consider one's political and religious preferences
B
Underwriters use the same guidelines as they do for long-term care insurance
C
Certain factors may be more or less important than for the underwriting of life insurance
D
The underwriters use the same guidelines as they do when they underwrite disability income insurance
ANS: C
Certain factors may be more or less important than for the underwriting of life insurance
Certain underwriting factors for health insurance may be more of less important than for the
underwriting of life, disability, or long-term care insurance.
How would an insurance agent most likely use a financial rating service?
A
To evaluate the financial stability of an insurance company
B
To obtain a better commission rate
C
To determine how much premium to charge a client
D
, To publish the agent's opinion of an insurer ANS: A
To evaluate the financial stability of an insurance company
Rating services evaluate the financial stability of an insurer. These services are important to insurance
agents and producers, as they are responsible for placing business with insurers that are financially
sound.
If an annuity is annuitized, then the _________ investment is recovered income tax-free over the
income benefit payment period.
A
After-tax
B
Non-guaranteed
C
Pre-tax
D
Exclusion ANS: A
After-tax
Only the after-tax investment is recovered income tax-free from an annuity that is annuitized. It
represents a return of the cost basis.
Fred's group health plan offers prepaid routine medical exams to provide early treatment and
preventive care. He most likely has what type of coverage?
A
PPO
B
Which provision in a health insurance plan is used to avoid over-insurance when a person is covered by
more than one plan?
A
Schedule of Benefits
B
Coordination of Benefits
C
Extension of Benefits
D
Primary Care Coverage ANS: B
The purpose of the Coordination of Benefits provision is to prevent over-insurance. The 'COB' provision
appears in both group and individual health policies.
A permanent policy is surrendered for its cash value, and that sum is greater than the amount of
premiums paid in. How is the excess taxed?
A
Taxed as a short term capital gain
B
No tax is due
C
Taxed as long term capital gain
D
Taxed as ordinary income ANS: D
Taxed as ordinary income
,Upon surrender, any equity (i.e., amount above total premiums paid) is taxed as ordinary income. The
premiums paid are also referred to as 'cost basis.'
A limited pay life policy:
A
Start off with small premium payments and then they increase, but only up to a specified limit
B
Can only be purchased by individuals on a specified limited income
C
Is offered in limited face amounts only
D
Requires premium payments for a specified number of years or until a specified age is reached ANS: D
Requires premium payments for a specified number of years or until a specified age is reached
In a limited pay life policy the insured policyowner pays premiums for a specified time period or until a
specified age, and the insurance protection continues throughout his or her life or until endowment at
age 100, whichever comes first.
Small employer plan preexisting conditions may not be excluded for any longer than _____ months.
A
18
B
36
C
29
D
,12 ANS: D. 12
Preexisting conditions may not be excluded for any longer than 1 year.
When rating health insurance risk:
A
The underwriters consider one's political and religious preferences
B
Underwriters use the same guidelines as they do for long-term care insurance
C
Certain factors may be more or less important than for the underwriting of life insurance
D
The underwriters use the same guidelines as they do when they underwrite disability income insurance
ANS: C
Certain factors may be more or less important than for the underwriting of life insurance
Certain underwriting factors for health insurance may be more of less important than for the
underwriting of life, disability, or long-term care insurance.
How would an insurance agent most likely use a financial rating service?
A
To evaluate the financial stability of an insurance company
B
To obtain a better commission rate
C
To determine how much premium to charge a client
D
, To publish the agent's opinion of an insurer ANS: A
To evaluate the financial stability of an insurance company
Rating services evaluate the financial stability of an insurer. These services are important to insurance
agents and producers, as they are responsible for placing business with insurers that are financially
sound.
If an annuity is annuitized, then the _________ investment is recovered income tax-free over the
income benefit payment period.
A
After-tax
B
Non-guaranteed
C
Pre-tax
D
Exclusion ANS: A
After-tax
Only the after-tax investment is recovered income tax-free from an annuity that is annuitized. It
represents a return of the cost basis.
Fred's group health plan offers prepaid routine medical exams to provide early treatment and
preventive care. He most likely has what type of coverage?
A
PPO
B
