California Life and Health Insurance

Created by Mathew-Righetti 

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Medical expense premiums paid by sole proprietors or partners are?

They are fully deductible.

What is the Eligibility of a Qualified Plan?

ERISA prescribes that all full time employees who have worked for at least 1 year and are age 21 or more must be covered in a Qualified Plan, if offered.

If an insurance contract has "variable" features, which set of laws does it come under?

It is under the Federal Securities Laws. They have met the defition of a security as defined by the Federal Securities Act of 1933.

What insurance product has a flexible premium, fixed rate of return, tax deferred growth and a death benefit equal to the cash value?

A flexible premium deferred annuity.

What is "Whole Life" insurance?

It is sometimes called "Cash Value" life insurance and is considred to be permanent. It covers you until you die or until the policy reaches maturity, which is normally age 100. A Whole Life policy cannot be changed without the client's consent and it never has to be renewed, although the premium may be paid annually or even more frequently. Whole Life is said to have a relatively low net cost, since it does develop a cash value after the third year that belongs to the policyholder while living. However, upon death of the insured, the policy will pay the "face amount" (policy limit), but the company will keep the accumulated cash value.

Disability Income policies often do not begin paying benefits immediately when an insured person becomes disabled. Usually, the disability must continue for a period of time before benefits begin. The period is known as the?

Elimination Period.

A contract where only one party, the insurer, makes an enforceable promise is said to be?

Unilateral

A survivorship life insurance policy will pay benefits when the?

The last party dies.

Speculative risk has a chance of?

gain or loss.

Nursing home coverage under Medicaid is based on?

Financial Need.

How many "classes" of insurance are in California?

There are 20 specific classes of insurance.

An insurance company that issues participating policies?

A Mutual Insurance company

Most assignments of a life-insurance policy are made in order to protect the?

The insured's personal or business credit.

On an HMO, initial care and consultation is performed by...

The primary care physician.

Federal securities laws are enforced by?

The Securities and Exchange Commission.

Policy delivery refers to the delivery of the?

Completed insurance policy to the applicant.

The 'carry-over-deductible' applies to claims occurring within?

The last three months of the year.

In general Group Life Insurance is?

The most inexpensive type of life insurance, since it is usually sold to employer groups on a payroll deduction plan, which lowers the cost of administration compared to individual policies.

Ryder buys an annuity naming Gerry and Cheryl as co-annuitants. The amount of the monthly payments during the annuity period will be based upon?

The joint life span of both Gerry and Cheryl.

What are Nonprofit Service Organization (Insurers)?

They are organizations providing prepaid plans for hospital, medical, and surgical expenses.

What changes on a Term Life insurance policy when an insured exercises the "Reentry" option?

Premium.

The period of time between the onset of a claim and the start of a disability income benefits is called the?

Elimination period (Or waiting period).

What is Part B-Hospital Insurance for Medicare?

Sometimes called Supplementary Medical Insurance (SMI) since it supplements Part A. Part B (the optional portion) is generally designed to cover physicians' services.

An insurance company organized in Great Britain doing business in California is considered to be?

Alien

On a refund annuity, who is entitled to the refund?

The beneficiary.

What is Modified Premium and Graded Premium Whole Life?

Since level premium whole life is expensive, many insurers offer premium discounts during the early years of a policy to make it easier to sell.

What does an annuity provide to a retired person?

They provide protection for a retired individual from outliving their savings.

Persons covered by Medicare are called?

Beneficiaries.

What are Stock Insurers?

The individual stockholder provides capital for the insurer. In return, they share in any profits and any losses.

An insurance prospect wants to purchase a policy that will accumulate the largest amount of cash by the age of 65. Which policy would be most likely to satisfy the prospect's needs?

Endowment at age 65.

If the insured/owner of the policy does not pre-designate a settlement option for the beneficiary prior to death, the beneficiary may?

The beneficiary may select the settlement option upon the death of the insured.

When only one deductible applies to all family members it is referred to as a?

Family deductible.

With regard to the ethical behavior of a Life agent, which of the following makes it easier for agents to conduct themselves in an ethical manner?

Always putting the best interests of clients and policyholders first.

What is Limited Payment and Single Premium (Whole Life)?

These policies are exactly like Ordinary or Stright Life policies, except, the premium is paid over a shorter period of time.

What is an Endowment Policy?

An endowment policy is exactly the same as a Whole Life policy, except maturity occurs at a predetermined time selected by the insured.

Under the Legal Actions Provision, the insured cannot sue for non-payment of a valid claim until after 60 days in order to?

Give the insurer time to investigate the claim.

What are the three types of ordinary life insurance?

W-E-T, Whole Life, Endowments, and Term.

Medicare Part B-Medical Insurance pays a percentage of?

The Medicare approved amount?

What are fraternal insurers?

Fraternal benefit societies are primarily life insurance carriers that exist as social organization and usually engage in charitable and benevolent activities. Fraternal insurers are distinguished by the fact that their membership is usually drawn from those who are also members of a lodge or fraternal organization.

To restore you financially after a claim is known as the?

The principal of indemnity.

A 46 year old is paralyzed in an accident on vacation. Disability benefits would most likely be paid by?

Social Security.

What is the principle of indemnity?

The principle of indemnity restores the insured person, in whole or in part, to the condition he or she enjoyed prior to the loss. Restoration may take the form of payment, repair, or replacement.

Group health insurance normally specifies that what percentage of those eligible must be enrolled under a noncontributory plan?

100% in a noncontributory group plan.

A settlement option that provides for payment to be made in regular installments of a specified amount until the principle and interest are exhausted is?

Fixed Amount

What is an accidental Injury?

It is an injury that is unintentional and unforeseen.

The Join and Survivor Life Annuity contract calls for the surviving annuitant to receive a?

Predetermined income for life.

In the medical insurance field, the term "Coinsurance" means that an insured person?

Will have to pay a portion of covered expenses.

A Keogh Plan is a qualified plan for?

Keogh plans are qualified plans for the self-employed and partners. Corporate officers are not eligible. Employees of public schools are eligible for Internal Revenue Code Sections 403b plans, also known as Tax Sheltered Annuities.

The Misstatement of Age Provisions gives the insurance company the right to?

Adjust benefits payable.

Upon death of the annuitant during the accumulation period of a deferred annuity, the proceeds are?

The proceeds are taxable to the beneficiary above the annuitant's cost basis.

Most group life insurance is what type of coverage?

Level Term

A permanent life insurance that offers cash value at the lowest premium is?

A Whole Life policy.

When medical expense policies do not state specific dollar benefit amounts, but instead base payments upon the charges for like services in the same geographical area, benefits are based on?

the Usual, reasonable and customary.

Under HIPAA, health coverage is "portable" from one group to another group without any new probationary period as long as coverage was continuous with no gaps greater than ____ days?

63 days.

What does Basic Medical Expense insurance policy cover?

It covers first dollar coverage for scheduled benefits. It has no deductible and pays up to the limit. For example it will pay the first $2000 but no more. It is "Major Medical" that covers high limits, deductible and co-insurance.

The words "disability (or health) insurance" could mean any of these five types?

1. Disability Income Insurance.
2. Accidental Death and Dismemberment (AD&D) Insurance.
3. Medical Expense Insurance.
4. Dental Insurance.
5. Long Term Care Insurance.

What happens at age 65 if one has been receiving Social Security Disability Income benefits?

At age 65 they are simply converted into retirement benefits instead.

Remember this about noncontributory group health insurance!

All employees must be enrolled. 100% participation is required.

Mr. Smith is insured on a contributory Group Disability Income plan that pays benefits of $4,000 a month. If Mr. Smith has to pay 1/4th of the monthly premium, how much of his monthly benefit will be taxable?

$3,000

An employer's requirement for hospital pre-authorization on a group health policy is designed to?

Prevent unnecessary hospitalization.

The uncertainty about loss that exists whenever more than one outcome is possible is called?

Risk.

When switching from one Group Medical Expense policy to another, the insurer must?

Give credit for prior creditable coverage. - Under HIPAA, Group health insurers must give terminated employees a Certificate of Creditable coverage, stating how much of their probationary period has already been satisfied under their prior group contract.

A Deferred Annuity is like?

It is like stashing our money in the bank for an extended period of time and it gains interest. At some point in the future you can start making to withdraw the premium plus interest earned.

The annuitants cost basis on a non qualified deferred annuity is?

The amount of the premiums paid in.

What is divisible surplus?

It is another name for policy dividends. Dividends paid by a mutual insurers to their policyholder are not taxable as the IRS considers them a return of overpayment of premium.

Under dental insurance, crowns are considered to be?

Restorative

A sworn statement of truth is a?

Warranty.

When a person takes early retirement under Social Security at age 62, when does coverage for Medicare Part A begin?

Automatically at age 65.

Something important to remember about annuities is that you are betting you are going to live and the insurance company is betting?

You are going to die. Annuities are the opposite of life insurance. They do not provide death benefit though a beneficiary would receive the premium plus interest.

Retirement benefits under Social Security are based primarily upon?

Average monthly wages.

How do insurance company's make money?

The insurance companies collect premiums to cover expenses, profits, and the cost of expected losses.

What type of licensee represents insureds or prospective insureds and does not represent an insurance company?

An insurance broker.

The federal law that allows a terminated employee to continue coverage in the group is known as?

Consolidated Omnibus Budget Reconciliation Act (COBRA). - Don't confuse 'continuation' of coverage with 'conversion' of coverage.

The purpose of a 75% participation requirement on a contributory Group Health plan is to?

Prevent adverse selection.

The section of a health policy that states the causes of eligible loss under which an insured is assumed to be disabled is the?

Insuring Clause.

When must isurable interest exist for life insurance?

For life insurance, insurable interest must exist at the time of the application of insurance, but it need not exist at the time of the insured's death.

In property and casualty and in medical-expense insurance, the principle of making someone "whole" again after a loss by paying only for actual losses is called?

Indemnity

Medicaid is funded by?

State and federal moneys.

What is important to remember about Paid-up additions.

It is a dividend option, not an insurance rider.

A producer has just been told by a policyholder that she is 10 years younger than was listed on the application. The producer should?

Notify the insurance company to adjust the existing policy to the correct age.

If a client would like to have both protection and cash accumulation which type of insurance would satisfy both needs?

Cash Value life insurance, upon death the policy will pay face amount to the beneficiary.

What are Mutual Insurers?

There are no stockholders. In a mutal company, ownership rests with the policyholders.

A movie production company is concerned about the possibility that their star might become disabled due to illness and become incapable of completing the picture. What type of insurance should they buy?

Miscellaneous.

When an insured purchases a decreasing term policy, what decreases each year?

The face amount.

A life insurance policy dividends are considered to be a return of?

a premium overcharge.

A life insurance benefit payable while the insured is still living is?

Accelerated benefits.

A single premium used to buy a Whole Life policy will pay up the policy for?

The life of the policy!

So when speaking of a "Qualified" retirement plan it is?

A "qualified" plan in connection to any sort of retirement plan, typically follows the ERISA and is paid in pre-tax (before tax) dollars.

Business overhead insurance will pay for which of the following?

Rent.

Which whole life non-forfeiture option provides lifetime coverage?

Reduced Paid up!

To qualify for disability income benefits from Social Security, you must?

Have fully insured status. Social Security is available only to those who are under age 65 and who have attained "fully insured" status, which requires beneficiaries to have contributed to Social Security for at least 40 quarters (10 years).

What is reducing a risk?

A person who reduces a risk may practice living healthier lifestyle and attempt to reduce the chance of illness.

If the insured is not entirely satisfied with the policy issued, she may return it to the insurance company for voiding and receive a refund of premium at which of the following times?

Within a specified period from the date the insured receives the contract.

What are reciprocal insurers?

Reciprocal insurers are unincorporated groups of people providing insurance for one another through individual indemnity agreements. Each individual who is a member of the reciprocal is known as a subscriber.

What does a policy assignment do?

It transfers the owner's rights under the policy to the extent expressed in the assignment form.

What is Medical Expense Insurance?

It is the most common type of disability insurance and covers doctor and hospital bills.

What is the most expensive type of insurance?

Endowment policies are the most expensive.

Premiums paid for individual Disability Income policies are?

Not tax deductible.

A life insurance company may contest a policy during the "Contestable Period" for which reason?

A Material Misrepresentation!

A Prepaid dental plan is similar to?

They operate in the same manner as HMOs.

What is a Profit Sharing and (401(k) Plans)?

These plans are voluntary, and if an employee elects to participate, amounts deferred are not included in taxable gross income and earnings credited to the account will grow tax-free until distributed.

The maximum probationary period on a Medicare Supplement is?

6 months.

What is an Equity Indexed Annuity?

An EIA is a fixed annuity where both the principle and the interest are guaranteed. This is not considered a security.

When a creditor has a temporary interest in a life insurance policy, it is known as a?

Collateral assignment.

What is a 1035 exchange considered to be?

A 1035 exchange is very similar to a rollover of a qualified plan. if an insured takes cash surrender of their life insurance policy or annuity they must pay ordinary income tax on any interest they received. The IRS will allow the insured/annuitant to defer paying this tax if they execute a 1035 exchange.

What is insurance?

Insurance is a social device for spreading the chance of financial loss among a large number of people.

What is the main purpose of life insurance?

To offer protection to your survivors in the event of your death.

A participating whole life insurance policy treats dividends as?

Treats dividends as a return of an overplayment of premium.

An insurance coverage that pays a certain dollar amount while an insured is confined in a hospital, and under which the benefits are not tied to the amount of incurred expenses, is?

A Hospital confinement indemnity insurance.

Which contract requires a series of benefit payments be made at specified intervals?

Annuity.

An insurable risk requires a "Large Number of Homogenous Units". Explain.

The expected loss experience of a group of exposure units cannot be predicted with any certainty unless there are a large number of exposure units in that group. You needs lots of people or units in a pool to be able to predict loss.

What is an "Absolute Assignment"?

It transfers all of the policyholder's rights to another party.

In a legal contract, each party must give something of value. Under contract law, this is referred to as?

Consideration

What is key person insurance?

A "Key Person" insurance, in which a business owner buys life insurance on a key employee, since the business would suffer if the key party died.

Premiums paid by sole proprietors for individual health insurance coverage are?

Fully deductible.

What is Annual Renewable Term insurance?

A policy in which the face amount stays level, but as the insured gets older, the premium increases each year. For example, a 30-year old male in good health could buy a $100,000 ART policy for an annual premium of about $100. However, he would have to renew the oplicy next year and the premium would increase to about $110.

When a person jumps off a street car and breaks their ankle, this injury is considered to be?

Sudden and unforeseen.

What is Level Premium Term?

Since most clients do not like their premiums to increase each year, most insurers also offer level for a period of time, such as five years, 10 years or even 20 years.

The premium paid by your employer for qualified long-term care insurance is?

Excluded from the employee's gross income.

A product with a flexible premium, guaranteed minimum rate of return, tax deferred earnings and tax free death benefits is?

Universal Life

To take cash surrender on an annuity, the insurer needs the permission of the?

Owner! Remember the owner may not actually be the annuitant.

If the client goes out of network for services on a PPO...

The amount paid will be reduced.

Explain the business use of life insurance called, "Buy and Sell Agreements".

Cross Purchase Buy/Sell Agreements help with the orderly continuation of a business in the event that an owner dies prematurely.

"Home Service" is another name for?

Industrial life

A producers underwriting responsibility would include which of the following?

Making sure all material facts are included in the application. - The producer is sometimes referred to as a 'front-line' underwriter, since they generally have personal contact with the applicant.

A Hospital Confinement Indemnity policy will do which of the following?

Pay a state amount only if in the hospital.

Buying Insurance does not eliminate?

Risk

What are Participating Policies?

Mutual companies do not have stock. Although they are corporations, they are owned by the policy holders. If the Board of Directors declares a dividend, it will be paid to the policyholders. The IRS has ruled that these dividends are return of premium already paid, so they are not taxable. Mutual companies issue participating policies. Dividends may never be guaranteed.

The IRS does not tax which of the three major benefit programs?

Welfare benefits, Social Security Disability benefits, and Workers Compensation benefits are not taxed.

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the?

Incontestability Clause.

A 46 year old is paralyzed in an accident on vacation. Disability benefits would most likely be paid by?

Social Security

"Ambulatory" services are generally those that stress?

Outpatient surgery.

Does the common disaster clause protects the Insurance Company if a lot of clients die due to the same disaster?

False. It is for cases where both the primary beneficiary and insured die in the same accident. it is designed to protect the interests of the contingent beneficiary.

in the property and casualty insurance field, "insurable interest" must exist when?

At the time of application and at the time of loss.

If an individual wants to purchase a policy that would provide the broadest coverage for medical expenses they should purchase?

Comprehensive major medical.

There is no cost basis for an annuitant when you create an?

Immediate annuity. - Be sure to know the difference between an immediate annuity and a deferred annuity. On an immediate annuity, you give the insurer the money and they start paying you back with monthly payments right away. Your cost basis is the amount of money you gave them, which was money you already paid taxes on (after tax dollars).

The insurance business is regulated primarily by?

State laws

Employees covered under a group health policy who attain age 65 may?

continue in the group with no change in coverage.

The insured is required to submit a Notice of Claim to the insurance company within how many days after a loss?

20 days.

The authority of an insurance agent that is spelled out in the written words of the agency contract between the agent and the insurer is?

Express Authority.

A producer offering a variable contract must also give his client a disclosure document commonly known as a?

Prospectus.

The group insurance provision that prevents two insurers from paying more than the actual loss is called?

Coordination of Benefits.

Tom O'Hara was hospitalized for two weeks and received a bill for $2,100. He has Major Medical policy with a $100 deductible. His coinsurance is 80/20, figured after reducing the bill by the deductible amount. Mr. O'Hara is expected to pay a total of?

$500

What is a sickness?

A sickness or disease which first manifests itself after the effective date of the insurance policy.

A valid 1035 Exchange of a life insurance contract must be?

On the life of the same person?

The main purpose of HIPAA is?

HIPAA is to regulate probationary periods.

What term describes the concept that the insurer and the insured share in the cost of medical expenses, with the insurer bearing the greater share?

Coinsurance.

Is it true that the definition of total disability is standardized by all insurers?

It is false. Total disability is specified in the individual policy.

The insured can receive the face amount of an endowment policy if they are still living when the policy's?

Cash value equals the face amount.

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