Michigan Life and Health

Which is TRUE regarding the annuitant, when the annuitant is NOT the policy owner?

1. The annuitant has the right to name the beneficiary

2. The annuitant is the person paying the premiums

3. The cash value is available to the annuitant for withdrawals

4. Annuity payments will be based on the annuitants life expectancy

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Terms in this set (1649)

Annuity payments will be based on the annuitants life expectancy

Signing an applicants name for insurance is known as...?
1. Concealment

2. Defamation

3. Coercion

4. Forgery

4. Forgery

Failure to pay a penalty assessed by the commissioner may result in...?

1. Revoked or suspended license

2. Require the license to retake the examination

3. Complete 5 extra hours of continuing education

4. Pay a late charge of 1.5%

1. Revoked or suspended license

Two business business partners own life insurance, which or the following allows the surviving partner to use death benefit to purchase the deceased owners share?

1. Buy-sell agreement

2. Key employee life insurance

3. Business continuation

4. Accidental death

1. Buy-sell agreement

Policy owner surrenders a policy for its cash value, when is tax liability incurred?

1. The cash value exceeds all premiums paid

2. The cash value is less than premiums paid

3. The policy is exchanged for a policy of equal value

4. The party is transferred to a third party

1. The cash value exceeds all premiums paid

When is insurable interest required?

1. At time of claim

2. At time of application

3. In event of a policy loan

4. Within the first year of death

2. At the time of application

Which of the following best describes a single premium cash policy?

1. It requires only one payment to make the policy paid up

2. It provides for only one premium to be paid without evidence of insurability

3. It waives one future premium of the owner becomes disabled

4. It requires the policy owner to pay one premium annually

1. It requires only one payment to make the policy paid up

When life insurance is funded by contributions to a qualified retirement...

1. Premiums are taxable

2. Death benefits are taxable

3. The insurance must be incidental to the plan

4. Death benefits are paid to the employer

1. Premiums are taxable

How does a graded premium whole life policy differ from a modified premium?

1. It increase the premium annually during the first several years of the policy

2. It increase the premium annually for the duration of the policy

3. It increases the premium once during the duration of the policy

4. It has lower premium for the duration of the policy

1. It has a lower premium for the duration of the policy

Which of the following is NOT true about converting a group policy into an individual policy?

1. The converted policy must be the same amount as the group coverage

2. Group policies must include a guarantee of conversion

3. Coverage continues during the conversion period

4. Proof of insurability must be required

4. Proof of insurability must be required

Before doing business under an assumed name, who must the producer first notify? 1. Insured 2. insurer 3. Commissioner 4. Insurance agency3. CommissionerWhich writer allows you to purchase additional insurance without underwriting or specific dates? 1. Guaranteed renewability 2. Guaranteed insurability 3. Cost of living 4. Disability income2. Guaranteed insurabilityWhich of the following is a life insurance contract written on the life of an individual? 1. Insurance 2. Survivorship policy 3. Joint life contract 4. Single life insurance4. Single life InsuranceAn Insurance policy lapsed due to nonpayment of premium to activate the reinstatement clause... 1. Play the premium within 15 days of the grace period. 2. Provide the insurer with the evidence of insurability 3. Apply for a new life insurance policy 4. Demonstrate the incontestable clause can be invoked2. Provide the insurer with the evidence of insurabilityTerm life insurance differs from permanent life insurance in that MOST often, term life insurance...Remains in force for a specific period of timeWhich activity does NOT require an insurance producer's license?UnderwritingWhich nonforfeiture option allows the policy owner to purchase less coverage for life? 1. Reduced paid-up insurance 2. Cash surrender value 3. Settlement value 4. Extended term1. Reduced paid-up insuranceIf the annuitant dies before the annuity start date, the interest earned is... 1. Taxable 2. Nontaxable 3. Never taxed 4. Taxed if the beneficiary is a spouse1. TaxableWhich type of annuity guarantees a level benefit payment? 1. Variable 2. Universal 3. Limited life 4. Fixed4. FixedFor a contract to be valid it MUST...Include an offer and acceptanceWhich of the following not an example of a producer duties? 1. Selling insurance 2. Issuing and countersigning policies 3. Collecting premiums 4. Represent the insured4. Represent the insuredIf a producer is found guilty of signing an applications name, the commissioner can do all of the following EXCEPT... 1. Place the producer on probation 2. Levy a civil fine on the producer 3. Suspend or revoke license 4. Require the producer to tell the client4. Require the producer to tell the clientIf an annuitant is making premium payments on a periodic which type of annuity? 1. Deferred 2. Immediate 3. Fixed period 4. Fixed amount1. DeferredGenerally If an application is not prepaid, the effective date of begins on the date the... 1. Application is signed 2. Application is postmarked and mailed to the insurer 3. Company underwriter approves the risk 4. Producer delivers the policy and collects the premium4. Producer delivers the policy and collects the premiumPolicy owner's future earning potential and determining how much of that amount would be devoted to his dependents... 1. Loss exposure report 2. Salary projection approach 3. At distribution 4. Only if there is a premature distribution3. At distributionWhat info is NOT required for a credit life insurance contract? 1. Charge for each type of insurance being purchased 2. Type of insurance being purchased 3. Post claim underwriting date 4. Insurer name2. Type of insurance being purchasedWhich of the following statements is TRUE concerning classification of risk? 1. Substandard applications are never issued policies 2. Rated policies merit lower premium 3. A preferred individual is issued a rated policy 4. Preferred risk pay a lower premium than standard risks4. Preferred risk pay a lower premium than standard risksAn insured had a 5-year renewable term life insurance policy. Upon exercising the renewable privilege, the insured MUST... 1. Provide evidence of insurability 2. Renew for at least 10 years 3. Pay an annual premium that may be higher 4. Convert to a whole life policy3. Pay an annual premium that may be higherA producer offers a potential insured 5% of their commission as an incentive to buy insurance is guilty of.... 1. Coercion 2. Rebating 3. Redlining 4. Twisting2. RebatingStatement by an applicant concerning personal health history, occupation, and hobbies are referred to as? 1. Depictions 2. Certification 3. Representation 4. Personal characteristics4. Personal characteristicsA license who informs an insurance fan inaccurate terms, benefits, or advantages of any policy is committing which of the following...? 1. Discrimination 2. Misrepresentation 3. Fraud 4. Defamation2. MisrepresentationInsurer's intentional relinquishment of a known right is...? 1. An estoppel 2. A privilege 3. A wavier 4. A choice3. A waiverWhich type of life insurance policy is characterized by premiums that are fully paid within a stated period, after which no further premiums are REQUIRED... 1. Vanishing premium 2. Continues premium 3. Endowment insurance 4. Limited payment insurance4. Limited payment insuranceHuman life value approach measures which of the following...? 1. Total lifetime earnings 2. Total lifetime benefits 3. Total lifetime family needs 4. Total lifetime dividends3. Total lifetime family needsIf a premium is NOT submitted with a life insurance application producer MUST have the applicant sign which of the following when delivering a policy?A replacement formWhich of the following is a provision is an interest- sensitive life policy which allows the policy owner to withdraw the policies cash value interest fee? 1. Partial surrender 2. Automatic premium waiver 3. Waiver of premium 4. Spendthrift clause1. Partial surrenderGroup life underwriting protects from? 1. Risk selection 2. Medical underwriting 3. Adverse selection 4. Risk underwriting3. Adverse selectionA license can disclose a consumer's policy account number to all of the following EXCEPT...? 1. Member in an affinity program that was identified to the consumers 2. Service provider marketing on behalf of the license 3. Consumer reporting cause 4. Nonaffiliated third party4. Nonaffiliated third partyInsurance applicants with an average life expectancy who represent the same risk classification as the majority of people with similar lifestyles are considered which type of risk? 1. Declined 2. Preferred 3. Standard 4. Substandard3. StandardIt early withdrawal before age 59 1/2 from a qualified plan is taxed in additional...?10%ABC insurance agency is entering each applicant who purchases insurance through their agent into a drawing to win a free trip. This is an example of ...? 1. Illegal inducement 2. False advertising 3. Concealment 4. Fraud1. Illegal inducementA method of handling risk such as having a sprinkler system installed in a building, is an example of...? 1. Transfer 2. Loss retention 3. Risk reduction 4. Avoidance3. Risk reductionIn addition to the actual policy, an entire contract includes which of the following? 1. Clauses 2. Credit report 3. Provisions 4. The application4. The applicationEarnings in a Roth IRA are taxed...At non-qualified distributionApplicant concerning personal health history, family health history, occupation referred to as...? 1. Depictions 2. Certifications 3. Representations 4. Personal characteristics4. Personal characteristicsThe grace period is a period of time... 1. Between the death of the insured individual and the payment of benefits 2. After the premium is paid and policy is issued 3. After the premium is received and before the policy is based 4. After the premium is due but while policy remains in force4. After the premium is due but while policy remains in forceA document that specifies the critical segments of a purchased policy is known as...? 1. Buyers guide 2. Policy summary 3. Conditional receipt 4. Underwriters report2. Policy summaryHow data reported and maintained on applicants for life or health by medical information? 1. In code symbols to preserve confidentiality 2. In public database with meme er insurance companies reporting data 3. In physician maintained database accessible by insurance companies and medical practitioners 4. As secured historical data to be purchased by member insurance companies seeking to enforce adverse underwriting3. In physician maintained database accessible by insurance companies and medical practitionersWhich approach considers the future needs of the survivors in determining amounts of life insurance? 1. Human life approach 2. Cost of comparison approach 3. Living benefits approach 4. Needs approach1. Human life approachWhat is insurable interest required? 1. At the time of a claim 2. At time of application 3. In the event of a policy loan 4. Within the first year of death2. At time of applicationWhich of the following is NOT an illegal inducement? 1. Giving the insured tickets to a sporting event valued at $100 2. Giving the insured a return of a premium excess of $25 3. Giving the insured an article of merchandise printed with the producers name costing $5 4. Giving the insured a free policy of insurance resulting from the resulting sale of a related policy of insurance3. Giving the insured an article of merchandise printed with the producers name costing $5Which of the following is NOT true about converting a group policy to an individual policy...? 1. The conversion amount must be the same amount as the group policy 2. Group policies must include a guaranteed of conversion period 3. Coverage continues during the conversion period 4. Proof of insurability will be required4. Proof of insurability will be requiredThe period during which an annuitant begins to receive income payments from an insurer is known as...?Annuitization periodAll of the following are examples of flexible life insurance policies EXCEPT...? 1. Whole life 2. Variable life 3. Universal life 4. Adjustable life1. Whole lifeWhich is the simplest type of life insurance plan that provides protection for a specific period of time and pays a benefit only if the insured dies during that period? 1. Whole life insurance 2. Level term life insurance 3. Variable term life insurance 4. Ordinary life insurance1. Level term life insuranceWhich of the following is the time period which is life insurance policy is considered incontestable, assuming otherwise in good standing...? 1. Period ends after 3 years 2. Period ends after 2 years 3. Period ends after 2 months 4. For majority of the policies there is no contestability period2. Period ends after 2 yearsWhich of the following statement BEST describes a single premium cash value policy?It requires one payment to make the policy paid upWhich of the following giraffe from a producer would NOT be considering rebating?$5 penWhen a beneficiary inherits a traditional IRA, which of the following is TRUE about taxation when the money is withdrawn? The beneficiary pays...? 1. No tax 2. An estate tax 3. Capital gains tax 4. Income tax4. Income taxUpon the death of an insured individual, what does life insurance guarantee to deliver to the beneficiary? 1. An annuity 2. A specific sum of money 3. A dividend 4. A final expense fund2. A specific sum of moneyWhich of the following policies has a guaranteed interest rate with the possibility to earn an interest rate higher than the guarantee rate? 1. Renewable term 2. Credit life 3. Term insurance 4. Universal life4. Universal lifeWhich statement is not a characteristic of a group life insurance plan? 1. A master contract 2. Probationary period 3. Individual underwriting 4. Certificate of insurance3. Individual underwritingWhat type of authority is given by an insurer to a provider but NOT formally communicated? 1. Express 2. Implied 3. Written 4. Apparent2. ImpliedWhich of the following is an example of an unfair claim settlement practice? 1. Delaying the settlement of claims in which liability has become clear 2. Replacing a policy when it is in the best interest of the insured 3. Adopting and implementing standards te settle claims in a timely matter 4. Disclosing the settlement terms and provisions of the contract of the insured1. Delaying the settlement of claims in which liability has become clearTerm life insurance offers pure protection...? 1. Until the insurance policy matures 2. For a specific period of time 3. For the life of the policy 4. At the highest cost of insurance2. For a specific period of timeFollowing is a characteristic of a level premium term life insurance... 1. It provides for lower benefits 2. It can be used for cash value 3. It matches the level amount of protection on the insureds life expectancy 4. The cost of insurance is averaged throughout the life of the contract3. It matches the level amount of protection on the insureds life expectancyConsumer privacy regulations permits the release of an insured's financial information when? 1. A distant relative requests financial info in writing 2. The depth of energy labor and economic growth makes a written request to the insurer for employment purposes 3. A creditor requests info in writing to approve a line of credit 4. An authorized agency makes a written request to the insurer during an insurance fraud investigation4. An authorized agency makes a written request to the insurer during an insurance fraud investigationWhich of the following is the concept of term life insurance? 1. Term life insurance accumulates cash value 2. Term life insurance pays an annual divided 3. Term life insurance provides low cost pure protection 4. Term life insurance provides for a permanent death benefit3. Term life insurance provides low cost pure protectionWhich of the following is the time period after which a life insurance policy is considered incontestable? 1. The contestability period ends after 3 years 2. The contestability period ends after 2 years 3. The contestability period ends after 2 months 4. For the majority of policies there is no contestability period2. The contestability period ends after 2 yearsWhen if ever are the earnings on a non-qualified annuity taxed... 1. Upon withdrawals of the contract value 2. Upon the death of the beneficiary 3. As payments are contributed 4. Earnings are not taxable1. Upon withdrawals of the contract valuePrior to annuitization what is the non-forfeiture value of an annuity? 1. Only premium vested in the account for 3 years 2. All premiums paid 3. As payments are contributed 4. Earnings are not taxable4. All premiums paid minus any withdrawals and surrender chargesWhich of the following is true of a payor benefit rider... 1. Waives premiums on a juvenile policy if the policy owner becomes disabled or dies 2. Pays a monthly income to the policy owner if the insured is totally disabled 3. Waives policy premiums if the insured become totally disabled 4. Increases the value of the policy if the policy owner dies1. Waives premiums on a juvenile policy if the policy owner becomes disabled or diesWhich term describes naming a contingent beneficiary as "all of my children"? 1. Successive beneficiary 2. Tertiary designation 3. Class designation 4. Trust arrangement3. Class designationWhich of the following does NOT describes a defining characteristics of a whole life policy? 1. The policy accumulates cash value 2. The policy is designed to provide coverage for life 3. The face amount of the policy remains the same over time 4. The death benefit is in force for a specific period of time4. The death benefit is in force for a specific period of timeWhen an insured desires to give specific directions on how proceeds are distributed including to minors most appropriate beneficiary? 1. Class 2. Estate 3. Individual 4. Trust4. TrustPremium payments for a universal life policy are NOT used for which of the following...? 1. Loading Cost 2. Death protection 3. Cash value accumulation 4. Separate account investments4. Separate account investmentsAn insurer that is owned by their policyholder and can pay annual dividends to them..? 1. Stock company 2. Mutual company 3. Fraternal insurer 4. Lloyd's of income2. Mutual companyBefore doing business under an assumed name, who must a producer first notify? 1. Insured 2. Insurer 3. Commissioner 4. Insurance agency3. CommissionerWho can surrender an annuity during the accumulation period? 1. The company 2. The beneficiary 3. The annuitant 4. The policy owner4. The policy ownerMaximum penalty commissioner can fine a producer? 1. 2,500 2. 5,000 3. 10,000 4. 7,5003. 10,000All of the following policies qualify for 1035 exchange EXCEPT? 1. A whole life policy to another whole life policy 2. A whole life policy to an annuity 3. An annuity to another annuity 4. An annuity to a whole life policy4. An annuity to a whole life policyWhich type of insurance is sometimes referred to as a non participating company? 1. Reciprocal insurer 2. Fraternal insurer 3. Mutual insurer 4. Stock insurer4. Stock insurerHow can the insured prevent the face amount of a life insurance policy from being subjected to the federal estate tax? 1. By assigning the policy at least 3 years before death 2. By naming the insured estate as the beneficiary 3. By remaining the policy holder until death 4. By taking policy loans from cash value2. By naming the insured estate as the beneficiaryAn insurance policy is a on lateral contract because ONLY the...? 1. Insured pays the premium 2. Insured is legally bound 3. Insurer is legally bound 4. Insurer can cancel the policy3. Insurer is legally boundProviding incorrect, misleading, incomplete, or materially untrue information... 1. Twisting 2. Redlining 3. Misappropriation 4. Misinterpretation4. MisinterpretationA whole life policy is replaced with an annuity without incurring a tax penalty? 1. Cross purchase plan 2. An endowment contract 3. A transfer of value 4. A 1035 exchange4. A 1035 exchangeWhich of the following is NOT a right if the insurance policy owner? 1. Assign or transfer the policy 2. Borrow from the cash value 3. Select and chance a beneficiary 4. Revoke an absolute assignment4. Revoke an absolute assignmentWhich of the following statements is TRUE concerning classifications of risk? 1. Substandard applicants are never issued policies 2. Rated policies merit lower terms 3. A preferred individual is issued a rated policy 4. Preferred risks pay a lower premium than standard risks4. Preferred risks pay a lower premium than standard risksIf an applicant purchases a life insurance policy to avoid forced sale of his assets what is this called? 1. Buy-sell funding 2. Capital retention 3. Capital liquidation 4. Estate conservation4. Estate conservationNot required for credit insurance? 1. Charge for each type of insurance being purchased 2. Type of insurance being purchased 3. Post claim underwriting date 4. Insurer name2. Type of insurance being purchasedA type of life Insurance policy that offers the policy owner the options to adjust the policies face amount, and premium without having to complete a new application or have a new policy inssued? 1. A modified whole life policy 2. A modified term life policy 3. An adjustable life policy 4. A variable life policy3. An adjustable life policyWhich statement is NOT true about the waiver of premium rider? 1. An additional premium is charged for the rider 2. The face amount is reduced by the amount of premium paid 3. The policy remains in force exactly as if premiums are being paid 4. There is a waiting period of 6 months before premiums are waived2. The face amount is reduced by the amount of premium paidWhich of the following is TRUE regarding 1035 exchange? 1. Because of complexity, 1035 exchanges are seldom 2. An exchange for another policy or annuity generally voids taxes 3. An exchange for lesser value policy or annuity generally avoids any taxes 4. Whether or not life insurance premiums are deductible depends on the income of the place holder2. An exchange for another policy or annuity generally avoids any taxesFailure of an insurance producer to timely remit premiums to an insurer? 1. A fiduciary violation 2. Material misrepresentation 3. Illegal inducement 4. A debating violation1. A fiduciary violationA whole life policy that offers the policy owner ability to adjust face amount l, premium and length without having to complete a new application...? 1. A modified whole life policy 2. A modified term life policy 3. An adjustable life policy 4. A variable life policy3. An adjustable life policyWhich of following statement is NOT true regards to the waiver of premium rider? 1. An additional premium is charged for this rider 2. The face amount is reduced by the amount of premiums paid 3. The policy remains in force exactly as if premiums are being paid 4. There is a waiting period of 6 months before premiums are paid1. An additional premium is charged for this riderWhich of the following individuals is REQUIRED to be licensed as an insurance counselor in the state of Michigan...? 1. An insurer officer or director 2. An individual selling insurance policies 3. A person providing insurance advice to a person of business for a fee 4. An employee working for an independent insurance agency performing non-insurance duties3. A person providing insurance advice to a person of business for a feeDiffered commissions may be paid to a person who sold an insurance policy when the person...? 1. Was a licensed broker at the time of the sale 2. Was a licensed producer at the time of the sale 3. Passed the examination and applied for a producer license at the time of the sale 4. Passed the examination and applied for a solicitor license at the time of the sale2. Was a licensed producer at the time of the saleIn contract law, legal purposes refer to the fact that...? 1. The contract must be personal 2. There must be consideration on the part of both parties 3. The reason for entering into a contract must be lawful 4. The parties entering the contract must be competent3. The reason for entering into a contract must be lawfulOption that allows proceeds to remain with the insured and earnings to be paid to a beneficiary on a monthly basis...? 1. Interest only 2. Lump sum 3. Fixed period 4. Fixed amount1. Interest onlyA deliberate lie by an insured to the insurer to obtain a lower premium is an example of...? 1. Omission 2. Fraud 3. Concealment 4. Aleatory2. FraudWhich rider would allow additional insurance to be purchased at specific dates or events, without additional underwriting? 1. Guaranteed renewability 2. Guaranteed insurability 3. Cost of living 4. Disability income2. Guaranteed insurabilityWhich type of policy is used to add addition insured riders? 1. Term life 2. Whole life 3. Variable life 4. Adjustable life1. Term lifeThe entity that has the power to revoke a producer's insurance license is the...? 1. Producer agency manager 2. Underwriting insurance company 3. National association of insurance commissioners (NAIC) 4. State department of insurance and financial services (DIFS)3. National association of insurance commissioners (NAIC)An owner of a life insurance policy may transfer ownership temporarily with...? 1. A collateral assignment 2. A beneficial assignment 3. An absolute assignment 4. A transfer assignment1. A collateral assignmentGenerally, what are the tax implications of life insurance proceeds to the beneficiary? 1. Taxed as earned income 2. Taxed according to the income of the beneficiary 3. Tax deductible to the estate of the insured 4. Tax free at the time of the insured's death4. Tax free at the time of the insured's deathThe unfair trade practice of using threat or forced restrict fair trade in the transaction of insurance is called...? 1. Twisting 2. Defamation 3. Intimidation 4. Misrepresentation3. IntimidationA reinstatement clause outlines conditions that include...? 1. A high premium charge 2. Payment of outstanding loans within the year 3. Proof of insurability 4. A decrease in policy limits3. Proof of insurabilityAn individual who is NOT acceptable by an insurer at standard rates because of ...? 1. Rating risk 2. Standard risk 3. Preferred risk 4. Substandard risk4. Substandard riskWhich of the following is NOT a right of the insurance policy owner? 1. Assign or transfer a policy 2. Borrow from the cash value 3. Select and charge a beneficiary 4. Revoke an absolute assignment4. Revoke an absolute assignmentWhich of the following is an example of risk sharing? 1. Purchasing an insurance policy to cover liability exposure 2. Installing a sprinkler system in a high-rise building 3. Pulling money to cover malpractice exposure 4. Choosing not to purchase a car1. Purchasing an insurance policy to cover liability exposurePredicting an individuals earning potential, how much of that would be devoted to his dependents incorporates the...? 1. Loss exposure approach 2. Salary protection allí 3. Personal needs approach 4. Human life value approach4. Human life value approachA producer who knowingly submits a false statement in support of a claim may be found guilty of...? 1. Coercion 2. Twisting 3. Rebating 4. Fraud4. FraudHow does a graded premium whole life policy differ from a modified premium whole life policy? 1. It increases the premium annually during the first several years of the policy 2. It increases the premium annually for the duration of the policy 3. It increases the premium once during the duration of the policy 4. It has a lower premium for the duration of the policy4. It has a lower premium for the duration of the policyWho can terminate a producer's appointment? 1. The insurer 2. The producer 3. The policy owner 4. The insured1. The insurerTerm Life Insurance, what's true? 1. Accumulates a much smaller cash value 2. Has a longer premium payment period 3. Remains in force for a specific period of time 4. Automatically renewable at the end of its term3. Remains in force for a specific period of timePremium payments for a universal Life policy are NOT used for which of the following? 1. Loading cost 2. Death protection 3. Cash value accumulation 4. Separate account investments3. Cash value accumulationA method of handling risk such as having a sprinkler system installed in a building...? 1. Transfer 2. Loss retention 3. Risk reduction 4. Avoidance3. Risk reductionWhat does a limited payment whole life policy provide? 1. Protection to age 65 2. Lifetime protection 3. A lower premium 4. Pure protection2. Lifetime protectionEach of the following are characteristics of a fixed annuity contract EXCEPT? 1. Funds are invested in a separate account 2. The minimum interest rate is guaranteed in the contract 3. Benefit payments remain level 4. It may be sold as an immediate or deferred annuity1. Funds are invested in a separate accountAnnuities purchased with a series of premium payments that vary year to year are called...? 1. Yearly premium insurance annuities 2. Flexible premium deferred annuities 3. Flexible premium insurance annuities 4. Level premium deferred annuities2. Flexible premium deferred annuitiesWhat is withholding of material fact called? 1. Fraud 2. Concealment 3. Obstruction 4. Misrepresentation2. ConcealmentBetty has a 200,000 whole life policy with a 50,000 cash value she wants to take out 30,000 to buy a van... 1. Whole life policies do not have any provisions 2. The net death benefit is increased by the amount of the loan 3. If the loan is not repaid the new death benefit will be reduced 4. This type of loan is interest free if used for hardship or medical purposes3. If the loan is not repaid the new death benefit will be reducedWhich of the following factors are used in life insurance premium determination EXCEPT? 1. Expense 2. Morbidity 3. Mortality 4. Interest1. ExpenseWhich of the following dividend option allows the policy owner to use the dividends to pay all or part of the next premium due to the policy? 1. Reduction of premium dividend 2. Cash dividend option 3. One year dividend option 4. Paid up option1. Reduction of premium dividendsWhat is the purpose of the automatic premium loan rider? 1. Allows partial surrender to make loan payments 2. Protects the policy owner against an unintentional lapse of coverage 3. The insured will cancel the loan if the insured is prematurely disabled 4. Insurer the right to purchase additional insurance with evidence of insurance2. Protects the policy owner against an unintentional lapse of coverageUnder which circumstances can a person obtain a portion of their life insurance benefit without federal income tax liability? 1. The policy is for less than $10 2. The policy is behind in premium payments 3. When the policy owner has elected a non-forfeiture option 4. When the insured is terminally ill and has less than 24 months to live3. When the policy owner has elected a nonforfeiture optionWhich of the following characteristics applies to a modified life policy? 1. Premiums remain level for the life of the policy 2. The policy provided immediate cash value that can be powered to a policy loan 3. The face amount of the policy will automatically increase after the policy is in force for 5 years 4. As long as premiums are paid, insurance protection is provided until the policy matures at age3. The face amount of the policy will automatically increase after the policy is in force for 5 yearsAn insurer in a general business practice fails to properly provide a reasonable explanation for the denial of a claim... 1. A contractual liability 2. An unfair claim settlement practice 3. A violation of the grace period provision 4. A fraudulent insurance act4. A fraudulent insurance actWhich of the following is TRUE regarding federal income tax obligations a beneficiary is faced with...? 1. Federal income tax is only charged if the amount exceeds 100K 2. The beneficiary must pay 10% regardless of the amount 3. There is no federal income tax on the life insurance proceeds 4. The federal income tax levies from state to state3. There are no federal income tax on the life insurance proceedsEarnings in a Roth IRA are taxed... 1. At distribution 2. Prior to contribution 3. Upon a premature distribution 4. During the accumulation period3. Upon a premature distributionWhich reimburse expenses incurred in a convalescent of nursing home... 1. Disability 2. Long term care 3. Accidental death 4. Cost of living2. Long term careWhole life policy that allows for delinquent premiums to be paid...? 1. Term rider 2. Fixed period installments 3. Automatic premium loan option 4. Spendthrift clause3. Automatic premium loan optionAnnuity is designed to make its first benefit payment to the Annuitant typically...? 1. When accumulation period of at least 24 months ends 2. In form of a lump sum payment 3. Only after all cash surrender value is with interest have been calculated 4. One month from annuitys purchase date4. One month from annuity's purchase datePortions of cash value in a whole life policy result in which of the following? 1. Lapsed policy 2. Higher premium 3. Lower interest rate 4. Reduced death benefit4. Reduced death benefitWhen if ever are the earnings on a non-qualified annuity taxed? 1. Upon withdrawal of the contract value 2. Upon the death of the beneficiary 3. As payments or contributed 4. Earnings are not taxable1. Upon withdrawal of the contract valueReceipts of an application to accelerate benefits, an insurer MUST provide the policy owner with...?Period tax advisorThe settlement option that allows proceeds to remain with the insurer and the earnings to be paid to the beneficiary on a monthly basis is called...? 1. Interest only 2. Lump sum 3. Fixed period 4. Fixed amount1. Interest onlyHow can the insured prevent the face amount of a life insurance policy from being subject to federal tax? 1. But signing the policy at least three years before death 2. By naming the insured's estate as the beneficiary 3. By remaining the policy owner until death 4. By taking policy loans from the cash value2. By naming the insured's estate as the beneficiaryRogers life insurance representative advised he buy a whole life policy for all of the following reasons EXCEPT...? 1. The policy will build cash value over time 2. The policy premiums will diminish overtime 3. The policy will pay death benefit upon his death 4. The policy premiums will remain level while the policy is in force2. The policy premiums will diminish overtimeIf and insured determine the insured is totally disabled the policy owner is relieved of paying the policy premium as long as the disability continues. This statement describes the? 1. Double indemnity rider 2. Disability rider 3. Return of premium rider 4. Waiver of premium rider4. Waiver of premium riderAll of the following can increase the death benefit amount EXCEPT? 1. Cost of living 2. Waiver of premium 3. Accidental death rider 4. Guaranteed insurability2. Waiver of premiumA policy owner can cancel an individual life or health insurance policy, which is NOT a replacement policy, by?Contacting the insurer by phone on or before the 10th day receiving the policyWhat information is NOT required to be in a credit life insurance contract? 1. Charge for each type of insurance being purchased 2. Type of insurance being purchased 3. Post claim underwriting date 4. Insurer name1. Charge for each type of insurance being purchasedHe's life insurance policy offers a 30 day grace period. This prevents the policy from being canceled a payment is received late, but within 30 days of the premium due date. Which of the following is TRUE, if an insured dies within the 30 day grace period?The late premium will be subtracted from the benefit amountIn public and producers actions of these demonstrates which type of authority? 1. Implied 2. Apparent 3. Express 4. Delegated2. ApparentAn insured has a 5 year renewable term life insurance policy. Upon exercising the renewable privilege the insured must? 1. Provide evidence of insurability 2. Renew for at least 10 years 3. Pay an annual premium that may be higher 4. Convert to a whole life policy3. Pay an annual premium that may be higherAll of the following are considering a risk EXCEPT the...? 1. Nature of the insured's occupation 2. Amount the insured charged for services 3. Location of the insured's business 4. Proximity of the insured location to emergency services2. Amount the insured charged for servicesAll of the following characteristics of fixed annuity contract EXCEPT? 1. Funds are invested in a separate account 2. The minimum interest rate is guaranteed in the contract 3. Benefit payments remain level 4. It may be sold as an immediate or different annuity1. Funds are invested in a separate accountWhich type of insurer is sometimes referred to as a participating company? 1. Authoritative insurer 2. Reciprocal insurer 3. Mutual insurer 4. Stock insurer3. Mutual insurerDOES NOT describe a defining characteristics of a whole life policy? 1. The policy accumulates cash value over time 2. The policy is designed to provide coverage 3. The face amount of the policy remains the same over time 4. The death benefit is in force for a specific period of time4. The death benefit is in force for a specific period of timeWhich of the following changes to an adjustable life policy REQUIRE proof of insurability? 1. Universal life coverage to term coverage 2. Term coverage to whole life coverage increase the death benefit 3. Term coverage to equal whole life coverage, with premium increase 4. Whole life coverage to equal term coverage decrease the death benefit2. Term coverage to whole life coverage increase the death benefitInsurance producer shall NOT act as an agent of an insurer until that producer has become...? 1. An independent agent of that insurer 2. A verified agent of that insurer 3. An appointed agent of that insurer 4. A certified agent of that insurer3. An appointed agent of that insurerIf the insured and primary beneficiary are in the same accident, the policy proceeds will be paid to the...? 1. Beneficiary determined by the insurer 2. Contingent beneficiary of the insured 3. Primary beneficiary's children 4. Estate of the primary beneficiary2. Contingent beneficiary of the insuredAnnuity products linked to a market-related index are called...? 1. Deferred-indexed annuity 2. Equity-indexed annuity 3. Market-adjusted annuity 4. Fixed annuity2. Equity-indexed annuityWhen individuals purchased life insurance to enable their heirs to pay estate taxes, this is called..?Submitted an application and received an insurance producer licenseAll of the following would trigger an accelerated death proceeds to remain with the insurer and the earning to be paid to the beneficiary...? 1. Death of the insured 2. Diagnosed with terminal illness 3. Diagnosed with a catastrophic illness 4. Confinement to a long term care facility2. Diagnosed with terminal illness10-Year Certain and Life Annuity Income OptionAn annuity payment option that provides guaranteed income for the life of a single annuitant, with payments guaranteed for 10 years. With a period certain and life annuity income option, income payments continue to the beneficiary if the annuitant dies before the end of the guarantee period. Guaranteed periods of 10 years, 15 years, and 20 years are the most common.General AccountThis is the insurance company's asset account into which fixed annuity and whole life insurance premiums are invested. Fixed annuities and whole life insurance are able to guarantee future contract values because general account assets are invested conservatively, which allows the insurer to guarantee: principal a minimum interest rate return a fixed level of lifelong annuitized payments (annuity) a death benefit and cash value (fixed permanent life insurance)Annuity BeneficiaryThe person the annuity owner chooses to receive the annuity contract's values if either the owner or the annuitant dies before annuitization. The beneficiary may be the annuitant (assuming the annuitant and owner are two different people). When it comes to beneficiaries, there are two types of annuity contracts: annuitant-driven and owner-driven.AnnuitantThe person upon whose life an annuity's payout is based, in terms of both the payment amount and duration. The annuitant may also be the recipient of the annuity payments, but this is a decision for the annuity owner to make. While the owner can choose any natural person as the annuitant, in most cases, the annuitant and the owner are the same person.Nonqualified Retirement PlanAn employer-sponsored retirement plan that does not meet the requirements of ERISA and therefore does not qualify for favorable income tax treatment. Though lacking the tax benefits of a qualified plan, nonqualified plans (e.g., deferred compensation plans) remain popular with key executives. Employers are not restricted by ERISA's nondiscrimination rules when nonqualified plans are involved; they can pick and choose the employees to whom they offer these plans.Insurable InterestThe financial interest a policyowner has in a person or property being insured, justifying the purchase of insurance. With life insurance, insurable interest between owner and insured must exist only at the time of purchase. Once issued, the owner may transfer the policy to another party regardless of any insurable interest between the new owner and the insured.Universal Life Insurance (UL)This most extreme of the flexible permanent life policies lets the policyowner change the premium amount without first notifying or gaining approval of the insurer. The three factors central to the policy (mortality, expenses, and interest) are separate elements. As long as the cash value is sufficient to fund the policy's insurance charges, the UL policyowner can reduce, increase, or skip premiums. Also, the UL policyowner can decrease or increase the death benefit (subject to evidence of insurability).Currently Insured Status (Social Security)This Social Security insured status makes workers eligible for death benefits only. To be considered currently insured, a worker must have 6 quarters of coverage in the 13-quarter period before death. A currently insured worker is not eligible for retirement or disability benefits.Industrial (Debit) Life InsuranceThis class of individual life insurance features policies with face amounts generally less than $25,000 and premiums frequently paid weekly. Originally sold as burial insurance, industrial life generally has a death benefit of $25,000 or less. Also known as debit life insurance, it is sold by home service insurance companies, so-called because agents frequently pick up the weekly premium at the policyowner's home.Backdating ApplicationsDating an application with a past date so that the insured's age is lower, thus qualifying for a lower premium. Also called "save age," backdating an application results in a lower premium due to the applicant's younger age. Most insurers permit backdating up to 6 months. Premiums due from the back date to the present must be paid with the application.Adjustable Life InsuranceThis first of the new generation of flexible permanent life insurance products lets the policyowner adjust the policy by changing the premium, face amount, or coverage term. Change requests must be formally presented to the insurer, which then amends the policy. Whichever policy factor the policyowner adjusts (premium, face amount, or coverage term), the effect is usually felt across other factors. For example, adjusting the premium will likely result in a change in the face amount and/or coverage term.Group Life InsuranceA category of life insurance, common with employers and labor unions, in which multiple individuals are provided benefits through a single master policy. Group life is most often provided in the form of annually renewable term insurance (though a form of group permanent life insurance is available).Variable Universal Life Insurance (VUL)This flexible permanent life insurance combines the premium flexibility of universal life insurance and the investment opportunity of variable life insurance. Like variable life, VUL policies invest their premiums in separate (nonguaranteed) investment accounts. Like universal life, VUL policies feature premium flexibility; the policy remains in force as long as its cash value covers the monthly insurance deductions. To sell VUL insurance, a producer must hold both a state life insurance license and a FINRA securities registration.Fair Credit Reporting Act (FCRA)This federal law sets forth procedures that credit reporting companies must follow to ensure confidentiality, accuracy of reporting, and proper use of credit information. The FCRA requires insurers that seek a credit report to notify the applicant about the request within three days. The requestor must disclose what the report will cover and must notify the applicant that s/he may request a summary of what the requestor learned in the credit report. The summary must be provided within five business days of the request.Automatic Premium Loan (APL) ProvisionThis optional policy provision prevents a whole life policy from lapsing by directing the insurer to pay overdue premiums through a policy loan. The APL provision authorizes the insurer to pay a policy's overdue premium through a policy loan at the end of the grace period. The premium loan is then treated like any other policy loan.Guaranteed Minimum Accumulation Benefit (GMAB)A variable annuity rider that guarantees that the VA's accumulated value will be at least equal to the sum of premiums paid. The GMAB rider guarantees that the VA's accumulated value will be at least equal to the sum of premiums paid after a specified period (typically five to ten years) minus previous withdrawals.Variable Life Insurance (VLI)A form of whole life insurance in which the death benefit and cash value rise and fall in response to the underlying investment subaccounts the policyowner selects. VLI policyowners choose their policy's investment subaccounts, which are managed in a separate account apart from the insurer's general account. The VLI cash value is not guaranteed, but the VLI death benefit is guaranteed never to be less than its amount at policy issue.AnnuitizationThe process through which a sum of money is converted into periodic payments through an annuity contract. Different for every age and annuity income option, annuity purchase rates are defined in terms of income dollars per $1,000 of accumulation. For example, a rate of $4.75 and a lump sum of $100,000 produces $475 of monthly income.Straight Life Annuity Income OptionAn annuity payment option that provides guaranteed income for the life of a single annuitant, with payments ceasing upon the annuitant's death. Of the various life contingency income options, the straight life income option provides the largest monthly income payment for a given amount of annuitized funds.Decreasing Term Life InsuranceThis form of term life features a death benefit that diminishes over time and premium that remains level for the term of the policy. Decreasing term life insurance is most commonly used to cover financial needs that decline over time, such as a mortgage or car loan. While decreasing term life insurance can generally be converted to a permanent plan for most of the term period, it cannot be renewed.Insuring ClauseLocated on the schedule of benefits page of the insurance policy, this policy provision defines the insurance agreement between the policyowner and the company. A typical life insurance insuring clause reads as follows: The Company will pay to the beneficiary, upon receipt of due proof of the death of the insured, the insurance in force at his or her death, subject to the provisions of this policyParticipating Life InsuranceA category of life insurance, most commonly sold by mutual insurance companies, that features the distribution of policy dividends to policyowners. Participating policies are eligible for policy dividends. These dividends reflect any savings or improved operations the insurer realized. The policyowner has several optional ways to receive policy dividends.The Health Insurance Portability and Accountability Act of 1996 (HIPAA)This federal law imposes strict disclosure requirements on entities who collect, transfer, and exchange health and medical information about consumers. Insurers are subject to HIPAA. Insurers must notify applicants of their right to privacy and must allow them to either consent to or refuse to disclose personal medical information to other parties.Living Benefits (Life Insurance)General term referring to uses for permanent life insurance while the insured is alive. Permanent life insurance policies accumulate a cash value that represents a "living benefit" because it is available to the policyowner through a policy loan, withdrawal, or surrender. These funds may be used for virtually any purpose, including: college, retirement, and a source of emergency funds.Whole Life InsuranceThis oldest and most traditional form of permanent life insurance features more guarantees than any other form of permanent life insurance available today. Whole life insurance features a guaranteed cash value, a fixed guaranteed death benefit, level premiums, and coverage that can remain in effect as long as the insured lives (up to age 120). Its most basic form is called straight (or ordinary) whole life insurance.ERISAThe 1974 federal law that lays the foundation for employer retirement plan qualification. The Employee Retirement Income Security Act of 1974 (ERISA) protects the rights of employees covered under an employer-sponsored plan by stipulating minimum participation, vesting, and funding requirements.Premium Payment ModeRefers to the different frequencies over which policyowners may pay their insurance premium (i.e., monthly, quarterly, or annually). Gross premium calculations assume an annual premium is paid at the start of the policy year, so insurance companies add a charge to reflect processing costs and lost interest earnings when spreading out the annual premium over a more frequent premium mode (i.e., monthly).Equity-Indexed Life Insurance (EIL)This newer form of flexible permanent life insurance ties the policy's interest rate to a specific equity index (such as the S&P 500). Equity-indexed life insurance can be one of two basic forms: universal life, where the premium payments are flexible whole life, where the premium payments are fixed Although the interest rate is derived through a stock index, EIL is regulated as a fixed interest product.Single Premium Whole Life (SPWL)A type of whole life policy that becomes paid up with one premium payment at the time of application. Single premium whole life policies are deemed to be modified endowment contracts (MECs), which subject the policy proceeds to potential taxation that is avoided with standard non-MEC life insurance policies.Disability Income Benefit RiderThis life policy rider pays a monthly benefit to the insured if s/he becomes permanently disabled. The monthly income provided under a disability income benefit rider may be paid for as long as the disability lasts or for a limited time. Most disability income benefit riders also include a provision for a waiver of premium.Joint (First-to-Die) Life InsuranceA type of permanent life coverage that insures two persons under one policy and that pays the death benefit when the first insured dies. Business partnership succession planning uses this type of policy because it provides funds needed by a surviving partner to buy out the deceased partner's share of the business. It is also popular with families desiring a single policy that would pay upon the first parent's death. One joint life policy is less expensive than two comparable single life policies.Expense Charge (Load Factor)One of the three basic life insurance premium factors, this one covers the insurer's costs of doing business. Sometimes called a load factor or premium load. The load factor reflects the costs the insurer expects to incur on the policy. In determining its load factor, an insurer is generally guided by three objectives: to cover total operating costs to provide a safety margin to contribute to profits or surplusTransfer-for-Value RuleThis tax rule subjects a portion of a life policy's death benefit to income taxation if that policy had previously been sold to a different owner. The transfer-for-value rule states that the taxable portion of the death benefit equals the gain in the policy (i.e., death benefit minus total amount paid by the new owner for the policy, including future premiums). Exceptions to the transfer-for-value rule include sales to the insured individual or a business partner of the insured.Sources of Underwriting InformationThese various sources of information about the applicant help the underwriter assess the applicant's insurance risk. The primary source of underwriting information is the application and accompanying agent's report. An APS, inspection report, MIB report and/or medical exam may also be requested.Guaranteed Minimum Income Benefit (GMIB)A variable annuity rider that provides a guaranteed minimum life income regardless of the contract's accumulated value. The GMIB rider can guarantee a minimum life income regardless of the contract's accumulated value because its premium includes a growth factor that ensures a guaranteed minimum account value.Accelerated Benefit RiderThis rider permits an insured suffering a terminal illness to access a portion of the life policy's death benefit while alive. Also available through a policy provision, the typical accelerated benefit rider allows up to 50 percent of the death benefit to be available to the eligible insured, though some policies allow up to 100 percent. This money may be used for any purpose.Suicide ClauseThis life insurance policy provision excludes coverage if the cause of the insured's death within the first two policy years is suicide. Suicide during the exclusion period results in a return of paid premiums plus interest. The exclusion period is typically two years, though some states limit it to one year.Variable Life InsuranceA form of life insurance in which policy values may rise and fall to reflect changes in equity-based subaccounts. The cash value is not guaranteed. Variable life insurance premiums are invested in investment subaccounts selected by the policyowner and managed by the insurer in its separate account. The policy guarantees a minimum death benefit, but the cash values and the death benefit rise and fall based on the subaccounts' investment performance.Field UnderwritingRefers to the activities producers undertake when completing insurance applications. These activities provide insurers with additional information that is important to the underwriting process. Producers collect data and record their observations to help their insurer properly assess the applicant's risk. The producer must also disclose to the applicant information about the insurer's underwriting and policy issue practices.Current Assumption Whole LifeA form of flexible whole life insurance in which premiums can change over time in response to the insurer's actual mortality, interest, and expense experience. If the insurer's actual experience is good, then premium rates are lowered. If the insurer's actual experience is worse than predicted, then premium rates are increased. The insurer sets a minimum interest rate to be credited to the policy and a maximum premium rate.Rollover IRAA form of IRA into which a participant's retirement plan funds are transferred after the participant leaves the company. An IRA rollover is the process through which retirement funds are transferred tax free from one IRA to another. Rollover IRAs have no contribution limit. Strict rules govern the transfer, including the need to complete the transaction within 60 days of distribution.Roth ConversionThe process through which a traditional IRA is converted into a Roth IRA. Anyone can convert a traditional IRA to a Roth IRA. However, income taxes must be paid on the traditional IRA when the account is converted. From that point on, funds can be withdrawn tax free.Variable Annuity AnnuitizationThe process by which a sum of money is converted into periodic payments through a variable annuity contract. Variable annuitization uses an annuity purchase rate that is based on an assumed interest rate (AIR) selected by the owner (for example, 3% and 5%). A lower AIR (i.e., 3 percent) makes it easier to maintain level payments and to realize an increase over time. A higher AIR (i.e.., 5 percent) produces a higher starting payment that requires consistently good investment returns to maintain and is at higher risk for a reduction.Policy Dividend OptionsThe five different ways in which a participating whole life policyowner may elect to receive policy dividends. Policy dividends are not guaranteed, but when they are paid, there are five common ways the policyowner may elect to receive them: take the cash reduce the premium accumulate at interest buy paid-up life insurance buy one-year term insuranceBuy-Sell AgreementA legal agreement through which two or more owners of a business arrange for the disposition of each owner's share of the business upon death. Buy-sell agreements are common with small businesses, such as partnerships or close corporations. Life insurance is a logical and popular choice of asset used to fund the agreement upon the insured owner's death.Limited Payment Whole Life InsuranceAny form of whole life insurance in which premiums are paid for some period other than the insured's entire life, either a set number of years or to a certain age. At the end of the premium period, the policy is paid up. Common examples of limited payment whole life include 10-, 15-, and 20-pay life; life-paid-up-at-age-65; and single premium whole life.Cross-Purchase Buy-Sell AgreementA type of buy-sell agreement in which each owner purchases a life insurance policy on each of the other owners. Because each owner purchases life insurance on each of the other owners, the cross-purchase approach makes the most sense when there are few owners, such as a two-person partnership (two policies). If there are five owners, this type of agreement would require a total of 20 policies [N x (N - 1), in which N equals the number of owners].Incontestability ClauseThis policy provision states that, except for nonpayment of premiums, the insurer may not cancel or void the contract after a specified period. If an insurer discovers a material misrepresentation on the application during the contestability period (typically within two years of policy issue), it may void the policy. After the contestability period ends, the insurer may not void the contract except for nonpayment of premiums.Deferred Compensation PlanA nonqualified benefit plan under which an employee agrees to defer a portion of his or her salary until a future date (typically retirement). Life insurance is commonly used as the funding instrument for a deferred comp plan. The business owns the life insurance that is used to informally fund the plan and may use the policy's cash value as the source of funds to pay the executive's deferred compensation.Roth IRAThis individual retirement plan is noted for "back-end" tax benefits that allow withdrawals to be made tax free. Contributions to a Roth IRA are paid with after-tax dollars and cannot be deducted, but the earnings on those contributions, when withdrawn, are entirely tax free, provided the withdrawal meets the requirements for a qualified distributionTerm Life InsuranceThe most basic type of life insurance. It provides temporary protection for a specified, limited time and does not generate a cash value. Term life is pure insurance, with no cash value (or "savings element") associated with it, and is available in three basic forms: level term insurance decreasing term insurance increasing term insuranceFixed AnnuityAny type of annuity that guarantees both the annuity principal and a specified rate of interest to be credited to the contract. Like whole life insurance, fixed annuities provide the peace of mind that comes with knowing all future values are guaranteed, in part because premiums are invested in the insurer's general account.Convertible Term Life InsuranceThis optional form of term life insurance lets the policyowner convert the policy to a whole life policy without having to prove insurability. The new policy's face amount cannot exceed the term policy's face amount at the time of conversion. Typically, the option to convert must be exercised no later than a certain date, such as two or three years before the policy expires.Right to Examine ("Free Look") ProvisionThis contract provision gives new policyowners a certain time within which to decide whether to keep the policy or to return it for a full refund. The free-look period begins when the policy is delivered to the owner. While 10 days is the shortest free-look period permitted in any state, some states require a longer free-look period in certain situations.AnnuityAn insurance contract between a person and an insurer to distribute an accumulated sum of money over a certain period, including the person's lifetime. Annuities come in many forms, but they all have two common purposes: to accumulate money on a tax-deferred basis to distribute the accumulated money as income in a guaranteed amount for a guaranteed period (including the annuitant's life)Long-Term Care (LTC) RiderThis life policy rider provides funds to help pay the costs of long-term medical and nursing care. Like the accelerated benefits provision, the LTC rider allows a portion of the life policy's face amount to be paid out should the insured require long-term care. With the LTC rider, benefits become payable if the insured requires long-term care and meets the conditions for payment.Group InsuranceA class of insurance featuring a single policy covering multiple people associated with a common employer, labor union, trade, or professional association. Group insurance is available for both life insurance and health insurance. Covered individuals (such as employees) are not parties to the contract but receive individual certificates of coverage as evidence of coverage.Market-Value Adjusted Annuity (MVA)A nonvariable market-linked annuity that adjusts the interest rate when the contract is renewed, annuitized, or surrendered. An interest rate adjustment feature makes it possible for an MVA contract to lose money if the contract is surrendered before the end of its term. At the end of an interest rate term (usually 10 years), an MVA annuity owner may: renew the contract at the same rate (likely if the contract rate is higher than the current rate) transfer funds to a new MVA (likely if the new rate is higher) withdraw funds without a surrender chargePolicy Dividend (Life Insurance)Paid to owners of participating whole life insurance policies, this is essentially a return of unearned premiums. Policy dividends are paid out of an insurance company's divisible surplus. Dividends are a return of premiums that exceed the insurer's actual expenses and mortality experience and are treated as a tax-free return of premium.Equity Indexed Annuity (EIA)A nonvariable annuity whose interest return is tied to the performance of a stock index, such as the S&P 500. Simply called indexed annuities, EIAs are tied closely to the performance of a stock index but are not variable contracts. While they may produce interest returns higher than their fixed interest counterparts, they have a guaranteed rate that helps avoid losses to principal.Exclusion RatioThe percentage of an annuity payment that is excluded from income taxation. Based on the principle of a tax-free return of basis, the exclusion ratio identifies the percentage of an annuity payment that is excluded from income taxation. It is determined by dividing the investment in the contract (sum of money paid in) by the total expected return (sum of expected payments).Survivorship (Second-to-Die) Life InsuranceThis is a type of permanent life coverage that insures two persons under one policy and that pays the death benefit only when the second insured dies. Survivorship life is especially popular in the estate planning market. Married couples use these policies to create a sum of money that will be needed when the second spouse dies (which is when estate taxes and other estate settlement costs are due).Entire Contract ProvisionThis policy provision states that the contract consists only of the policy document (including riders) and the completed application. The signed application is a legal part of the entire contract. This is why it is so important for applicants to answer questions fully and truthfully. An insurer may void a policy if it discovers during the contestability period that a policyowner lied or concealed relevant information on the application.ReplacementThis occurs when an applicant purchases a new annuity or insurance policy and a current, similar, one is surrendered, terminated, or otherwise reduced in value. Certain disclosures must be made anytime an insurance sale involves replacing a current policy. Most states also require that producers determine if any sale will include replacement.Section 529 PlanA qualified savings plan that provides a way to save in a tax-favored way for a child's college education. There are two forms of Section 529 plan: prepaid tuition plan savings plan A prepaid tuition plan is a state-sponsored plan set up to "pre-pay" a child's education; it requires a minimum level of funding. A college savings plan takes the form of a state-managed investment account into which parents (or grandparents) can contribute; it has no minimum funding requirement.Fixed Life InsuranceA form of permanent life insurance that features a guaranteed death benefit and a guaranteed minimum rate of return on the policy's cash value. Fixed life insurance can guarantee a fixed death benefit and a minimum rate of return on the policy's cash value by investing premiums in the company's general account.UL Death Benefit Option 1 and Option 2The two basic forms of death benefit available through a universal life insurance policy are called ______ and ______. Like traditional whole life insurance, UL Death Benefit Option 1 features decreasing pure insurance protection that, with a rising cash value, produces a level death benefit. UL Option 2 features a level amount of pure insurance protection that, with a rising cash value, produces an increasing death benefit.Mortality charge, interest credit, and expense chargeThe three basic factors that make up a life insurance premium. The mortality charge covers the risk of death posed by the applicant in the current year. It increases with age. Interest, a credit, is the amount the insurer expects to earn on invested premiums. The insurer covers its expenses through an expense charge that is added to the net premium, resulting in the gross premium.Joint and Survivor Annuity Income OptionThis annuity income option continues annuity payments to a second named annuitant when the first annuitant dies. Common joint and survivor settlement options include: Joint and 100% survivor—The survivor continues to receive the same amount for his or her life. Joint and two-thirds survivor—Payments made to the survivor are reduced to two-thirds of the original amount. Joint and one-half survivor—Payments made to the survivor are reduced to one-half of the original amount.BeneficiaryIn life insurance, this is a person or entity identified as an intended recipient of the policy's death benefit. Policyowners are not restricted in their choice of beneficiary or beneficiaries. Insurable interest is not necessary between a beneficiary and the insured. The beneficiary may be a natural person, such as a spouse or business partner, or the beneficiary may be a legal entity, such as a corporation or trust.Noncontributory Group Life Insurance PlanA group life insurance plan in which the plan sponsor (employer) pays the full premium without requiring participant contributions. Insurers require noncontributory plans to cover all eligible group members (that is, a 100% participation rate). They require only a 75% participation rate with contributory plans.Juvenile Life InsuranceThis is a type of whole life insurance designed for young insureds (under age 21) in which the face amount increases significantly upon reaching a specified age in adulthood. Though it goes by various names (such as juvenile estate builder and jumping juvenile life), juvenile life insurance features low premiums and a death benefit that increases, usually to five times the original face amount, when the child reaches an age specified in the policy (i.e., age 21). The premium does not increase with the face amount increase.Renewable Term Life InsuranceThis optional form of level term life insurance lets the policyowner renew the policy without having to prove insurability. Renewable term life insurance policies charge a slightly higher premium than comparable nonrenewable policies to account for the fact that some renewals will involve insureds who have become uninsurable. Because the renewal premium is based on the insured's age at the time of renewal, premiums increase with each renewal. The oldest form is annually renewable term (ART).Entity-Purchase Buy-Sell AgreementA type of buy-sell agreement in which the business purchases a life insurance policy on each of the owners. When there are more than a few owners, an entity-purchase buy-sell agreement usually makes the most sense. If there are five owners, the business purchases and owns five policies. If the business is a close corporation, this type of agreement is called a stock redemption agreement.Partial Surrender (Life Insurance)Surrendering a portion of a whole life policy to access a portion of the cash value and/or to reduce the premium. A partial surrender reduces the death benefit in proportion to the percentage of cash value withdrawn. For example, if 40 percent of the cash value is withdrawn, the face amount is reduced 40 percent. This contrasts with the UL cash value withdrawal, which reduces the death benefit dollar-for-dollar by the amount of the withdrawal.Irrevocable BeneficiaryThis beneficiary designation cannot be changed by the policyowner without that beneficiary's permission. Policyowners typically avoid irrevocable beneficiary designations unless legally required to do so. Without the beneficiary's written consent, the policyowner cannot change anything in the policy that affects the policy rights of the irrevocable beneficiary.Cash Value WithdrawalHow a universal life policyowner can access the policy's cash value for living benefit purposes. Traditional policy loans are not available with UL insurance. Instead, UL policyowners who want to access their cash value may do so only through a cash value withdrawal, which removes money from the cash value and immediately reduces the policy's face amount by that same amount.Net Premium and Gross PremiumThe two stages of a life insurance premium calculation, the first of which includes only the mortality charge and interest credit, and the second of which is the actual premium charged to the policyowner. Two-step process: Calculate the net premium using the factors of mortality and interest. Calculate the gross premium charged to the policyowner by adding an expense load to the net premium.Accidental Death Benefit (ADB) RiderThis life policy rider provides additional death benefit coverage if the insured dies as a result of an accident. An ADB rider pays its benefit only if death is a direct result of an accident. Death resulting from illness, physical disability, or a self-inflicted wound does not qualify for the additional benefit. Also, the death must occur within a stated period following the accident, such as 60 or 90 days.Primary and Contingent BeneficiariesThese terms refer to the first and second orders of succession in a beneficiary designation. The primary beneficiary is the first person (or class of persons) in line to receive the death benefits. Contingent beneficiaries receive the proceeds only if the primary beneficiaries die before the insured.Risk Classifications (underwriting)Upon completion of underwriting, applicants are assigned one of these indicating their level of risk. There are four basic risk classifications: Standard risk—Standard risks pay standard premium rates. Preferred risk—Above-standard risks are rewarded with a discounted premium. Substandard risk—Below-standard risks are issued a rated policy with a higher-than-standard premium (and/or restricted coverage). Declined risk—Extremely high risks are considered uninsurable, and coverage is declined.Modified and Graded Premium Whole LifeTwo similar forms of whole life insurance in which premiums start at a lower level than standard but rise in time to a higher level. Modified premium whole life has a single increase (typically five years after policy issue), with premiums remaining level thereafter. Graded premium whole life starts with an even lower premium, but premiums increase in a series of steps until they, too, become level for the remainder of the premium period.Key Person Life InsuranceA use for life insurance in which a business applies for, owns, and is the beneficiary of a policy covering a key employee. If a key employee ends his or her employment, the employer can continue the policy in force. However, many employers choose to: sell the policy to the insured for an amount equal to its cash value surrender the policy or change insureds if allowed by the insurance company and applicable state lawLife Insurance "Living Benefits"Refers generally to several benefits available through permanent life insurance while the insured is alive. Living benefits are made possible by the policy's cash value, which is always available to the policyowner through policy loans, withdrawals, and partial surrenders. The funds may be used for any purpose.Variable AnnuityAn investment-focused annuity whose contract values vary in response to the contract's underlying assets and are therefore not guaranteed. Variable annuity contract values are maintained in a separate account managed by the insurer, which holds the various investment subaccounts available to contract owners. Contract owners should choose subaccounts that best suit their investment risk profile.Bring-Back RuleIn estate planning, this rule requires life insurance policies transferred from the insured within 3 years before death to be returned to the decedent's estate for valuation purposes. To reduce an estate's value, estate planners typically try and remove life insurance policies from the insured's estate. To avoid the bring-back rule, it is best for life policies to be purchased and owned by a trust or someone other than the insured.Absolute Assignment and Collateral AssignmentThe two ways in which a life insurance policyowner may transfer policy ownership to another party. A policy may be assigned only if the current beneficiary designation is revocable (not irrevocable). The two types of assignments are: absolute assignment (effectively full and permanent ownership transfer) collateral assignment (partial temporary transfer, i.e., loan collateral)Cash Value LoanThe basic way in which the owner of a whole life insurance policy may access the policy's cash value while the insured is alive. Cash values loans are loans from the insurer, which uses the cash value as loan collateral. With traditional whole life, the entire cash surrender value (less any prior policy debt) may be borrowed. With variable life insurance, loans are usually limited to 90% or less of the cash value.Mortality ChargeOne of the three basic life insurance premium factors, this one covers the risk of death posed by the insured in the current policy year. It increases with age. As the starting point for determining their mortality charges, insurers use the 2001 Commissioners Standard Ordinary (CSO) table. This table reflects the mortality experience of the U.S. population for every age beginning at birth and concluding at age 120.Term Life InsuranceThis basic form of life insurance provides temporary protection and does not include a cash value while the insured is alive. Term life insurance provides temporary coverage that can be as short as one year. If renewed at the end of the coverage period, premiums usually increase. Coverage is provided through pure life insurance protection only; there is no cash value.Permanent Life InsuranceThis basic form of life insurance features a cash value and provides lifelong protection, usually with level premiums. Unless surrendered by the owner, permanent life insurance coverage is provided until the insured dies or reaches age 120, whichever comes first.Qualified Retirement PlanAny retirement plan that meets the requirements of ERISA and therefore qualifies for favorable income tax treatment. To qualify for favorable tax treatment, a retirement plan must comply with a number of ERISA-mandated requirements, including: must be in writing and communicated to employees must require consistent contributions cannot discriminate in coverage must set limits on contributions and benefits must provide a minimum vesting scheduleSettlement Options (Life Insurance)Refers to the different ways that a life insurance death benefit may be paid out to the beneficiary. Proceeds from a life insurance policy can be paid out in a variety of ways. There are two general categories of settlement options: those without a life contingency (i.e., lump sum cash or payments for a fixed period) those with a life contingency (i.e., straight life income or joint and survivor life income)Ordinary Life InsuranceThis class of individual life insurance has many flexible options and features policies with face amounts greater than $25,000. Ordinary insurance includes virtually every type of life insurance and annuity product covered in this course. Ordinary life insurance is especially popular with consumers today because of its many flexible options.Endowment PolicyA form of life insurance that matures ("endows") at an age younger than age 120, typically age 65, and pays the policy face amount if the insured is alive at that age. Because they no longer qualify as "life insurance" for federal income tax purpose (because of their maturity before age 120), endowments are no longer sold today. However, those that were sold before 1986 are grandfathered and retain their favorable life insurance taxation.Family Income Life Policy and Family Maintenance Life PolicyThese two types of specialized life insurance policies are similar in one respect: both provide some form of monthly income benefit in addition to the face amount death benefit. Both types of specialized policies use a whole life policy to provide the face amount coverage. To fund the monthly income benefit: The family income policy adds a decreasing term life rider. The family maintenance policy adds a level term life rider.Individual Retirement Account (IRA)The basic form of individual retirement plan available to individuals. These plans are also available to employees within certain types of small-employer retirement plans. When established in 1974, IRAs were reserved for workers not covered by a qualified employer plan. In 1981, IRA eligibility was extended to all workers regardless of coverage by an employer plan. Today, any worker can have an IRA, but tax-deductible contributions are restricted by income.Guaranteed Minimum Withdrawal Benefit (GMWB)A variable annuity rider that guarantees that the owner can withdraw a minimum amount annually without a surrender charge. Annual withdrawals are usually limited to a specified percentage, such as 5 to 10 percent, of total premiums paid.Premium ReceiptGiven to the applicant in return for the initial premium, this item provides interim coverage during underwriting. There are two basic types. The conditional receipt provides interim coverage only as long as the applicant is found to be insurable. The binding receipt (also called temporary insurance agreement) provides coverage regardless of insurability.Modified Endowment Contract (MEC)A tax classification that is assigned to a life insurance policy that violates tax code funding rules, resulting in loss of some tax advantages common with life insurance. Any permanent life insurance policy becomes a MEC (and is thus subject to less favorable income tax treatment) if it fails to meet the 7-pay test. Do not confuse a MEC with a traditional endowment contract.Section 1035 ExchangeThe section in the US Tax Code that exempts certain insurance contract exchanges from taxation. IRC Section 1035 permits the following tax-free exchanges: an annuity for an annuity a life insurance policy for an annuity a life insurance policy for another life insurance policy a life insurance policy for an endowment policy an endowment policy for another endowment policy Note that an annuity cannot be exchanged tax-free for a life insurance policy.Conversion Privilege (Group Life)This group plan feature lets terminating participants change their group term life coverage into an individual whole life policy without having to prove insurability. The maximum conversion amount is the amount of coverage the person had under the group plan. Conversions must be requested within 31 days following termination or retirement from the group. Group life coverage remains in effect for the terminated participant during this 31-day period.UnderwritingThe general process through which an insurer analyzes an application to decide if the applicant will be issued a policy and, if so, at what premium. The underwriter decides whether the applied-for policy will be: issued as requested and applied for issued as a rated (substandard) policy issued with a different amount of coverage declinedSTOLI (stranger-originated life insurance)A disreputable form of third-party ownership of life insurance in which an investor(s) arranges for a consumer to buy a life insurance policy that is then purchased by the investor(s). Because the STOLI investor has no insurable interest in the insured and hopes only to profit upon the insured's death, STOLI is widely controversial and is discouraged in most jurisdictions.Return of Premium RiderThis term life policy rider pays a sum equal to a portion of premiums paid if the insured is alive at the end of the policy term. If the insured dies during the policy term, the policy face amount is paid to the beneficiary but no return-of-premium benefits are payable. If the policy is canceled before the end of the policy term, no premiums are returned.Fully Insured Status (Social Security)This Social Security insured status makes workers eligible for all types of Social Security benefits. To be considered fully insured, a worker must have 40 quarters of coverage. A fully insured worker is eligible for disability, retirement, and death benefits.Immediate AnnuityThis basic form of annuity begins distributing income immediately following payment of single large premium. An immediate annuity is purchased only to distribute guaranteed income. Because immediate annuities are bought with a lump-sum single premium payment, they are often referred to as a single premium immediate annuities, or SPIAs.)Deferred AnnuityThis basic form of annuity is purchased first to accumulate funds on a tax-deferred basis, which may be annuitized at a later date designated by the owner. Deferred annuities may be funded in two different ways: Single premium deferred annuity—Purchased with a single payment. Flexible premium deferred annuity—Purchased through periodic premium payments over time.Level Term Life InsuranceThis popular form of term life features a death benefit and premium that remain level for the term of the policy. The policy term can be for a set period of years (i.e., 5-year term, 10-year term, 20-year term, etc.). It can also be set to a specified age (i.e., term-to-55, term-to-65, etc.). Coverage expires and protection ends at the end of the term.BackdatingThis term refers to putting a date on a life insurance application that is earlier than its actual date of completion in order to obtain a lower premium. Also called saving age, backdating an application to before the insured's last birthday is intended to result in a lower premium. The maximum backdate period allowed is typically six months, and past premiums must be paid with the application.Payor Benefit (Juvenile life Insurance)This life policy rider waives the premiums if the adult owner of a juvenile life insurance policy dies or becomes disabled. If the adult owner of a juvenile life policy is unable to pay premiums, the policy will lapse because minors cannot pay the premium. The payor benefit rider avoids this problem.Common Disaster ProvisionThis policy provision describes how the death benefit proceeds are distributed if the insured and the primary beneficiary die in a common accident. The common disaster provision stipulates that if the primary beneficiary does not survive the insured more than a minimum period (commonly five days) following a common accident, then proceeds are payable to the contingent beneficiarySocial Security Survivor BenefitsSingle sum and monthly benefit payments from a federal social insurance program to the surviving family members of a deceased worker. Available to all currently insured workers, Social Security provides for a lump-sum payment of $255 (payable only to a spouse or dependent children). It also provides monthly payments to eligible family members of the deceased worker (spouse, children, dependent parents).Indexed Whole LifeA form of whole life insurance that ties its death benefit and premiums to changes in a specified index, most commonly the consumer price index (CPI). An indexed whole life policy's face amount increases automatically with CPI increases. Insurers use one of two common pricing methods to cover face amount increases: The premium increases with each increase in the face amount. The premium remains level but is higher at policy issue than the first method.Increasing Term Life InsuranceThis form of term life features a death benefit that rises over time. The increasing term insurance death benefit increases over the term to a preset amount or at a preset rate. It is most commonly used as a "cost-of-living increase" rider on a permanent life insurance policy. The premium normally remains level, though at a higher level than either level or decreasing term.Waiver of Premium (WP) Rider (Life Insurance)This whole life policy rider waives the need to pay premiums if the policyowner becomes totally disabled. Most WP riders have a waiting period before the waiver begins, during which time premiums must be paid. If the policyowner is still disabled at the end of the waiting period, the insurer refunds the premiums paid during the waiting period and waives future premiums as long as the disability continues.Credit Life InsurancePurchased by lenders, this type of group life insurance insures borrowers for the amount of their outstanding loans. Decreasing term life insurance is the type of life insurance coverage underlying credit life insurance. The coverage is matched to the declining balance on the loan. As the insured's loan balance decreases, so does the coverage.Third-Party Policy OwnershipA policy ownership situation in which the life insurance policyowner and insured are two different people. In third-party ownership, the three parties to the contract are: the insurer, the owner, and the insured. This is common with estate planning and business planning.Nonforfeiture OptionsThe different ways a policyowner can receive a whole life insurance policy's cash value upon policy surrender. There are three standard life insurance nonforfeiture options: cash surrender option (lump sum cash payment) extended term insurance option (coverage continues for a limited time as term insurance with the same face amount) reduced paid-up insurance option (reduced permanent coverage becomes fully paid up)Term Life RidersA variety of riders that add coverage for more than one person on a single whole life policy. Term life riders insure people other than the primary insured under a base whole life policy. The three most common types of term life riders are: other insured term rider children's term rider family term riderNeeds ApproachThe standard method used today in determining the amount of life insurance an individual should own. The needs approach to determining life insurance needs is based on a detailed review of a person's specific situation. It examines personal and family income, liabilities, and assets, as well as future financial goals, to calculate the right amount of life insurance.Human Life Value ApproachAn old method of determining life insurance needs based on the discounted value of a person's future income. Based on the economic value of a human life, the somewhat-outdated human life value approach estimates a person's net future earnings (after taxes and living expenses) each year to retirement, and then discounts that sum to a present lump-sum value using a reasonable interest rate.Guaranteed Insurability RiderThis life policy rider guarantees that additional coverage can be added to a whole life policy even if the insured has become uninsurable. With the guaranteed insurability rider, additional coverage can be obtained without requiring the insured to provide evidence of insurability. Additional insurance can be purchased on specified policy anniversaries, usually in three-year intervals nearest the insured's age of 25, 28, 31, 34, 37, and 40.Viatical SettlementAn arrangement in which a noninsurance company or group of investors purchases a life insurance policy from a chronically or terminally ill insured. Viatical settlements provide chronically or terminally ill insureds a sum of money greater than their policy's cash value, making it more financially advantageous than simply surrendering the policy. How much is actually paid depends on factors that include the estimated life expectancy.The Commissioner of Insurance is appointed by the Governor for a term of4 yearsAll of the following are examples of insurance transactions except: A. soliciting applications for insurance B. delivering policies C. licensing of producers D. collecting premiumsCorrect answer: C - licensing of producersA temporary license issued to close the affairs of a deceased producer may be issued for up to _____ days at the discretion of the Commissioner180 daysContinuing Education (CE) ______ hours of CE every two years ______ hours must be in Ethics ______ day grace period to complete CE24 total hours every two years 3 hours in ethics 90 day grace periodMichigan Life and Health Insurance Guaranty AssociationProtects policy holders against failure insolvent insurersControlled businessIt is permitted provided it does not exceed 15% of the premiums written in a 12-month periodTo motivate a buyer to sign an application for insurance, a producer promises a gift equal to 50% of the commission. This is an example of __________.RebatingDefamationA written statement that is false and derogatory that is designed to injure someone's reputation.The maximum fine for knowingly violating a cease and desist order is $________ and __________________.$10,000 and possible license revocationInsurance counselorProvides advice concerning an insurance policy and charges a fee for that advice.An applicant who has been denied an insurance license has _____ days to request a hearing to protest the denial.30 daysTrue / False A producer may share commissions with another licensed producerTrueTrue / False A producer may not share commissions with a licensed nonresident producerFalseIf, after a hearing, the Commissioner believes a producer knowingly violated insurance licensing laws, the Commissioner can:Fine the producer a max of $2,500 per violationA producer has a fiduciary responsibility to all of the following:- Insured on cancelled policies - Insurer, for premiums due - Prospective purchaser of insurance, when the application is rejected.Why can't a producer barter or trade an insurance contract for goods and services?The insurance product is not the producer's to barter; it belongs to the insured.How often must the Commissioner examine the books, records, and documents of domestic insurers?At least once every 5 yearsA producer has _____ days to respond to charges of violating insurance laws.30 days.If a producer is convicted of routinely misrepresenting benefits in insurance policies, he may be fined up to $_______ for all violations.$25,000Under what type of policy does an insured have to be notified if current policy values are insufficient to maintain the policy, given guaranteed interest and expense rates?Universal Life InsuranceAn advertisement for a life insurance policy must include all of the following:- information material to the insurance policy - a description of the type of policy advertised - the identity of the insurerImplying that policy dividends are guaranteed as an inducement for an insured to drop an existing policy and purchase a new policy is an example of _____________.TwistingThe minimum number of lives that must be covered under a group life insurance policy in Michigan is ______.2 lives.The maximum life insurance policy loan interest that may be charged on a fixed interest loan is ______%.8%In life insurance, all advertisements must be kept by the insurer for at least ________ months.48 monthsThe maximum life insurance policy loan interest that may be charged on an adjustable rate loan is ______%.18%True/ False A long-term care policy can exclude all of the following: - Alcoholism - Drug addiction - Alzheimer's disease - Self-inflicted injuryFalse A long-term care policy can exclude all alcoholism, drug addiction, and self-inflicted injury. Alzheimer's disease cannot be excluded.True/False A long-term care application must include questions that reveal when the proposed coverage will replace other existing health or long-term care coverage.TrueTrue/False A Medicare supplement policy can indemnify against losses resulting from accidents on a different basis than losses resulting from sickness.False - Medicare supplements must indemnify the same way for accidents and sickness.True/False A Medicare supplement policy must cover intermediate outpatient care for substance abuse.True - Intermediate care for substance abuse includes inpatient treatment for drug addiction and alcohol abuseIn Michigan, the free-look or trial examination period for a LTC policy is ______ days.30True/False All LTC policy owners must be offered a cost-of-living benefit adjustment option.TrueHealth insurance is in force for newborns from birth and notification must be given within _____ days of birth for coverage to extend beyond that point.31 daysAn individual that is continually insured under a group policy for at least ____ months may convert to an individual policy upon policy termination.3 monthsA person becomes eligible for the federal Medicare program at the age of ____. Coverage must be requested within _____ days before or after the applicant's birthday.65 years old, 90 daysThe Medicare maximum preexisting condition exclusion period is ____ months.6 monthsThe free-look period for Medicare supplements and LTC policies is ____ days.30 daysAn employee who works at least _____ hours weekly must be considered an eligible employee for small employer medical plans.30 hours / weekThe number of eligible full-time employees for small group health plans is _____ to _____.2 to 50 employeesA LTC policy must provide coverage for at least ______ consecutive months.12 consecutive monthsAn insurance company must file a notice of appointment or give notice of appointment termination to a producer within _____ days.15 daysA producer has ______ days to notify the Department of Insurance of any name or address changes.30 daysPerilImmediate specific event causing a lossHazardA factor that gives rise to a loss.The five methods of managing risk are:STARR (sharing, transfer, avoidance, reduction, retention)Elimination periodTotal # of days an insured must be disabled before income benefits will pay out.CoinsuranceShared expenses between the insured and the insurer. The insurer always has the higher %.Participating insurance companyPays dividendsUnauthorized/non-admittedCannot transact insurance within the state.Express authorityExplicit authority that an agent has per the written contractImplied authorityAuthority that is not expressly granted in the contract but is necessary in order to conduct businessApparent authorityAuthority the agent seems to have to the general public based on actions undertaken by the agent.WaiverIntentional giving up of a rightAleatory contractDependent on an uncertain eventContract of adhesionThe insurance company drafts the contract wording and the insured simply follows it.Unilateral contractThe insured makes the premium payments only one party has the responsibility.Loss Ratio % =operating expenses / premiumsContributoryThe insured contributes $ to their group plan____% of eligible employees must participate in a contributory plan.75%Non-contributoryPremium is paid entirely by the employer.____% of eligible employees must participate in a non-contributory plan.100%Enrollment periodTime in which you can enroll in benefits without having to undergo medical underwriting. (No evidence of insurability)Probationary periodThe period of time before an employee is eligible to enroll in benefits.The human life value approach to selling life insurance focuses on an individual's _______________.An individual's future stream of income. (Annual salary, expenses, years remaining until retirement, future value of current dollars)The needs approach to selling life insurance focuses on ___________________.The needs of the survivors. (Funeral expenses, final illness, continuing family income, education)Blackout periodThe pre-retirement period (the time before the insured/spouse is eligible for Social Security)FiduciaryPerson of financial trustReentry Term InsuranceAllows the insured to provide evidence of insurability to qualify for a lower rate.Level Term InsuranceFixed face amount, premium may increase over time.Whole Life - Cash ValueGuaranteed cash value, little cash value in the beginning but increases over time.Universal life InsuranceHas death protection that resembles 1 year renewable term and cash value that is based on interest rates (current annual rate and contract rate)Variable Life InsuranceCash values are not guaranteed and are backed by equity investments. They are regulated as securities by the SEC and FINRA.Equity Indexed Life InsurancePolicies with face amounts that are linked to an equity index such as S&P 500.With credit life insurance, the creditor is both the ________ and the _________.Owner & beneficiary.Individuals with terminal illnesses are able to sell their life insurance policies to __________.Viatical companiesEntire contract clauseThe policy and copy of the application make up the entire insurance contract.Life insurance coverage is granted in consideration of the __________ and the payment of the ______________.Application, initial premiumPayment of premium provisionSpecifies when and how premiums are to be paid. The more frequently the premium mode, the more the policy will cost over time.A life insurance policy contract will permit reinstatement within _____ years of a policy lapsing. Proof of insurability may be required. Reinstatement application must be filed.3 yearsTrue/False When calculating the death benefit for a life insurance policy, any outstanding loans and loan interest must be deducted from the face amount.TruePolicy loans may be taken from _____% of the total cash value from whole life policies and ____% to ____% of the total cash value from variable life policies.90%, 70-90%A life policy's incontestability period is ___ years. After this time, the insurer CANNOT dispute the validity of the contract2 yearsIf the insured dies within the first ___ policy years, there is no coverage. However, premiums that have been paid are refunded to the beneficiary.2 years (Suicide clause)The death benefit is adjusted to the amount that the premium would have been in the instance of ________ __ _____.Misstatement of sexRevocable beneficiaryCan be changed by the insured at any time without notifying the beneficiary.Irrevocable beneficiaryCannot be change without the consent and signature of the beneficiary.Per CapitaPer person, death benefit is only paid to the people listed in the policyPer Stirpes(By way of branches), the death benefit is passed down to the beneficiary's living children.With a ___________ clause, the death benefit is not distributed in a lump sum and cannot go to a creditor when the funds are held by the insurance company.Spendthrift clauseThe ____________ rider ( _____ ________ rider) pays double the face amount if the insured dies due to an accident. (Within 90 days)Accidental death, double indemnityWaiver of premium riderPremium is waived if the insured becomes permanently and totally disabled. Subject to a waiting period. Does not change the face amount of cash value.The __________ __________ rider waives premium payments while the inured is disabled and pays a monthly income.Disability Income RiderThe _______ rider for juvenile policies waives premium payments if the person who pays the premium dies or becomes disabled until the insured is of a certain age.Payor riderAnnuities are ___________ during the accumulation period, but benefit payments are _________ as income.Taxed, not taxedTrue/False The basic function of an annuity is to liquidate funds over a specific period of time in order to protect against living too long.TrueA ___________ is given to each covered person under a group life insurance policy.Certificate of InsuranceSocial security excludes:Railroad workers, federal employees hired before 1984, and employees of state and local government.To be considered fully insured by Social Security, you must have earned ____ quarters of coverage which is equal to _____ years40 quarters, 10 yearsThe elimination period of disability benefits is ____ months and the disability must be expected to result in death or continue for at least 12 months.5 month elimination periodUp to _____% of Social Security benefits are included in a worker's adjusted gross income for taxes.85%Policy proceeds that are paid in a lump sum are ____________. For installment payments, the principal portion is ___________, while the interest portion is __________.Not taxable, not taxable, taxable.Modified Endowment Contracts (MECs) discourage the use of life insurance with high premiums as investments. Policies that fail the test are considered MECs and are subject to _________.Less favorable tax treatmentTrue / False Dividends are taxable as income.False, dividends are not taxable as they are considered to be a return of premium. Interest that dividends earn, however, is taxable.Qualified retirement planMeets federal requirements and receives favorable tax benefits.A defined benefit plan is where the employer agrees to make necessary contributions on behalf of _____________ in order to provide a specific retirement benefit.Eligible employeesGroup deferred annuitiesspecified amounts of deferred annuities are purchased each year on in individual basis.Profit Sharing PlansContributions are made by the employer from the company profits. Each employee gets a % based on their salary. Benefits vary based on profits.Individual Retirement Accounts (IRA)- Can contribute 100% of wages up to the amount set by the IRS - Early withdrawal penalties apply - Required distributions at 70 1/2 yearsRoth IRAs- Contributions are not tax deductible, but distributions are tax free if it has been maintained for 5 years.Keough Plans (HR-10)For self employed individuals and their eligible employees.A policy or rider that pays a face amount if there is an accidental loss of: 2 arms, 2 legs, or the loss of vision in both eyesAccidental Death & Dismemberment (AD&D)Limited/Special Health Insurance Policies **HITABCDH I - hospital income T - travel accident insurance A - accident only B - blanket insurance C - credit insurance D - Dread diseaseBlue Cross & Blue Shield pay benefits on a ________ basis, this means that they pay the ____________ directly.service basis, pays the provider directlyHealth Maintenance Organizations (HMO) focus on routine wellness exams. They pay for other services on a ____________ basis, which is based on what is _________.fee-for-service basis, prices that are usual, reasonable, and customary.The system in which an insured must see their primary care physician for a referral to a specialist.GatekeeperPreferred Provider Organizations (PPOs)Made up of a selected group of independent hospitals and medical practitioners. Fee-for-service basis.Flexible Spending Accounts (FSA)Funded by the employee via salary reduction (pretax $). The $ is used to cover certain medical expenses.Health Savings Accounts (HSAs)For people with high-deductible plans.Insurance agents are appointed by ________.Insurance companiesWhich element is NOT necessary for the formation of a valid contract? A. Consideration B. Competent parties C. Written document D. Legal purposeCorrect answer - C, the contract does NOT need to be written.Joe has only paid 5 payments on his health insurance policy when he is hit by a car. The insurance company pays out nearly half a million to cover treatment for injuries. This is an example of: A. Contract of adhesion B. Aleatory contract C. Unilateral contract D. Utmost good faithCorrect answer - B, it is contingent on an uncertain eventKaren applies for a life insurance policy and pays the initial premium. Carol has : A. Made an offer to the insurer B. Accepted an offer from the insurerCorrect answer - A, made an offer to the insurerThe failure to disclose known facts is _____.ConcealmentExample of an aleatory contractWhen one party may receive much more from the contract than they give in exchange.Simplified issueLife insurance that requires no medical exam and asks only basic medical questionsAndy is a 30 year old man who drinks occasionally, does not smoke, and has no known health problems. What type of risk would he be classified as?Standard riskTo be certain that insurers have the money available to pay claims as they arise, they are required to maintain _______.ReservesTo be eligible to purchase insurance, an association group must: A. Be organized an maintained strictly for the purpose of obtaining insurance. B. Have at least 200 members C. Have a constitution and bylaws D. All of the aboveCorrect answer - C, have a constitution and bylaws. The group must be organized for purposes other than insurance coverage.Kevin starts a new job on March 1, he is not eligible for insurance benefits until July 1. The period between the start date and the eligibility date is the _________.Probationary periodA baker's union and a butcher's union join together to form a trust to provide insurance to their employees. This type of group is called _______.Taft-Hartley trust (Group made of one or more unions)Which of the following underwriting characteristics is generally required by law? A. Employer control B. Predetermined coverage amount C. Insurance incidental to group D. Nondiscriminatory classificationsCorrect answer - D, nondiscriminatory classificationsTrue/False Life insurance can be purchased to guarantee lifetime retirement income.FalseMichael's wife died 3 years ago, leaving him with 2 grade-school aged children. Which income period is Michael in?Family dependency periodTrue/False Life insurance proceeds are generally the only source of income for surviving dependents of a breadwinner.False, Social Security and retirement plans are other potential sources of income.Which of the following is NOT financed using life insurance? A. Buy-sell agreements B. Section 303 stock redemption C. Cross purchase agreement D. Split-dollar planCorrect answer - D, split dollar planKelly fills out an application for life insurance, but does not pay the initial premium. What kind of receipt will she receive?Inspection receiptThis type of receipt is most commonly used in life insuranceConditional receiptThe most common reason why a payment of a death claim would be delayed is because - .The insurer has not received the proper notification of death.True/False Term insurance provides pure insurance protection.TrueWhat type of policy is commonly used to cover a mortgage on a house if the insured were to die before paying it off.Decreasing term insuranceWhole life insurance policies provide all of the following EXCEPT: A. pure insurance protection B. an opportunity for significant investment gains C. cash values D. the ability to take loans against the cash valueCorrect answer - B, an opportunity for significant investment gainsPam has a policy that pays dividends which are used to purchase additional paid-up insurance to increase the face value of the policy. Pam has what type of policy?Economatic policyWhich of the following is NOT flexible in a universal life policy: A. Premium amount B. Premium schedule C. Guaranteed interest rate D. Death benefitsCorrect answer - B, guaranteed interest rateAngela has a universal life policy that she purchased several years ago. At that time, the death benefit of the policy was $250,000. Her cash value is now $50,000. How much is her current death benefit?$250,000, UL policies have a level death benefit despite the cash value accumulationsRyan collects insurance premiums every Wednesday at the home of several policyholders. Which type of policy do these policyholders probably have?Industrial life insuranceIn order to sell variable policies, the producer must possess a state insurance producer license, get a passing score on the appropriate securities exam, and registration with ________.FINRATrue/False Once a year a variable life insurance policy must have a face amount that is higher than the cash value by a certain percentage in order to meet the cereal definition of life insurance.TrueFamily income policyCombines whole life insurance with decreasing term coverageFamily maintenance policyCombines whole life insurance with level term coverageMinimum deposit policies are less popular due to tax regulations, but they can still be used as long as ___ of ___ premium payments are made from sources other than the cash value4 of 7Family protection policyCombines whole life on one family member with term coverage on the other family membersLeslie has a policy that will pay $100,000 if she dies before age 65 and $75,000 if she dies after age 65. She probably has what type of policy?Multiple protection policyHow long is the typical grace period?31 daysIf Ben dies, Joan will receive the death benefit. If Joan had died before Ben, Toby would receive the benefit. Toby is what type of beneficiary?Contingent beneficiaryLiz purchases an immediate annuity. The annuity contract must be a _____ _______ annuity.Single premiumWhich type of annuity is most likely to provide a death benefit?Deferred annuityWhich of the following is NOT used to determine annuity premiums? A. Assumed interest rate B. Annuitant's retirement date C. Income amount and payment guarantee D. Applicant's sexCorrect answer - B, annuitant's retirement dateAn annuity is the opposite of _______.Life insuranceTrue/False An annuity is the distribution of a lifetime income.TrueFixed annuityGuarantees a minimum rate of return.Straight-life annuityAn annuity that will pay a monthly income for the remainder of the annuitant's life and then stop making payments.Carol is eligible fore retirement benefit based on her own earnings as well as her late husband's earnings. What benefits will Carol receive?Only the larger benefitP. I. A.Primary Insurance AmountA person who receives retirement benefits at normal retirement age receives _____% if PIA as a retirement benefit.100%A surviving spouse who is disabled can start receiving survivor benefits at age ____, if the deceased was fully insured.Age 50A surviving spouse who is not disabled can start receiving survivor benefits at age ____, if the deceased was fully insured.Age 60At what age is an individual eligible to receive full Social Security retirement benefits? A. 65 B. Nominal retirement age C. 67 D. Normal retirement ageD. Normal retirement ageTrue/False As a general rule, life insurance and annuity premiums are tax deductible.False, life and annuity premiums are NOT tax deductible.Jan is receiving the proceeds of a life insurance policy as a stream of income over a period of several years. What part of the money is subject to tax? A. None of it; it is life insurance proceeds B. All of it; it is being paid out as income C. Only the part that represents income earned on the original death benefit. D. Only the part that represents the original death benefit.C. Only the part that represents income earned on the original death benefit is subject to tax.True/False Anyone with earned income may contribute to an IRA.TrueQualified plan distributions are likely to receive a tax penalty if the distribution is _____ or _____.Premature or latePremature IRA or qualified plan distributions must be taxed as income and have a penalty tax of ___%10%At what age is an individual no longer subject to early withdrawal penalties under an IRA? A. 65 B. 59 1/2 C. 67 D. 63 1/2B. 59 1/2Jeff has a policy that will pay any expenses he incurs as the result of in-hospital medical treatment, as well as some of the expenses he incurs on an outpatient basis. Jeff probably has a: A. disability income policy B. long-term care policy C. medical expense insurance policy D. hospital income policyC. Medical expense insurance policyJT's HMO requires that he receive health care services from a specified, limited number of health care providers chosen by the HMO. JT's HMO is a ______ panel.ClosedAll of the following are managed care plans EXCEPT: A. Point-of-service plans B. Health maintenance organizations C. Preferred provider organizations D. Indemnity arrangementsD, indemnity arrangementsCapitationA method of payment in which a provider is paid a specific fee monthly for each subscriber is known as capitation.A type of plan where employees can select benefits from a variety of coverage options based on individual and family needs.Cafeteria planUnder workers' compensation, the permanent total disability benefit, which subject to minimum and maximum dollar amounts, is generally ______%66.66%Health insurance coverage never applies until: A. the policy is delivered B. the insured has paid for the policy C. an underwriting decision is made D. the application is reviewed by underwritingB. the insured has paid for the policyOnce health insurance become effective, unless it is cancelled, it will stay in force for: A. an indefinite period B. 6 months C. 1 year D. The length of the termD. the length of the termTrue/False No loss/no gain legislation requires a replacing policy to continue to pay claims ongoing under the policy it replaces.TrueAn entire contract contains all of the following EXCEPT: A. the insurance policy B. the premium payment C. any attachments D. any endorsementsB. the premium paymentAll insurance policies can be cancelled at any time by _______________ only.The insured.If there is no beneficiary listed on a policy, benefits are paid to ________________.The insured's estate.Written proofs of loss must be furnished within ____ days after the loss.90 daysA pro-rata return is one in which the insurer returns ______ of the unearned premium.All of the unearned premium is returned.An insurer has a ____ day window when the insured cannot sue the insurer to recover under a claim since the insurer needs time to be able to respond.60 day windowChristina has a claim for $3,000 and a past due premium of $150. How will the insurer handle the claim?Pay the claim minus the past due premium.If George cancels his health insurance policy, the insurer will issue a ________ refund of _______ unearned premium.short-rate refund of most of the unearned premiumTrue/False Consideration for a health policy includes the statements made in the application and the premium.TrueTo receive benefits from a disability income policy due to sickness, the insured must be: A. totally disabled B. partially disabled C. both A & BA. totally disabledRehabilitation benefitA benefit that enables a disabled insured to learn to work in another occupation.Cost-of-living benefitA benefit that protects agains the erosion of purchasing power for fixed disability benefits.A rider that provides more benefits during the first 6 months or year of a claim is a _________________ rider.Additional monthly benefit riderThe elimination period may be thought of as a ________ deductible.Time deductibleThe longer the benefit period, the _____ the premium.HigherWhich definition of total disability is more favorable to the insured, own occupation or any occupation?Own occupationLong-term disability policies provide benefits: A. For 2-5 years B. to age 65 C. to age 100B. to age 65Disability benefits will generally be paid for the lifetime of the insured if total disability due to sickness begins at age ______ or earlier.Age 55 or earlierThe out of pocket limit is also known as _______.Stop-loss limitFirst dollar coverageNo deductible applies ($0 deductible)Maximum benefitThe dollar limit beyond which the insurer no longer participates in the payment of expenses.Corridor deductibleA deductible that runs between the first dollar coverage of a basic policy and the comprehensive coverage of a supplemental policy.Scheduled benefits are generally ____ than reasonable and customary allowances.Lower, the insured may also have some out of pocket costs.True/False Teeth that are knocked out in an accident will generally not be replaced under a dental policy.False, this is not a common exclusionPrepaid dental plans offer services based on _________.CapitationA hospital income policy will make payments to: A. the hospital B. the insured C. both A&B D. the beneficiaryB. the insuredJosh has a hospital income policy that will pay $1,500 per month for up to 12 months with no elimination period. If Josh is in the hospital for 10 days, how much will the policy pay?$500 ($1,500 per month / 30 days = $50 per day; $50 per day x 10 days = $500)Dread disease policies cover ________ diseases.Specific diseasesAll of the following could be considered dependents EXCEPT the insured's: A. Parents B. Adopted children C. 25-year-old child who became physically disabled at 24 D. 21-year-old child who is attending college full timeC. 25-year-old child who became disabled at 24True/False Under the coordination of benefits rule, the primary health company pays as if there were no other coverage.True, the secondary company will pay whatever the primary company will not pay up to the policy limits.Under Medicare Part B, individuals pay a deductible each _________.YearAfter the deductible is satisfied, Part B pays what % of all approved charges?80%Medicare supplement policies are also known as ______.Medigap policiesFully insured and disability insured are defined by: A. the state legislatures B. Social Security regulations C. Individual insurers D. the state department of insuranceB. Social security regulationsUnder social security benefits, disabled workers receive a benefit equal to their ______ ______ ______.Primary Insurance Amount (PIA)For each benefit period, Medicare will pay the full cost of ___ days of hospital care.60 daysNursing home care is generally covered by: A. Medicare B. Medicare supplements C. Long-term care policies D. All of the aboveC. Long-term care policiesMost people will require _____ or ____ care at some time during their later years.Custodial or residential careMeredith's company pays the entire premium for her group disability coverage. How much of her benefits from this coverage would be subject to tax?All of the benefits are subject to tax since the company can deduct the premium payments. If Meredith paid half of the premium, then only half would be subject to taxes.The Commissioner of Insurance is appointed by the Governor for a term of4 yearsAll of the following are examples of insurance transactions except: A. soliciting applications for insurance B. delivering policies C. licensing of producers D. collecting premiumsCorrect answer: C - licensing of producersA temporary license issued to close the affairs of a deceased producer may be issued for up to _____ days at the discretion of the Commissioner180 daysContinuing Education (CE) ______ hours of CE every two years ______ hours must be in Ethics ______ day grace period to complete CE24 total hours every two years 3 hours in ethics 90 day grace periodMichigan Life and Health Insurance Guaranty AssociationProtects policy holders against failure insolvent insurersControlled businessIt is permitted provided it does not exceed 15% of the premiums written in a 12-month periodTo motivate a buyer to sign an application for insurance, a producer promises a gift equal to 50% of the commission. This is an example of __________.RebatingDefamationA written statement that is false and derogatory that is designed to injure someone's reputation.The maximum fine for knowingly violating a cease and desist order is $________ and __________________.$10,000 and possible license revocationInsurance counselorProvides advice concerning an insurance policy and charges a fee for that advice.An applicant who has been denied an insurance license has _____ days to request a hearing to protest the denial.30 daysTrue / False A producer may share commissions with another licensed producerTrueTrue / False A producer may not share commissions with a licensed nonresident producerFalseIf, after a hearing, the Commissioner believes a producer knowingly violated insurance licensing laws, the Commissioner can:Fine the producer a max of $2,500 per violationA producer has a fiduciary responsibility to all of the following:- Insured on cancelled policies - Insurer, for premiums due - Prospective purchaser of insurance, when the application is rejected.Why can't a producer barter or trade an insurance contract for goods and services?The insurance product is not the producer's to barter; it belongs to the insured.How often must the Commissioner examine the books, records, and documents of domestic insurers?At least once every 5 yearsA producer has _____ days to respond to charges of violating insurance laws.30 days.If a producer is convicted of routinely misrepresenting benefits in insurance policies, he may be fined up to $_______ for all violations.$25,000Under what type of policy does an insured have to be notified if current policy values are insufficient to maintain the policy, given guaranteed interest and expense rates?Universal Life InsuranceAn advertisement for a life insurance policy must include all of the following:- information material to the insurance policy - a description of the type of policy advertised - the identity of the insurerImplying that policy dividends are guaranteed as an inducement for an insured to drop an existing policy and purchase a new policy is an example of _____________.TwistingThe minimum number of lives that must be covered under a group life insurance policy in Michigan is ______.2 lives.The maximum life insurance policy loan interest that may be charged on a fixed interest loan is ______%.8%In life insurance, all advertisements must be kept by the insurer for at least ________ months.48 monthsThe maximum life insurance policy loan interest that may be charged on an adjustable rate loan is ______%.18%True/ False A long-term care policy can exclude all of the following: - Alcoholism - Drug addiction - Alzheimer's disease - Self-inflicted injuryFalse A long-term care policy can exclude all alcoholism, drug addiction, and self-inflicted injury. Alzheimer's disease cannot be excluded.True/False A long-term care application must include questions that reveal when the proposed coverage will replace other existing health or long-term care coverage.TrueTrue/False A Medicare supplement policy can indemnify against losses resulting from accidents on a different basis than losses resulting from sickness.False - Medicare supplements must indemnify the same way for accidents and sickness.True/False A Medicare supplement policy must cover intermediate outpatient care for substance abuse.True - Intermediate care for substance abuse includes inpatient treatment for drug addiction and alcohol abuseIn Michigan, the free-look or trial examination period for a LTC policy is ______ days.30True/False All LTC policy owners must be offered a cost-of-living benefit adjustment option.TrueHealth insurance is in force for newborns from birth and notification must be given within _____ days of birth for coverage to extend beyond that point.31 daysAn individual that is continually insured under a group policy for at least ____ months may convert to an individual policy upon policy termination.3 monthsA person becomes eligible for the federal Medicare program at the age of ____. Coverage must be requested within _____ days before or after the applicant's birthday.65 years old, 90 daysThe Medicare maximum preexisting condition exclusion period is ____ months.6 monthsThe free-look period for Medicare supplements and LTC policies is ____ days.30 daysAn employee who works at least _____ hours weekly must be considered an eligible employee for small employer medical plans.30 hours / weekThe number of eligible full-time employees for small group health plans is _____ to _____.2 to 50 employeesA LTC policy must provide coverage for at least ______ consecutive months.12 consecutive monthsAn insurance company must file a notice of appointment or give notice of appointment termination to a producer within _____ days.15 daysA producer has ______ days to notify the Department of Insurance of any name or address changes.30 daysPerilImmediate specific event causing a lossHazardA factor that gives rise to a loss.The five methods of managing risk are:STARR (sharing, transfer, avoidance, reduction, retention)Elimination periodTotal # of days an insured must be disabled before income benefits will pay out.CoinsuranceShared expenses between the insured and the insurer. The insurer always has the higher %.Participating insurance companyPays dividendsUnauthorized/non-admittedCannot transact insurance within the state.Express authorityExplicit authority that an agent has per the written contractImplied authorityAuthority that is not expressly granted in the contract but is necessary in order to conduct businessApparent authorityAuthority the agent seems to have to the general public based on actions undertaken by the agent.WaiverIntentional giving up of a rightAleatory contractDependent on an uncertain eventContract of adhesionThe insurance company drafts the contract wording and the insured simply follows it.Unilateral contractThe insured makes the premium payments only one party has the responsibility.Loss Ratio % =operating expenses / premiumsContributoryThe insured contributes $ to their group plan____% of eligible employees must participate in a contributory plan.75%Non-contributoryPremium is paid entirely by the employer.____% of eligible employees must participate in a non-contributory plan.100%Enrollment periodTime in which you can enroll in benefits without having to undergo medical underwriting. (No evidence of insurability)Probationary periodThe period of time before an employee is eligible to enroll in benefits.The human life value approach to selling life insurance focuses on an individual's _______________.An individual's future stream of income. (Annual salary, expenses, years remaining until retirement, future value of current dollars)The needs approach to selling life insurance focuses on ___________________.The needs of the survivors. (Funeral expenses, final illness, continuing family income, education)Blackout periodThe pre-retirement period (the time before the insured/spouse is eligible for Social Security)FiduciaryPerson of financial trustReentry Term InsuranceAllows the insured to provide evidence of insurability to qualify for a lower rate.Level Term InsuranceFixed face amount, premium may increase over time.Whole Life - Cash ValueGuaranteed cash value, little cash value in the beginning but increases over time.Universal life InsuranceHas death protection that resembles 1 year renewable term and cash value that is based on interest rates (current annual rate and contract rate)Variable Life InsuranceCash values are not guaranteed and are backed by equity investments. They are regulated as securities by the SEC and FINRA.Equity Indexed Life InsurancePolicies with face amounts that are linked to an equity index such as S&P 500.With credit life insurance, the creditor is both the ________ and the _________.Owner & beneficiary.Individuals with terminal illnesses are able to sell their life insurance policies to __________.Viatical companiesEntire contract clauseThe policy and copy of the application make up the entire insurance contract.Life insurance coverage is granted in consideration of the __________ and the payment of the ______________.Application, initial premiumPayment of premium provisionSpecifies when and how premiums are to be paid. The more frequently the premium mode, the more the policy will cost over time.A life insurance policy contract will permit reinstatement within _____ years of a policy lapsing. Proof of insurability may be required. Reinstatement application must be filed.3 yearsTrue/False When calculating the death benefit for a life insurance policy, any outstanding loans and loan interest must be deducted from the face amount.TruePolicy loans may be taken from _____% of the total cash value from whole life policies and ____% to ____% of the total cash value from variable life policies.90%, 70-90%A life policy's incontestability period is ___ years. After this time, the insurer CANNOT dispute the validity of the contract2 yearsIf the insured dies within the first ___ policy years, there is no coverage. However, premiums that have been paid are refunded to the beneficiary.2 years (Suicide clause)The death benefit is adjusted to the amount that the premium would have been in the instance of ________ __ _____.Misstatement of sexRevocable beneficiaryCan be changed by the insured at any time without notifying the beneficiary.Irrevocable beneficiaryCannot be change without the consent and signature of the beneficiary.Per CapitaPer person, death benefit is only paid to the people listed in the policyPer Stirpes(By way of branches), the death benefit is passed down to the beneficiary's living children.With a ___________ clause, the death benefit is not distributed in a lump sum and cannot go to a creditor when the funds are held by the insurance company.Spendthrift clauseThe ____________ rider ( _____ ________ rider) pays double the face amount if the insured dies due to an accident. (Within 90 days)Accidental death, double indemnityWaiver of premium riderPremium is waived if the insured becomes permanently and totally disabled. Subject to a waiting period. Does not change the face amount of cash value.The __________ __________ rider waives premium payments while the inured is disabled and pays a monthly income.Disability Income RiderThe _______ rider for juvenile policies waives premium payments if the person who pays the premium dies or becomes disabled until the insured is of a certain age.Payor riderAnnuities are ___________ during the accumulation period, but benefit payments are _________ as income.Taxed, not taxedTrue/False The basic function of an annuity is to liquidate funds over a specific period of time in order to protect against living too long.TrueA ___________ is given to each covered person under a group life insurance policy.Certificate of InsuranceSocial security excludes:Railroad workers, federal employees hired before 1984, and employees of state and local government.To be considered fully insured by Social Security, you must have earned ____ quarters of coverage which is equal to _____ years40 quarters, 10 yearsThe elimination period of disability benefits is ____ months and the disability must be expected to result in death or continue for at least 12 months.5 month elimination periodUp to _____% of Social Security benefits are included in a worker's adjusted gross income for taxes.85%Policy proceeds that are paid in a lump sum are ____________. For installment payments, the principal portion is ___________, while the interest portion is __________.Not taxable, not taxable, taxable.Modified Endowment Contracts (MECs) discourage the use of life insurance with high premiums as investments. Policies that fail the test are considered MECs and are subject to _________.Less favorable tax treatmentTrue / False Dividends are taxable as income.False, dividends are not taxable as they are considered to be a return of premium. Interest that dividends earn, however, is taxable.Qualified retirement planMeets federal requirements and receives favorable tax benefits.A defined benefit plan is where the employer agrees to make necessary contributions on behalf of _____________ in order to provide a specific retirement benefit.Eligible employeesGroup deferred annuitiesspecified amounts of deferred annuities are purchased each year on in individual basis.Profit Sharing PlansContributions are made by the employer from the company profits. Each employee gets a % based on their salary. Benefits vary based on profits.Individual Retirement Accounts (IRA)- Can contribute 100% of wages up to the amount set by the IRS - Early withdrawal penalties apply - Required distributions at 70 1/2 yearsRoth IRAs- Contributions are not tax deductible, but distributions are tax free if it has been maintained for 5 years.Keough Plans (HR-10)For self employed individuals and their eligible employees.A policy or rider that pays a face amount if there is an accidental loss of: 2 arms, 2 legs, or the loss of vision in both eyesAccidental Death & Dismemberment (AD&D)Limited/Special Health Insurance Policies **HITABCDH I - hospital income T - travel accident insurance A - accident only B - blanket insurance C - credit insurance D - Dread diseaseBlue Cross & Blue Shield pay benefits on a ________ basis, this means that they pay the ____________ directly.service basis, pays the provider directlyHealth Maintenance Organizations (HMO) focus on routine wellness exams. They pay for other services on a ____________ basis, which is based on what is _________.fee-for-service basis, prices that are usual, reasonable, and customary.The system in which an insured must see their primary care physician for a referral to a specialist.GatekeeperPreferred Provider Organizations (PPOs)Made up of a selected group of independent hospitals and medical practitioners. Fee-for-service basis.Flexible Spending Accounts (FSA)Funded by the employee via salary reduction (pretax $). The $ is used to cover certain medical expenses.Health Savings Accounts (HSAs)For people with high-deductible plans.Insurance agents are appointed by ________.Insurance companiesWhich element is NOT necessary for the formation of a valid contract? A. Consideration B. Competent parties C. Written document D. Legal purposeCorrect answer - C, the contract does NOT need to be written.Joe has only paid 5 payments on his health insurance policy when he is hit by a car. The insurance company pays out nearly half a million to cover treatment for injuries. This is an example of: A. Contract of adhesion B. Aleatory contract C. Unilateral contract D. Utmost good faithCorrect answer - B, it is contingent on an uncertain eventKaren applies for a life insurance policy and pays the initial premium. Carol has : A. Made an offer to the insurer B. Accepted an offer from the insurerCorrect answer - A, made an offer to the insurerThe failure to disclose known facts is _____.ConcealmentExample of an aleatory contractWhen one party may receive much more from the contract than they give in exchange.Simplified issueLife insurance that requires no medical exam and asks only basic medical questionsAndy is a 30 year old man who drinks occasionally, does not smoke, and has no known health problems. What type of risk would he be classified as?Standard riskTo be certain that insurers have the money available to pay claims as they arise, they are required to maintain _______.ReservesTo be eligible to purchase insurance, an association group must: A. Be organized an maintained strictly for the purpose of obtaining insurance. B. Have at least 200 members C. Have a constitution and bylaws D. All of the aboveCorrect answer - C, have a constitution and bylaws. The group must be organized for purposes other than insurance coverage.Kevin starts a new job on March 1, he is not eligible for insurance benefits until July 1. The period between the start date and the eligibility date is the _________.Probationary periodA baker's union and a butcher's union join together to form a trust to provide insurance to their employees. This type of group is called _______.Taft-Hartley trust (Group made of one or more unions)Which of the following underwriting characteristics is generally required by law? A. Employer control B. Predetermined coverage amount C. Insurance incidental to group D. Nondiscriminatory classificationsCorrect answer - D, nondiscriminatory classificationsTrue/False Life insurance can be purchased to guarantee lifetime retirement income.FalseMichael's wife died 3 years ago, leaving him with 2 grade-school aged children. Which income period is Michael in?Family dependency periodTrue/False Life insurance proceeds are generally the only source of income for surviving dependents of a breadwinner.False, Social Security and retirement plans are other potential sources of income.Which of the following is NOT financed using life insurance? A. Buy-sell agreements B. Section 303 stock redemption C. Cross purchase agreement D. Split-dollar planCorrect answer - D, split dollar planKelly fills out an application for life insurance, but does not pay the initial premium. What kind of receipt will she receive?Inspection receiptThis type of receipt is most commonly used in life insuranceConditional receiptThe most common reason why a payment of a death claim would be delayed is because - .The insurer has not received the proper notification of death.True/False Term insurance provides pure insurance protection.TrueWhat type of policy is commonly used to cover a mortgage on a house if the insured were to die before paying it off.Decreasing term insuranceWhole life insurance policies provide all of the following EXCEPT: A. pure insurance protection B. an opportunity for significant investment gains C. cash values D. the ability to take loans against the cash valueCorrect answer - B, an opportunity for significant investment gainsPam has a policy that pays dividends which are used to purchase additional paid-up insurance to increase the face value of the policy. Pam has what type of policy?Economatic policyWhich of the following is NOT flexible in a universal life policy: A. Premium amount B. Premium schedule C. Guaranteed interest rate D. Death benefitsCorrect answer - B, guaranteed interest rateAngela has a universal life policy that she purchased several years ago. At that time, the death benefit of the policy was $250,000. Her cash value is now $50,000. How much is her current death benefit?$250,000, UL policies have a level death benefit despite the cash value accumulationsRyan collects insurance premiums every Wednesday at the home of several policyholders. Which type of policy do these policyholders probably have?Industrial life insuranceIn order to sell variable policies, the producer must possess a state insurance producer license, get a passing score on the appropriate securities exam, and registration with ________.FINRATrue/False Once a year a variable life insurance policy must have a face amount that is higher than the cash value by a certain percentage in order to meet the cereal definition of life insurance.TrueFamily income policyCombines whole life insurance with decreasing term coverageFamily maintenance policyCombines whole life insurance with level term coverageMinimum deposit policies are less popular due to tax regulations, but they can still be used as long as ___ of ___ premium payments are made from sources other than the cash value4 of 7Family protection policyCombines whole life on one family member with term coverage on the other family membersLeslie has a policy that will pay $100,000 if she dies before age 65 and $75,000 if she dies after age 65. She probably has what type of policy?Multiple protection policyHow long is the typical grace period?31 daysIf Ben dies, Joan will receive the death benefit. If Joan had died before Ben, Toby would receive the benefit. Toby is what type of beneficiary?Contingent beneficiaryLiz purchases an immediate annuity. The annuity contract must be a _____ _______ annuity.Single premiumWhich type of annuity is most likely to provide a death benefit?Deferred annuityWhich of the following is NOT used to determine annuity premiums? A. Assumed interest rate B. Annuitant's retirement date C. Income amount and payment guarantee D. Applicant's sexCorrect answer - B, annuitant's retirement dateAn annuity is the opposite of _______.Life insuranceTrue/False An annuity is the distribution of a lifetime income.TrueFixed annuityGuarantees a minimum rate of return.Straight-life annuityAn annuity that will pay a monthly income for the remainder of the annuitant's life and then stop making payments.Carol is eligible fore retirement benefit based on her own earnings as well as her late husband's earnings. What benefits will Carol receive?Only the larger benefitP. I. A.Primary Insurance AmountA person who receives retirement benefits at normal retirement age receives _____% if PIA as a retirement benefit.100%A surviving spouse who is disabled can start receiving survivor benefits at age ____, if the deceased was fully insured.Age 50A surviving spouse who is not disabled can start receiving survivor benefits at age ____, if the deceased was fully insured.Age 60At what age is an individual eligible to receive full Social Security retirement benefits? A. 65 B. Nominal retirement age C. 67 D. Normal retirement ageD. Normal retirement ageTrue/False As a general rule, life insurance and annuity premiums are tax deductible.False, life and annuity premiums are NOT tax deductible.Jan is receiving the proceeds of a life insurance policy as a stream of income over a period of several years. What part of the money is subject to tax? A. None of it; it is life insurance proceeds B. All of it; it is being paid out as income C. Only the part that represents income earned on the original death benefit. D. Only the part that represents the original death benefit.C. Only the part that represents income earned on the original death benefit is subject to tax.True/False Anyone with earned income may contribute to an IRA.TrueQualified plan distributions are likely to receive a tax penalty if the distribution is _____ or _____.Premature or latePremature IRA or qualified plan distributions must be taxed as income and have a penalty tax of ___%10%At what age is an individual no longer subject to early withdrawal penalties under an IRA? A. 65 B. 59 1/2 C. 67 D. 63 1/2B. 59 1/2Jeff has a policy that will pay any expenses he incurs as the result of in-hospital medical treatment, as well as some of the expenses he incurs on an outpatient basis. Jeff probably has a: A. disability income policy B. long-term care policy C. medical expense insurance policy D. hospital income policyC. Medical expense insurance policyJT's HMO requires that he receive health care services from a specified, limited number of health care providers chosen by the HMO. JT's HMO is a ______ panel.ClosedAll of the following are managed care plans EXCEPT: A. Point-of-service plans B. Health maintenance organizations C. Preferred provider organizations D. Indemnity arrangementsD, indemnity arrangementsCapitationA method of payment in which a provider is paid a specific fee monthly for each subscriber is known as capitation.A type of plan where employees can select benefits from a variety of coverage options based on individual and family needs.Cafeteria planUnder workers' compensation, the permanent total disability benefit, which subject to minimum and maximum dollar amounts, is generally ______%66.66%Health insurance coverage never applies until: A. the policy is delivered B. the insured has paid for the policy C. an underwriting decision is made D. the application is reviewed by underwritingB. the insured has paid for the policyOnce health insurance become effective, unless it is cancelled, it will stay in force for: A. an indefinite period B. 6 months C. 1 year D. The length of the termD. the length of the termTrue/False No loss/no gain legislation requires a replacing policy to continue to pay claims ongoing under the policy it replaces.TrueAn entire contract contains all of the following EXCEPT: A. the insurance policy B. the premium payment C. any attachments D. any endorsementsB. the premium paymentAll insurance policies can be cancelled at any time by _______________ only.The insured.If there is no beneficiary listed on a policy, benefits are paid to ________________.The insured's estate.Written proofs of loss must be furnished within ____ days after the loss.90 daysA pro-rata return is one in which the insurer returns ______ of the unearned premium.All of the unearned premium is returned.An insurer has a ____ day window when the insured cannot sue the insurer to recover under a claim since the insurer needs time to be able to respond.60 day windowChristina has a claim for $3,000 and a past due premium of $150. How will the insurer handle the claim?Pay the claim minus the past due premium.If George cancels his health insurance policy, the insurer will issue a ________ refund of _______ unearned premium.short-rate refund of most of the unearned premiumTrue/False Consideration for a health policy includes the statements made in the application and the premium.TrueTo receive benefits from a disability income policy due to sickness, the insured must be: A. totally disabled B. partially disabled C. both A & BA. totally disabledRehabilitation benefitA benefit that enables a disabled insured to learn to work in another occupation.Cost-of-living benefitA benefit that protects agains the erosion of purchasing power for fixed disability benefits.A rider that provides more benefits during the first 6 months or year of a claim is a _________________ rider.Additional monthly benefit riderThe elimination period may be thought of as a ________ deductible.Time deductibleThe longer the benefit period, the _____ the premium.HigherWhich definition of total disability is more favorable to the insured, own occupation or any occupation?Own occupationLong-term disability policies provide benefits: A. For 2-5 years B. to age 65 C. to age 100B. to age 65Disability benefits will generally be paid for the lifetime of the insured if total disability due to sickness begins at age ______ or earlier.Age 55 or earlierThe out of pocket limit is also known as _______.Stop-loss limitFirst dollar coverageNo deductible applies ($0 deductible)Maximum benefitThe dollar limit beyond which the insurer no longer participates in the payment of expenses.Corridor deductibleA deductible that runs between the first dollar coverage of a basic policy and the comprehensive coverage of a supplemental policy.Scheduled benefits are generally ____ than reasonable and customary allowances.Lower, the insured may also have some out of pocket costs.True/False Teeth that are knocked out in an accident will generally not be replaced under a dental policy.False, this is not a common exclusionPrepaid dental plans offer services based on _________.CapitationA hospital income policy will make payments to: A. the hospital B. the insured C. both A&B D. the beneficiaryB. the insuredJosh has a hospital income policy that will pay $1,500 per month for up to 12 months with no elimination period. If Josh is in the hospital for 10 days, how much will the policy pay?$500 ($1,500 per month / 30 days = $50 per day; $50 per day x 10 days = $500)Dread disease policies cover ________ diseases.Specific diseasesAll of the following could be considered dependents EXCEPT the insured's: A. Parents B. Adopted children C. 25-year-old child who became physically disabled at 24 D. 21-year-old child who is attending college full timeC. 25-year-old child who became disabled at 24True/False Under the coordination of benefits rule, the primary health company pays as if there were no other coverage.True, the secondary company will pay whatever the primary company will not pay up to the policy limits.Under Medicare Part B, individuals pay a deductible each _________.YearAfter the deductible is satisfied, Part B pays what % of all approved charges?80%Medicare supplement policies are also known as ______.Medigap policiesFully insured and disability insured are defined by: A. the state legislatures B. Social Security regulations C. Individual insurers D. the state department of insuranceB. Social security regulationsUnder social security benefits, disabled workers receive a benefit equal to their ______ ______ ______.Primary Insurance Amount (PIA)For each benefit period, Medicare will pay the full cost of ___ days of hospital care.60 daysNursing home care is generally covered by: A. Medicare B. Medicare supplements C. Long-term care policies D. All of the aboveC. Long-term care policiesMost people will require _____ or ____ care at some time during their later years.Custodial or residential careMeredith's company pays the entire premium for her group disability coverage. How much of her benefits from this coverage would be subject to tax?All of the benefits are subject to tax since the company can deduct the premium payments. If Meredith paid half of the premium, then only half would be subject to taxes.Retirement income annuityDeferred annuity with a decreasing term life insurance rider. A retirement income annuity provides both a death benefit (with a decreasing term rider) and the annuity's surrender value if the annuitant dies before retirement.What type of eligible groups for health insurance consists of 2 or more employers or labor unions?MET and MEWA. Multiple employer trusts and multiplier employer welfare arrangements consist of 2 or more employers or labor unions seeking group health insurance coverage.An underwriter will consider which of the following conditions in making their decision to approve an application for insurance?A condition that occurs prior to making an application for insurance. An underwriter should be informed about any conditions that existed prior to an application for insurance.Field underwriting is primarily useful to:Make observations that could impact insurability. The primary value of field underwriting, is that the agent has the opportunity to view the applicant in his/her surroundings, in person, and make observations regarding insurability and perhaps class of risk (i.e. is the applicant obese, does he/she have any obvious dangerous hobbies, does he/she smoke).Which of the following is a benefit of a prescription drug policy?Prescriptions are for a set, lower price. Under a prescription policy, prescription drugs are not only at a set price, but a much lower price - usually $2, $3, or $5, regardless of the actual cost of the drug.For a non-contributory plan, how many of the employees must be offered coverage under the group?100% A non-contributory plan is based on the employer paying the full cost of the program, which means 100% of the employees are covered.Any of the following is considered advertising for a health insurance company, EXCEPT:Morbidity tables Morbidity tables are used to determine rates for health products.Which of the following is not an element of the nonforfeiture value of a whole life insurance policy?Cash withdrawn does not reduce the face value of the life policy. Cash withdrawn from a whole life policy DOES reduce the face value of the policy as well as the cash value of the policy.When the only logical beneficiary is a minor, all of the following options are available, EXCEPT:The benefits can go directly to the estate of the insured. In the event that the only logical beneficiary for a life policy is a minor, the guardian, trust and insurance company holding the proceeds are all options available.Steven currently earns $50,000 annually. He has calculated that he should have approximately $1,500,000 in life insurance to be sure his family is guaranteed the lifestyle he would provide if he dies. This approach is called:Human life value. While there is not specific way to determine the worth of one life, using the income one may earn over the course of ones life is one approach.When completing an application for insurance, an agent is allowed to do which of the following:Witness the applicants signature. The agent must be present to witness signatures. The other actions are either prohibited or functions for others in the underwriting process.A person becomes eligible for Medicare when:Part A is automatic for all persons reaching Age 65. When a person reaches age 65, they become eligible for Medicare part A, even if they continue to work.Collin intentionally surrendered a right on his contract known as waiver. What prevented him from reclaiming the right?Estoppel. Waiver is voluntarily surrendering a right, and estoppel is the legal process preventing the reclaiming of that right.Which of the following is usually the owner of the annuity?The annuitant. The annuitant is the insured - or person on whose whole life the annuity contract has been insured. The annuitant is usually also the owner of the annuity.Term insurance provides:Pure protection and is the least expensive form of insurance.Which of the following is NOT an unfair method of competition or a deceptive act in the business of insurance?Replacement. No insurance producer may enter into any agreement to commit any act of boycott, coercion, or intimidation. Replacement is not unfair UNLESS it were to involve twisting or churning.Which dividend option may offset some or all of the benefit reduction caused by loans from a participating whole life plan?One-year term option. The one-year term option will purchase up to the amount of the cash value annually.Which of the following is NOT a right of the owner of a life insurance policy?Changing the irrevocable beneficiary, implementing a verbally agreed change, and borrowing funds before cash value exists. Must have cash value to borrow from policy.What kind of plan uses designated physicians and hospitals for a nominal co-pay and other providers subject to a deductible and a co-insurance payment.A Preferred Provider Organization (PPO) plan that allows employees to use other providers with a higher out-of-pocket expense. As part of most PPO plans, the insured is allowed to choose providers that do not have contracts with the network and those deductions and co-insurance amounts are higher.Elements of insurable risks:Loss must be by chance or accident, large number of homogenous units, loss must be predictable. NOT "Loss must be catastrophic"Which of the following is not a characteristic of a group life insurance plan?Individual selection benefits. Group life insurance is available at lower rates than individual insurance because the administrative, operational, and selling costs associated with group life insurance are less than those of individual plans. These savings are passed on to group policyholders in the form of lower premiums.When does the waiver of premium ride take effect?At the moment of disability. The waiver of premium rider will waive premiums retroactively (if necessary) to when the disability occurred.What constitutes the entire contract for a health insurance policy?The policy only. NOT "illustrations" or "application"Generally, an expense-incurred medical policy is:Guaranteed renewable. Generally, an insurer that provides an expense-incurred medical policy must renew the policy at the option of the individual. However, guaranteed renewal is not required in cases of fraud, intentional misrepresentation, or lack of payment, as well as if the insurer ceases to provide that type of coverage or the individual moves outside the service area.In an insurance policy valuable consideration is exchanged for:A promise of benefits. An insurance policy is a contract where a promise of benefits to be paid is exchange for premium payments.An applicant for insurance may pay an initial premium with the application and receive a document called:Conditional receipt A conditional receipt is given that does not guarantee coverage.If the Commissioner finds that a person has violated a regulation which of the following will be issued?Cease and desist order. If the commissioner finds that a person has violated a regulation or engraved in methods of unfair competition or deceptive acts, he will serve the person with a formal charge, including his findings and a cease and desist order, requiring the person to stop the actions which are in violation of the rules.All of the following must be included in each Medicare supplement policy, EXCEPT:Buyer's Guide. Each Medicare supplement policy must include an outline of coverage, a description of restricted network provisions and a description of the coverage for emergency and urgently needed care. An insurer must provide a prospective buyer with a Medicare supplement Buyer's Guide, but it is NOT part of the policy.Identical twins apply for same exact life insurance policy. What explains one being charged a higher premium?Risk classificationAn employees eligibility for group enrollment may be determined by all of the following, EXCEPT:GenderWhich of the following is not covered by a dental plan?Replacement of dentures.Group and individual plan comparison:Individual - each person has a policy. Group - one master policy Individual - health is evaluated. Group - no individual underwriting Individual - coverage is renewable. Group - coverage stops when the insured leaves the group.Who negotiates and binds ceding reinsurance contracts on behalf of an insurer and acts as an agent for that insurer?Managing general agent. A person may not act in the capacity of an MGA with respect to risks located in this state for an insurer authorized in this state unless that person is licensed as an agent in this state.Upon receipt of proof of loss for an individual health policy, a valid claim settlement must be paid:Immediately.What plan is most likely to have a pre-negotiated discount with various medical providers?PPO. By definition, a PPO contracts with medical providers for a pre-determined discount for services provided.Types of beneficiaries:Irrevocable, contingent, or primary.All of the following services are offered as a basic service in an HMO, EXCEPT:Durable equipment. Services provided: doctor services, rehabilitation therapy, and preventative and routine care like annual physical and immunizations.After a group disability insurance policy is approved by the commissioner, what is issued?Certificate of coverage. Group disability insurance policies are required to be filed and approved by the Commissioner, who will then issue a certificate of coverage.Four main components of an insurance contract:Insuring clause, policy conditions, exclusions, and policy face. Adhesion is a characteristic of insurance contracts.Which of the following provisions for individual health insurance policies is NOT optional?Reinstatement. Optional: misstatement of age, change of occupation, and expense-incurred basis. Reinstatement is a required provision and states that if any renewal is not paid on time, a subsequent acceptance of premium not the insurer will reinstate the policy.If an employee is terminated from employment, how much time do they have to convert a group life insurance policy to an individual policy?31 days. A group life insurance policy must contain a provision, which states that if the employee is terminated from employment, he has 31 days to apply and pay a premium for an individual life insurance policy in an amount equal to the protection provided by the group policy.Which of the following is a true statement about the different private insurers?An insurer that conducts business in the state it was incorporated in is a domestic insurer. An insurer that conducts business in states other than the state in which it was incorporated is a foreign insurer. An insurer that conducts business in countries that it was not incorporated in is an alien insurer. Conducting business in the state where it was incorporated is a domestic insurer.Both spouses are covered by their employer group plans for full family coverage. Based on usual guidelines, how is the order of coverage determined?Primary coverage is usually determined by which parent's birthday comes earliest in the year. Unless there is a legal separation and a court order, the spouse's plan whose birthday falls earliest in the year is the primary.Which of the following is true about policy loans?They are subject to interest. If the loans are not repaid, the amount of the loan, plus interest reduces the policy face amount.What type of life insurance program would be a good choice for grandparents to help their grandson in later years?Juvenile life. Juvenile life is designed for this purpose.A medicare supplement policy may exclude pre-existing conditions for a maximum of:6 months. A person, who is not insured under an individual or group medical expense incurred policy and who applies for a Medicare Supplement policy, is entitled to coverage that may include a provision for exclusion from pre-existing conditions for 6 months after the inception of coverage.All of the following are true regarding Roth IRAs, EXCEPT:Contributions are tax deductible (FALSE). Contributions to a Roth IRA is not tax-deductible. True: contributions are the same as a traditional IRA, withdrawals are tax-free, contributions are limited to a person with an income less than $105,000-$120,000.Guaranteed issue is usually available on what basis?At the time of hire or other annual enrollments. When an employee is hired, he or she may enroll without restriction within the prescribed enrollment period. if there is an open enrollment at a later time, the employee may also qualify for guaranteed issue. Guaranteed issue is a term used in health insurance to describe a situation where a policy is offered to any eligible applicant without regard to health status.Which of the following is a true statement about the waiver of premium rider?The disability must be permanent and total. In order for the waiver of premium rider to take effect, the disability of the policyholder must be permanent and total.All of the following exchanges would qualify under Section 1035 of the Internal Revenue code, EXCEPT:Vacant land for another piece of vacant land. Exchanging a piece of vacant land for another piece of vacant land does not qualify under the Section 1035 rule as an exchange that would not have tax implications for a gain or loss. Exchanges that would qualify: Annuity for another annuity, life insurance policy for another life insurance policy, or endowment for another endowment.Mrs. Conroe's policy lapsed. Her agent accepted her past due premiums and re-instated her policy. Since agents cannot usually reinstate policies, why was it allowed in this case?The agent was allowed to accept late premiums in the past to reinstate policies. Because the insurance company allowed the agent to accept late premiums in the past for the purpose of reinstating a policy, they allowed it in this case.Which of the following are reasons the application for an insurance policy is important?An application becomes part of the policy when it is attached to the policy. The statements made in the application will become the basis for issuing a policy. The application helps to establish insurability.Which of the following is a characteristic of an interest sensitive whole life policy?Flexible premiums, guaranteed minimum death benefit, and guaranteed minimum rate of return.All of the following is true regarding comprehensive dental plans, EXCEPT:Benefits are paid on a first-dollar basis (FALSE). Comprehensive plans have coinsurance, deductibles, and they are also referred to as nonscheduled.An HMO will stress all of the following, EXCEPT:Higher deductibles for curative services (FALSE). An HMO stresses: low or no co-pay for doctor visits, screenings for potential health conditions, and wellness as a lifestyle.How many hours of continuing education must producers complete during every licensing period?24 hours. All insurance producers must, for each licensing period, complete 24 hours of continuing educations courses.It is considered a controlled business in Michigan if the premiums written by the producer on controlled business exceed what percentage of the premiums on all policies written by the producer?15%. It is considered a controlled business in Michigan if the premiums written by the producer on controlled business exceed 15% of the premiums on all policies written by the producer.Which policy would best suit someone who retires with a large amount of cash?Single premium whole life insurance.Cheryl has a $500,000 permanent life insurance policy. She has paid $200,000 in premiums, and the policy has a cash value of $216,000. If Cheryl dies, her beneficiary will pay taxes on:$0. Life insurance benefits are tax-free. The cash value is included in the death benefit, so it is not taxed.All of the following are true about a Medical Expense policy, EXCEPT:Available on a group basis only (FALSE). A medical expense policy is a reimbursement policy that will pay based on a pre-set schedule of benefits. It is not restricted to groups. True: Covers both accidental and sickness losses, pays benefits outlined in the policy, and covers both inpatient and outpatient expenses.How is Medicaid funded?Jointly funded by individual states and the federal government. Medicaid is a form of welfare and is funded by the federal government and the individual states. The states administer the program in their locale. Rules and qualifications may vary due to differences in the states.An equity indexed life policy is:Linked to something like the S&P 500.The outline of coverage for a Medicare supplement policy contains all of the following, EXCEPT:Cost comparisons (Doesn't contain). Contains: premium info, disclosure pages, and benefit features. An insurer, who offers a Medicare Supplement policy, must provide the application at the time of application with an outline of coverage which consists of a cover page, the premium information, the disclosure pages, and the charts displaying the benefit features.If an HMO and PPO plan member elects to use out of network providers, he/she may expect any of the following results, EXCEPT:Lower quality of care (FALSE). Lower benefits reimbursement, more out-of-pocket expense, and more individual paperwork. The choice of provider, in or out of network, does not automatically result in a lower quality of care.What constitutes the entire contract for a life insurance policy?The policy only.Who assesses loss or damage under a policy of insurance?Insurance adjuster. An individual with an insurance adjuster license may adjust loss or damage under a policy of insurance and advertise himself as an insurance adjuster. Licenses are not needed for persons who practice law in Michigan, who are adjusting loss or damage under a policy within his control, or who are employees of an insurer authorized as an adjuster.Which of the following is not an example of a limited policy?Universal life (not a limited policy). Prescription drugs, vision, dread disease (limited policies).The coordination of benefits in a group contract is designed to:Prevent the possibility of over-insurance. When two group contracts are involved for the same person, COB acts to prevent an amount of more than 100% of a loss being paid out.A life insurance policy may be reinstated within how many years from the date of default in premium payments?3 years.Coordination of benefits is designed to limit which of the following?Limit the claim to 100% of the loss when two group plans are involved.Which of the following statements concerning the payment from a non-qualified annuity is correct?Since this is a non-qualified plan only a portion of the plan will be taxable.A group health plan's rates may be affected by any of the following, EXCEPT:Mortality tables. Can be affected by: experience of the group (claims vs. premium), stability of the group, and morbidity tables.Which of the following would be considered a limited benefit policy?A travel accident policy. Will only pay a benefit if the loss occurs while traveling.Which of the following are common personal uses for life insurance?Estate planning, cash accumulation, and protection of survivors.Mindy became disabled while a group policy was in force. When the policy was terminated, which of the following is a responsibility of the insurer?Extension of benefits and offer conversion to an individual policy. If Mindy was disabled prior to the termination of the group policy, benefits can be extended, and she must be offered the opportunity to convert to an individual policy.Which life insurance dividend option does not increase a policy's cash value?Cash payment. With the cash payment dividend option, the policyholder is sent check for the amount of the dividend, which does not increase the policy's cash value. Increases cash value: accumulate at Interest, paid-up insurance, paid-up additions.During the accumulation phase of the annuity, the interest for a fixed annuity:Is the current interest rate, plus a guaranteed minimum. A fixed annuity can have two levels of interest rates. The insurer can guarantee the current rate at the beginning of the calendar year, and also guarantee a minimum rate that is paid if the current rate falls below that level.Which of the following would NOT be considered unfair discrimination?Discrimination based on illegal occupation. Unfair = discrimination based on sex, race, or blindness.A licensee must inform the Commissioner of a change in address within:30 days.A Medicare Supplement policy can be returned for a full refund within:30 days. A person is allowed to return a Medicare Supplement policy and obtain a full refund of any paid premiums within 30 days.What process determines group rates by using a preset table that deals with the demographic make up of the group?Community rating. Community rating uses data gathered on a specific geographic area's overall health insurance claims experience.An annuity contract provides all of the following, EXCEPT:A health plan. Depending on the type of annuity, it usually provides a safe retirement income tool, acts as a forced savings accounts, and has payment for a lifetime of a fixed period of time.A change of occupation provision will allow the insurance company to do any of the following at the time of the claim, EXCEPT:Increase the premiums for that individual. A change of occupation will allow the insurance company to reduce benefits, but it will not be allowed in increase premiums on an individual basis. Company can: pay benefits stated in the policy, pay a reduced benefit for a higher risk occupation, and require a doctor's statement confirming disability.What risk classification will a smoker most likely be rates, and how will the premium be affected?Substandard, higher premium. Smoking is an underwriting factor that will cause an application to be rated as substandard. Individuals who are rated as substandard tend to have higher premiums.Which of these is also known as the 'time deductible' in a basic total disability plan?Elimination period. The elimination period is also known as time deductible. It is the amount of time that the insured must be disabled before benefits can begin.Concurrent review will help monitor all of the following, EXCEPT:Reduce the amount of emergency admission and treatment (FALSE). Helps monitor: the length of stay once a patient is admitted to the hospital, compare the services provided to services consistent with the patient's admission diagnosis, over utilization of services.All of the following are benefits of a long-term care rider, EXCEPT:The rider defers taxes if you do not need it. Benefits: the rider is added to an existing life policy, the rider helps the insured pay for long term care if it is needed, the rider helps to protect retirement income.The clause that prevents the insurance company from acting unilaterally to change a policy is:The entire contract clause. The entire contract clause does not allow either the insurance company or the insured to make unilateral changes to the terms of the contract.Which of the following is not true regarding the fixed-amount installment life insurance settlement option?The larger the payment amount, the longer time periods payments will be received (FALSE). The larger the payment amount, the shorter time period payments will be received. True: The length of time installments are paid depends on the amount of the policy proceeds, payments consist of principal and interest, and payments are made until the principal and interest reach zero.A group plan benefit booklet states: 'the first $10,000 of medical expenses is covered in full. After the first $10,000 is exhausted, the plan will apply a $500 deductible and additional expenses will be covered at 80%.' This is what kind of plan?A basic medical plan with a corridor deductible.Which of the following statements best describes how cash value in a life insurance policy is taxed?If the policy cash value is surrendered, the interest earned on the cash value is taxable as ordinary income. If the policy cash value is surrendered or endows, the interest is taxable as ordinary income.Underwriting considerations for group coverage employ which of the following considerations?Groups usually do not have a requirement for medical exams.Martin's employer group health plan provides primary coverage for his end stage renal disease for 30 months, after which Medicare provides:Primary coverage. Employer group health plans must provide primary coverage to individuals with ESRD for 30 months, after which Medicare provides primary coverage.Which of the following is true about Medicare/Medicaid and Medicare supplements?None of the above. False: they can provide nursing home benefits needed for aging. Medicare and medicare supplements can provide nursing home benefits from an injury for 6 months. They all provide nursing home benefits. Medicare pays for nursing home care that is related to a covered illness or injury - not for aging. Medicare and Medicare supplements can provide nursing home benefits, but the coverage is limited and usually does not extend beyond 100 days and only if it follows hospital confinement.All of the following are false regarding the tax consequences of Roth IRAs, EXCEPT:Contributions are made with taxed dollars; however, interest grows tax-free. Roth IRAs have qualified tax-free distributions that may be made before the plan participant is 59 1/2, and all distributions made after the age of 59 are tax-free.Samantha purchased a universal life policy when the death benefit in the policy was $200,000. With a current cash value of $50,000, she has selected the death benefit option. How much is her current death benefit?$250,000. Option B of a universal life policy provides for the death benefit to equal the face amount plus the cash value. The premiums are higher if the policy owner selects this option.Universal life policies allow the policy owner to:Take out a policy loan and withdraw cash. Similar to whole life policies, as long as there is cash value in the account, universal life policies allow the policy owner to take out policy loans and withdraw cash.A producer must report any administrative action taken against them to the Commissioner within:30 days. An insurance producer must report to the Commissioner any administrative action taken against him in another jurisdiction or governmental agency within 30 days after the final disposition of this matter.In a replacement transaction, the agent's duties include all of the following, EXCEPT:Verifying the applicants information in the proposal. Verifying the applicants information in the proposal is the replacing insurer's duty, not the agents. In a replacement transaction, the agent's duties include obtaining a signed statement by the applicant which states that the existing life insurance will be replaced, submitting a statement to the insured, which states whether or not replacement is involved, giving the applicant a copy of the sales proposal, and submitting the application to the insurer.Which of the following is true about immediate annuities?They do not have an accumulation period. Payments must begin within one year of the first premium payment.Karl is riding his bike when a dog jumps up at him and knocks both him and his bike to the ground. He breaks his wrist and must go to the hospital. This kind of peril is considered:Accidental. Karl could not have foreseen that a dog would chase his bike and knock him down. Therefore, him breaking his wrist is considered an accident.Insurance is which method of handling risk?Transfer Risk transfer is the essence of insurance. Risk is transferred from one party to another.Which of the following is part of the loss of earnings test for disability?Inability to perform duties of the insured's own occupation for 2 to 5 years AND Inability to perform the duties of any suitable occupationWhich of the following is NOT covered by blanket disability insurance?Retired military members. Blanket disability insurance covers passengers on any common carrier, employees with exceptionally hazardous occupations, students and teachers, volunteer groups, creditors, sports team members, and other similar group members.In a replacement transaction, the insurer's duties include all of the following, EXCEPT:Obtaining a signed replacement statement by the applicant. In a replacement transaction, the insurer's duties include informing the agents of the replacement regulations, obtaining from the agent a list of all current lie insurance policies, and verifying the applicant's information in the proposal.What nonforfeiture option allows the policy owner to receive the policy's cash value?Cash surrender value.If the total of a taxpayer's medical expenses exceeds 10% of their adjusted gross income, all of the following can be deducted, EXCEPT:Disability insurance premiums. Deductible: Long term care premiums, health insurance premiums, accident insurance premiums.When Jack and Jill divorced, the court ordered that Jack name Jill beneficiary of his insurance. He may not change this, even if he remarries unless Jill gives her permission. Jill isAn irrevocable beneficiary. The policy owner may not change an irrevocable beneficiary without the beneficiary's written consent.A small employer has a minimum of how many employees?2. Small employer means any person, firm, corporation, partnership, LLC, or association actively engaged in business that, on at least 50% of its working days during the preceding and current calendar years, employed at least 2, but not more than 50 employees.Premiums for all of the following health insurance policies are tax-deductible as a business expense, EXCEPT:Individual disability income. Premiums paid for individually-owned disability income policies are not tax-deductible, however, disability income benefits are tax-free. Tax-deductible as business expense: Employer-sponsored group disability income plan, group dental expense, and group medical expense.A credit life insurance policy must contain all of the following, EXCEPT:Buyer's Guide. A credit life insurance policy must contain the federal truth-in-lending disclosure, a notice of proposed insurance, and the application for insuranceIn determining life insurance premiums, the actuary uses all of the following factors, EXCEPT:Morbidity (used when calculating accident and health premiums).A Actuary uses: mortality, investment returns, and expense ratios.An insurer may exclude or limit coverage for conditions for which medical advice or treatment was recommended before enrollment for no more than:12 months. An insurer may exclude or limit coverage for conditions for which medical advice or treatment was recommend within 6 months before enrollment and the exclusion does not exceed more than 12 months.Which of the following has not been taken to court for further interpretation?Subrogation Reasonable expectations, ambiguities in a contract of adhesion and utmost good faith have all been taken to court for interpretation.An insurer must file a notice of appointment within:15 days. To appoint a producer, the insurer must file a notice of appointment within 15 days from the date the agency contract is executed.When an agent or insurer does not truthfully explain the terms, benefits, limitations, or exclusions of an insurance policy, or makes untrue statements of fact or law, or fails to state material facts or other disclosures required by law, this is:Misrepresentation. -- when an agent or an insurer misrepresents the terms, benefits, limitations, or exclusions of a policy. The agent or insurer makes untrue or misleading statements of fact or law, and fails to state material facts or other discloses as required by law.Which of the following is correct concerning representations?Carla has represented that the information she has furnished is true to the best of her knowledge. A representation is a statement that the insured believes to be true, but the actual facts may vary.What happens to the amount payable on a health insurance contract if the age of the person was misstated?The amount payable for the correct age will be made. If the age of a person applying for health insurance has been misstated, the amount payable on the contract will be the amount that would have been due had the correct age been given.A beneficiary may choose any of the following methods to receive life insurance proceeds, EXCEPT:Variable installments based on a specific stock index. A life insurance company may not engage in at risk investments for life insurance proceeds.Gregory recently purchased a one-year term insurance policy. At the end of the year, he can purchase an identical policy without having to show proof of insurability. What type of policy did he purchase?Renewable term. It is a renewable term policy that allows the policy owner to purchase another identical policy at the end of the year without proving insurability.Which of the following is an annuity payout option?Period certain, life annuities, cash refund annuity. Period certain income for a fixed period, life annuities (income for life), and cash refund annuities (income for life and benefits to a beneficiary) are all common annuity payout options.What is described by: "No insurance producer may make any misrepresentation for the purpose of inducing a policyholder to lapse on their current insurance and take out another policy?"Twisting.Which of the following is a factor used to calculate life insurance premiums?The rate at which specific populations die (mortality rate).Each member insured under a group life insurance policy receives a(n):Certificate of insurance. The group entity is issued the master policy, and each insured receives a certificate of insurance as proof of coverage.To be considered an out of network a provider must:Not have a contract with the network. The primary distinction of a non-network provider is that he/she has not agreed to the discounts or fee schedule outlined in the provider contract.All of the following are true about the accumulation period of an annuity, EXCEPT:Once the contract is made, the owner cannot make changes. The owner can make changes during the accumulation period. True: The principal earns interest, the interest earned by an annuity is not taxed as with other types investments, the annuitant can earn interest on their interest.When Olivia started a new job, she didn't receive enrollment material for the company's health plan, even though the company paid the full cost of the plan. What action would the insurance company take when Olivia is injured 6 months later?Olivia will be covered and the company will be required to pay premiums from her date of eligibility.Which of the following is not a consideration in replacing a health policy?The location of the insurer. Producers must take care that the replacement of an existing policy is for the insured's benefit. The location of the insurer is not an issue. Taken into consideration: pre-existing conditions, new waiting periods, and coverage and benefits.All of the following statements are true about decreasing term, EXCEPT:Decreasing term is useful for people wishing to purchase life insurance as an investment. Because the policy is worth-0- at the end of the policy period, it is not a type of insurance that would be considered useful for someone looking to fund an investment. Statements true about decreasing term: They are sometimes convertible, when the policy period expires, the term insurance is worth 0. Decreasing term is often used to protect (i.e. pay off) a mortgage if the insured dies.Replacement is defined as any of the following, EXCEPT:Existing life insurance is continued as extended term insurance. Defined as: existing life insurance is extended, existing life insurance is contained as extended term insurance, existing life insurance is reissued with a reduction in cash value. Replacement is defined as any life insurance transaction in which existing life insurance has lapsed or terminated, is continued as extended term insurance, will be reduced in value by the use of nonforfeiture benefits, is being reissued with a reduction in cash value.Under what circumstance is an insurer NOT required to give a privacy notice to the insured?If the insurer does not disclose any nonpublic personal financial information to any nonaffiliated third party and the insurer does not have a customer relationship with the consumer AND if a notice has already been provided by an affiliated insurer.Which of the following would result in a premium increase for an adjustable whole life policy?Converting a term policy to a whole life policy with the same face value. Because term insurance is generally less expensive than whole life insurance, if the policyowner covered a term policy to a whole life policy - with the same face value - the premiums would increase.Which of the following is a major concern when a company changes the insurer for their group policy?Carryover of probationary period, coinsurance, and deductibles. When a company changes to a new insurer, it is important that there is no new probationary period, and that coinsurance and deductibles carry over.Long-term care insurance policies may not limit or exclude which care benefits?Home health. Long-term care insurance policies may not limit or exclude home health care benefits by limiting services provided by registered nurses or Medicare-certified agents.In addition to moral hazards, an underwriter will be very concerned about what physical conditions?Obesity. Obesity is a primary concern in health insurance underwriting.John is an agent, and he did not completely explain the features of a policy he replaced with new coverage. Since John is negligent in this transaction, he may subject to liability under:Errors and omissions procedures.How can someone enrolled in an HMO be able to access doctors who are specialists?He must consult his primary care physician and receive a referral to a specialist based on his primary doctor's evaluation. An HMO is usually set up so there is a primary physician assigned or selected by the member. the member is required to consult with the primary physician and obtain a referral to a specialist in the event his condition warrants.Jim has a life policy with a face value of $250,000 and a total of $25,000 is loans and interest outstanding on the policy. He is killed in a skiing accident. With his double indemnity rider, how much in benefits will the policy pay?$475,000 Jim's policy, with the double indemnity rider, has a death benefit of $500,000 (double $250,000). Subtract the outstanding policy loan of $25,000. The policy will pay $475,000.Which of the following must be given to an applicant for long-term care insurance?Shoppers Guide and outline of coverage. All prospective applicants of long-term care insurance must be provided with a shoppers guide, except for life insurance policies or riders. An outline of coverage must be given to a prospective applicant for long-term care insurance at the time of initial solicitation or upon the applicants request.Any individual may insure another person's life only if they have what kind of interest in the other person?Insurable interest. In order to insure the life of another person, someone must have an insurable interest in the life of another person.Which of the following is considered a reimbursement contract?Major medical contract. Except for major medical, the benefit is known before a claim occurs. Major medical will pay based on the covered loss, which is not known until the loss occurs.What is the maximum that the Michigan Life and Health insurance Guaranty Association will pay for any one life for basic hospital, medical, and surgical benefits?$500,000. For any one life, the Michigan Life and Health Insurance Guaranty Association will pay for a maximum of $500,000 for basic hospital, medical, and surgical insurance benefits.What is the grace period for an individual health insurance policy with a weekly premium?7 days.After written proof of loss is given to an insurer, what is the maximum time that legal action may be brought against the insurer?3 yard. No legal action may be brought to recover on a health insurance policy after the expiration of 3 years after the time written proof of loss is required to be furnished.All individual and group health insurance policies will provide health insurance benefits for a newly born child of the insured or subscriber:From the moment of birth. Individual disability insurance policies providing coverage on an expense incurred basis and which provide coverage for a family member of the insured, must also provide coverage for newborn children from the moment of birth.What is circulation of a maliciously critical statement about any insurer's financial condition to injure the insurer?Defamation. No insurance producer may make an oral or written statement which is false of maliciously critical of the financial condition of any person, and which is calculated to injure. An advertisement may not disparage competitors, their policies, services, or business methods and may not disparage or unfairly minimize competing methods of marketing business.What is the typical partial disability benefit?50% of the monthly indemnity for total disability. The partial disability indemnity is usually 50% of the monthly or weekly indemnity for total disability.Which of the following does not fall in the private insurer category?Self-insurers. Self-insurers retain their own risk and are not considered private insurers. Private insurers: stock companies, mutual companies, and noncommercial organizations.A Health Maintenance Organization (HMO) is known for stressing which type of medical care?Preventative and wellness care to keep its members well. HMOs are designed to encourage its members to participate in testing and wellness programs to promote good health.All of the following government programs provide health insurance protection, EXCEPT:Food stamps. While food stamps are a government program, it will not provide health benefits to participants. The other plans will provide benefits to those who are eligible for the benefits provided. OASDI, Medicare, and Medicaid provide health insurance protection.Which of the following is a benefit of a prescription drug policy? Select one: a. Prescriptions are usually free. b. Prescriptions are for a set price. c. Prescriptions are for a set, lower price. d. Prescriptions can be refilled at any time.c. Prescriptions are for a set, lower price. Under a prescription policy, prescription drugs are not only at a set price, but a much lower price - usually $2, $3 or $5, regardless of the actual cost of the drug.Which dividend option may offset some or all of the benefit reduction caused by loans from a participating whole life plan? Select one: a. Paid up additions b. Accumulate at interest c. One-year term option d. Reduction of his loanc. One-year term option The one-year term option will purchase up to the amount of the cash value annually.Which of the follow statements concerning the payment from a non-qualified annuity is correct? Select one: a. Since this is a non-qualified plan, all payments are 100% tax free. b. Since this is a non-qualified plan only a portion of the payment will be taxable. c. Since this is a non-qualified plan all the income received will be taxable. d. If the income is below a certain threshold, Jack is not required to report it.b. Since this is a non-qualified plan only a portion of the payment will be taxable. A formula called the exclusion ratio causes part of the annuity payment to be tax free and part to be taxable.Which of the following is not an element of the nonforfeiture value of a whole life insurance policy? Select one: a. The policyowner can withdraw some or all of the cash value from the policy. b. Cash withdrawn does not reduce the face value of the policy. c. Cash withdrawn reduces the cash value of the policy. d. The policyowner owns the cash value in the policy.b. Cash withdrawn does not reduce the face value of the policy. Cash withdrawn from a whole life policy DOES reduce the face value of the policy as well as the cash value of the policy.licensee must inform the Commissioner of a change in address within: Select one: a. 15 days b. 30 days c. 45 days d. 60 daysb. 30 days A licensee must inform the Commissioner of a change in address within 30 days of the change.Coordination of benefits is designed to limit which of the following? Select one: a. Limit what an individual policy will pay if the insured is also covered under a group plan. b. Prevent the insured from receiving more that 100% of a loss if an individual plan and a group plan cover the same loss. c. Limit the claim to 100% of the loss when two group plans are involved. d. Prevent the insured from having more than one policyc. Limit the claim to 100% of the loss when two group plans are involved. Group plans have a coordination of benefits clause to prevent the insured from receiving more than 100% of loss incurred.All of the following statements are true about decreasing term, EXCEPT: Select one: a. Decreasing term policies are sometimes convertible b. When the policy period expires, the term insurance is worth 0-. c. Decreasing term is useful for people wishing to purchase life insurance for an investment. d. Decreasing term is often used to protect (i.e. pay off) a mortgage if the insured dies.c. Decreasing term is useful for people wishing to purchase life insurance for an investment. Because the policy is worth-0- at the end of the policy period, it is not a type of insurance that would be considered useful for someone looking to fund an investment.Collin intentionally surrendered a right on his contract is known as waiver. What prevented him from reclaiming the right? Select one: a. Consideration b. Estoppel c. Misrepresentation d. Concealmentb. Estoppel Waiver is voluntarily surrendering a right, and estoppel is the legal process preventing the reclaiming of that right.Which of the following provisions for individual health insurance policies is NOT optional? Select one: a. Reinstatement b. Misstatement of age c. Change of occupation d. Expense-incurred basisa. Reinstatement Reinstatement is a required provision and states that if any renewal premium is not paid on time, a subsequent acceptance of premium by the insurer will reinstate the policy.Which of the following is not true regarding the fixed-amount installment life insurance settlement option? Select one: a. The larger the payment amount, the longer time period payments will be received. b. The length of time installments are paid depends on the amount of the policy proceeds. c. Payments consist of principal and interest. d. Payments are made until the principal and interest reach zero.a. The larger the payment amount, the longer time period payments will be received. The larger the payment amount, the shorter time period payments will be received.Field underwriting is primarily useful to: Select one: a. Make observations that could impact insurability b. Get to know the family c. Develop leads d. Correct errors or omissions on the applicationa. Make observations that could impact insurability The primary value of the field underwriting, is that the agent has the opportunity to view the applicant in his/her surroundings, in person, and make observations regarding insurability and perhaps class of risk (i.e. is the applicant obese, does he/she have any obvious dangerous hobbies, does he/she smoke).All of the following services are offered as a basic service in an HMO, EXCEPT: Select one: a. Doctor services b. Preventive and routine care like annual physical and immunizations c. Rehabilitation therapy d. Durable equipmentd. Durable equipment Durable equipment is not listed as a basic service.Which of the following is a characteristic of an interest sensitive whole life policy? Select one: a. Flexible premiums b. Guaranteed minimum death benefit c. Guaranteed minimum rate of return. d. All of the aboved. All of the above Interest - Sensitive ( Current Assumption) Whole Life has flexible premiums, a guaranteed minimum death benefit, and a guaranteed minimum rate of return.In a replacement transaction, the agent's duties include all the following, EXCEPT: Select one: a. Obtaining a signed replacement statement by the applicant b. Verifying the applicant's information in the proposal. c. Submitting a statement to the insurer, which states whether or not replacement is involved. d. Giving the applicant a copy of the sales proposalb. Verifying the applicant's information in the proposal. Verifying the applicant's information in the proposal is the the replacing insurer's duty, not the agents. In a replacement transaction, the agent's duties include obtaining a signed statement by the applicant, which states that the existing life insurance will be replaced, submitting a statement to the insurer, which states whether or not replacement is involved, giving the applicant a copy of the sales proposal, and submitting the application to the insurer.The coordination of benefits provision in a group contract is designed to: Select one: a. Ensure that both policies involved pay maximum benefits b. Prevent the possibility of over insurance c. Limit the amount to be paid on a child when two policies are involved d. Require that extra diagnostic tests are completed to confirm a diagnosis.b. Prevent the possibility of over insurance When two group insurance contracts are involved for the same person, COB acts to prevent an amount of more than 100% of a loss being paid out.Term insurance provides: Select one: a. A fixed schedule and level premium b. Pure protection and is the least expensive form of insurance c. A flexible schedule and a flexible premium d. None of the aboveb. Pure protection and is the least expensive form of insurance Term insurance provides pure protection and it is the least expensive form of insurance.John is an agent, and he did not completely explain the features of a policy he replaced with new coverage. Since John is negligent in this transaction, he may be subject to liability under: Select one: a. Breach of ethics b. Violation of insurance company policies of conduct c. Errors and omissions procedures d. Liability from former insurance companyc. Errors and omissions procedures The Errors and Omissions carrier will be first in line to correct any financial issues suffered by the insured.An insurer must file a notice of appointment within: Select one: a. 15 days b. 21 days c. 30 days d. 31 daysa. 15 days To appoint a producer, the insurer must file a notice of appointment within 15 days from the date the agency contract is executed.Which of the following is considered a reimbursement contract? Select one: a. Life insurance contract b. Disability income contract c. Major medical contract d. Accidental Death and Dismemberment contractc. Major medical contract Except for major medical, the benefit is known before a claim occurs. Major medical will pay based on the covered loss, which is not known until the loss occurs.What is described by: "No insurance producer may make any misrepresentation for the purpose of inducing a policyholder to lapse on their current insurance and take out another policy?" Select one: a. Rebating b. Twisting c. Defamation d. Unfair discriminationb. Twisting No insurance producer may make any misrepresentation for the purpose of inducing a policyholder to lapse on their current insurance and take out another policy.What is the typical partial disability benefit? Select one: a. 50% of insured's previous earnings b. 50% of the monthly indemnity for total disability. c. 75% of the monthly indemnity for total disability d. 100% of insured's previous earningsb. 50% of the monthly indemnity for total disability. The partial disability indemnity is usually 50% of the monthly or weekly indemnity for total disability.After a group disability insurance policy is approved by the Commissioner, what is issued? Select one: a. Certificate of insurance b. Certificate of coverage c. Certificate of authorization d. Certificate of Fiduciaryb. Certificate of coverage Group disability insurance policies are required to be filed and approved by the Commissioner, who will then issue a certificate of coverage.A producer must report any administrative action taken against them to the Commissioner within: Select one: a. 15 days b. 21 days c. 30 days d. 31 daysc. 30 days An insurance producer must report to the Commissioner any administrative action taken against him in another jurisdiction or governmental agency within 30 days after the final disposition of the matter.Cheryl has a $500,000 permanent life insurance policy. She has paid $200,000 in premiums, and the policy has a cash value of $216,000. If Cheryl dies, her beneficiary will pay taxes on: Select one: a. $0 b. $16,000 c. $216,000 d. $500,000a. $0 Life insurance death benefits are tax-free. The cash value is included in the death benefit, so it is not taxed.When completing an application for insurance, an agent is allowed to do which of the following: Select one: a. Bind the coverage after reviewing all statements b. Order the Medical Information Bureau Report c. Sign for the applicant if he is out of state d. Witness the applicant's signatured. Witness the applicant's signature The agent must be present to witness signatures. The other actions are either prohibited or functions for others in the underwriting process.An insurer may exclude or limit coverage for conditions for which medical advice or treatment was recommended before enrollment for no more than: Select one: a. 3 months b. 6 months c. 9 months d. 12 monthsd. 12 months An insurer may exclude or limit coverage for conditions for which medical advice or treatment was recommended within 6 months before enrollment and the exclusion does not exceed more than 12 months.Guaranteed issue is usually available on what basis? Select one: a. At any time the employee wishes to enroll b. At the employer's discretion c. At the insurance company's discretion d. At the time of hire or other annual open enrollmentsd. At the time of hire or other annual open enrollments When an employee is hired, he or she may enroll without restriction within the prescribed enrollment period. If there is an open enrollment at a later time, the employee may also qualify for guaranteed issue.Samantha purchased a universal life policy when the death benefit in the policy was $200,000. With a current cash value of $50,000, she has selected death benefit option B. How much is her current death benefit? Select one: a. $50,000 b. $150,000 c. $200,000 d. $250,000d. $250,000 Option B of a universal life policy provides for the death benefit to equal the face amount plus the cash value. The premiums are higher if the policyowner selects this option.A person becomes eligible for Medicare when: Select one: a. Part A is automatic for all persons reaching Age 65. b. Part B is only available for those who have reached the fully insured status. c. There are no exceptions to the age 65 rule. d. If a person retires at age 59 1/2, they may request a special exception.a. Part A is automatic for all persons reaching Age 65. When a person reaches age 65 they become eligible for Medicare Part A, even if they continue to work.Which of the following would result in a premium increase for an adjustable life insurance policy? Select one: a. Converting a whole life policy to a term policy with a greater face value b. Converting a whole life policy to a term policy with the same face value c. Converting a term policy to a whole life policy with the same face value d. Converting a term policy to a whole life policy with a lesser face valuec. Converting a term policy to a whole life policy with the same face value Because term insurance is generally less expensive than whole life insurance, if the policyowner converted a term policy to a whole life policy - with the same face value - the premiums would increase.Jim has a life policy with a face value of $250,000 and a total of $25,000 in loans and interest outstanding on the policy. He is killed in a skiing accident. With his double indemnity rider, how much in benefits will the policy pay? Select one: a. $225,000 b. $250,000 c. $475,000 d. $500,000c. $475,000 Jim's policy, with the double indemnity rider, has a death benefit of $500,000 (double $250,000). Subtract the outstanding policy loan of $25,000. The policy will pay $475,000.What type of life insurance program would be a good choice for grandparents to help their grandson in later years? Select one: a. A fully funded universal life plan b. Annual renewable term c. Juvenile Life d. A limited pay life planc. Juvenile Life Juvenile life is designed for this purpose.Which of the following is true about immediate annuities? Select one: a. They cannot be purchased with one payment. b. They can begin payouts within two years of the first premium payment. c. They have annuity periods that are sometime (defined in the contract) in the future d. They do not have an accumulation period.d. They do not have an accumulation period. They do not have an accumulation period, and payouts must begin within one year of the first premium payment.Which plan is most likely to have a pre-negotiated discount with various medical providers? Select one: a. HMO b. TPA c. PPO d. ASOc. PPO By definition, a PPO contracts with medical providers for a pre-determined discount for services provided.A change of occupation provision will allow the insurance company to do any of the following at the time of claim, EXCEPT: Select one: a. Pay the benefits stated in the policy b. Increase the premiums for that individual c. Pay a reduced benefit for a higher risk occupation d. Require a doctor's statement confirming disabilityb. Increase the premiums for that individual A change of occupation will allow the insurance company to reduce benefits, but it will not be allowed to increase premiums on an individual basis.Which of the following has not been taken to court for further interpretation? Select one: a. Reasonable expectations b. Ambiguities in a contract of adhesion c. Utmost good faith d. Subrogationd. Subrogation Reasonable expectations, ambiguities in a contract of adhesion and utmost good faith have all been taken to court for interpretation.The principal losses related to accident and health insurance are: Select one: a. Loss of income from disability and medical expenses from the cost of medical treatments, physician's fees, hospitalization and prescriptions b. Loss of earning power caused by premature death c. Loss of retirement income caused by prolonged life d. All of the abovea. Loss of income from disability and medical expenses from the cost of medical treatments, physician's fees, hospitalization and prescriptions The principal types of losses dealt with in accident and health insurance are medical expenses and loss of income caused by disability.An HMO will stress all of the following, EXCEPT: Select one: a. Higher deductibles for curative services b. Low or no co-pay for doctor visits c. Screenings for potential health conditions d. Wellness as a lifestylea. Higher deductibles for curative services HMOs generally do not have deductibles, but they do assess co-pays in some cases.Which of the following is true about Medicare/Medicaid and Medicare supplements? Select one: a. They can provide nursing home benefits needed for aging. b. Medicare and Medicare supplements can provide nursing home benefits from an injury for 6 months. c. They all provide nursing home benefits. d. None of the aboved. None of the above Medicare pays for nursing home care that is related to a covered illness or injury - not for aging. Medicare and Medicare supplements can provide nursing home benefits, but the coverage is limited and usually does not extend beyond 100 days and only if it follows hospital confinement.The Commissioner of Insurance is appointed by the Governor for a term of4 yearsAll of the following are examples of insurance transactions except: A. soliciting applications for insurance B. delivering policies C. licensing of producers D. collecting premiumsCorrect answer: C - licensing of producersA temporary license issued to close the affairs of a deceased producer may be issued for up to _____ days at the discretion of the Commissioner180 daysContinuing Education (CE) ______ hours of CE every two years ______ hours must be in Ethics ______ day grace period to complete CE24 total hours every two years 3 hours in ethics 90 day grace periodMichigan Life and Health Insurance Guaranty AssociationProtects policy holders against failure insolvent insurersControlled businessIt is permitted provided it does not exceed 15% of the premiums written in a 12-month periodTo motivate a buyer to sign an application for insurance, a producer promises a gift equal to 50% of the commission. This is an example of __________.RebatingDefamationA written statement that is false and derogatory that is designed to injure someone's reputation.The maximum fine for knowingly violating a cease and desist order is $________ and __________________.$10,000 and possible license revocationInsurance counselorProvides advice concerning an insurance policy and charges a fee for that advice.An applicant who has been denied an insurance license has _____ days to request a hearing to protest the denial.30 daysTrue / False A producer may share commissions with another licensed producerTrueTrue / False A producer may not share commissions with a licensed nonresident producerFalseIf, after a hearing, the Commissioner believes a producer knowingly violated insurance licensing laws, the Commissioner can:Fine the producer a max of $2,500 per violationA producer has a fiduciary responsibility to all of the following:- Insured on cancelled policies - Insurer, for premiums due - Prospective purchaser of insurance, when the application is rejected.Why can't a producer barter or trade an insurance contract for goods and services?The insurance product is not the producer's to barter; it belongs to the insured.How often must the Commissioner examine the books, records, and documents of domestic insurers?At least once every 5 yearsA producer has _____ days to respond to charges of violating insurance laws.30 days.If a producer is convicted of routinely misrepresenting benefits in insurance policies, he may be fined up to $_______ for all violations.$25,000Under what type of policy does an insured have to be notified if current policy values are insufficient to maintain the policy, given guaranteed interest and expense rates?Universal Life InsuranceAn advertisement for a life insurance policy must include all of the following:- information material to the insurance policy - a description of the type of policy advertised - the identity of the insurerImplying that policy dividends are guaranteed as an inducement for an insured to drop an existing policy and purchase a new policy is an example of _____________.TwistingThe minimum number of lives that must be covered under a group life insurance policy in Michigan is ______.2 lives.The maximum life insurance policy loan interest that may be charged on a fixed interest loan is ______%.8%In life insurance, all advertisements must be kept by the insurer for at least ________ months.48 monthsThe maximum life insurance policy loan interest that may be charged on an adjustable rate loan is ______%.18%True/ False A long-term care policy can exclude all of the following: - Alcoholism - Drug addiction - Alzheimer's disease - Self-inflicted injuryFalse A long-term care policy can exclude all alcoholism, drug addiction, and self-inflicted injury. Alzheimer's disease cannot be excluded.True/False A long-term care application must include questions that reveal when the proposed coverage will replace other existing health or long-term care coverage.TrueTrue/False A Medicare supplement policy can indemnify against losses resulting from accidents on a different basis than losses resulting from sickness.False - Medicare supplements must indemnify the same way for accidents and sickness.True/False A Medicare supplement policy must cover intermediate outpatient care for substance abuse.True - Intermediate care for substance abuse includes inpatient treatment for drug addiction and alcohol abuseIn Michigan, the free-look or trial examination period for a LTC policy is ______ days.30True/False All LTC policy owners must be offered a cost-of-living benefit adjustment option.TrueHealth insurance is in force for newborns from birth and notification must be given within _____ days of birth for coverage to extend beyond that point.31 daysAn individual that is continually insured under a group policy for at least ____ months may convert to an individual policy upon policy termination.3 monthsA person becomes eligible for the federal Medicare program at the age of ____. Coverage must be requested within _____ days before or after the applicant's birthday.65 years old, 90 daysThe Medicare maximum preexisting condition exclusion period is ____ months.6 monthsThe free-look period for Medicare supplements and LTC policies is ____ days.30 daysAn employee who works at least _____ hours weekly must be considered an eligible employee for small employer medical plans.30 hours / weekThe number of eligible full-time employees for small group health plans is _____ to _____.2 to 50 employeesA LTC policy must provide coverage for at least ______ consecutive months.12 consecutive monthsAn insurance company must file a notice of appointment or give notice of appointment termination to a producer within _____ days.15 daysA producer has ______ days to notify the Department of Insurance of any name or address changes.30 daysPerilImmediate specific event causing a lossHazardA factor that gives rise to a loss.The five methods of managing risk are:STARR (sharing, transfer, avoidance, reduction, retention)Elimination periodTotal # of days an insured must be disabled before income benefits will pay out.CoinsuranceShared expenses between the insured and the insurer. The insurer always has the higher %.Participating insurance companyPays dividendsUnauthorized/non-admittedCannot transact insurance within the state.Express authorityExplicit authority that an agent has per the written contractImplied authorityAuthority that is not expressly granted in the contract but is necessary in order to conduct businessApparent authorityAuthority the agent seems to have to the general public based on actions undertaken by the agent.WaiverIntentional giving up of a rightAleatory contractDependent on an uncertain eventContract of adhesionThe insurance company drafts the contract wording and the insured simply follows it.Unilateral contractThe insured makes the premium payments only one party has the responsibility.Loss Ratio % =operating expenses / premiumsContributoryThe insured contributes $ to their group plan____% of eligible employees must participate in a contributory plan.75%Non-contributoryPremium is paid entirely by the employer.____% of eligible employees must participate in a non-contributory plan.100%Enrollment periodTime in which you can enroll in benefits without having to undergo medical underwriting. (No evidence of insurability)Probationary periodThe period of time before an employee is eligible to enroll in benefits.The human life value approach to selling life insurance focuses on an individual's _______________.An individual's future stream of income. (Annual salary, expenses, years remaining until retirement, future value of current dollars)The needs approach to selling life insurance focuses on ___________________.The needs of the survivors. (Funeral expenses, final illness, continuing family income, education)Blackout periodThe pre-retirement period (the time before the insured/spouse is eligible for Social Security)FiduciaryPerson of financial trustReentry Term InsuranceAllows the insured to provide evidence of insurability to qualify for a lower rate.Level Term InsuranceFixed face amount, premium may increase over time.Whole Life - Cash ValueGuaranteed cash value, little cash value in the beginning but increases over time.Universal life InsuranceHas death protection that resembles 1 year renewable term and cash value that is based on interest rates (current annual rate and contract rate)Variable Life InsuranceCash values are not guaranteed and are backed by equity investments. They are regulated as securities by the SEC and FINRA.Equity Indexed Life InsurancePolicies with face amounts that are linked to an equity index such as S&P 500.With credit life insurance, the creditor is both the ________ and the _________.Owner & beneficiary.Individuals with terminal illnesses are able to sell their life insurance policies to __________.Viatical companiesEntire contract clauseThe policy and copy of the application make up the entire insurance contract.Life insurance coverage is granted in consideration of the __________ and the payment of the ______________.Application, initial premiumPayment of premium provisionSpecifies when and how premiums are to be paid. The more frequently the premium mode, the more the policy will cost over time.A life insurance policy contract will permit reinstatement within _____ years of a policy lapsing. Proof of insurability may be required. Reinstatement application must be filed.3 yearsTrue/False When calculating the death benefit for a life insurance policy, any outstanding loans and loan interest must be deducted from the face amount.TruePolicy loans may be taken from _____% of the total cash value from whole life policies and ____% to ____% of the total cash value from variable life policies.90%, 70-90%A life policy's incontestability period is ___ years. After this time, the insurer CANNOT dispute the validity of the contract2 yearsIf the insured dies within the first ___ policy years, there is no coverage. However, premiums that have been paid are refunded to the beneficiary.2 years (Suicide clause)The death benefit is adjusted to the amount that the premium would have been in the instance of ________ __ _____.Misstatement of sexRevocable beneficiaryCan be changed by the insured at any time without notifying the beneficiary.Irrevocable beneficiaryCannot be change without the consent and signature of the beneficiary.Per CapitaPer person, death benefit is only paid to the people listed in the policyPer Stirpes(By way of branches), the death benefit is passed down to the beneficiary's living children.With a ___________ clause, the death benefit is not distributed in a lump sum and cannot go to a creditor when the funds are held by the insurance company.Spendthrift clauseThe ____________ rider ( _____ ________ rider) pays double the face amount if the insured dies due to an accident. (Within 90 days)Accidental death, double indemnityWaiver of premium riderPremium is waived if the insured becomes permanently and totally disabled. Subject to a waiting period. Does not change the face amount of cash value.The __________ __________ rider waives premium payments while the inured is disabled and pays a monthly income.Disability Income RiderThe _______ rider for juvenile policies waives premium payments if the person who pays the premium dies or becomes disabled until the insured is of a certain age.Payor riderAnnuities are ___________ during the accumulation period, but benefit payments are _________ as income.Taxed, not taxedTrue/False The basic function of an annuity is to liquidate funds over a specific period of time in order to protect against living too long.TrueA ___________ is given to each covered person under a group life insurance policy.Certificate of InsuranceSocial security excludes:Railroad workers, federal employees hired before 1984, and employees of state and local government.To be considered fully insured by Social Security, you must have earned ____ quarters of coverage which is equal to _____ years40 quarters, 10 yearsThe elimination period of disability benefits is ____ months and the disability must be expected to result in death or continue for at least 12 months.5 month elimination periodUp to _____% of Social Security benefits are included in a worker's adjusted gross income for taxes.85%Policy proceeds that are paid in a lump sum are ____________. For installment payments, the principal portion is ___________, while the interest portion is __________.Not taxable, not taxable, taxable.Modified Endowment Contracts (MECs) discourage the use of life insurance with high premiums as investments. Policies that fail the test are considered MECs and are subject to _________.Less favorable tax treatmentTrue / False Dividends are taxable as income.False, dividends are not taxable as they are considered to be a return of premium. Interest that dividends earn, however, is taxable.Qualified retirement planMeets federal requirements and receives favorable tax benefits.A defined benefit plan is where the employer agrees to make necessary contributions on behalf of _____________ in order to provide a specific retirement benefit.Eligible employeesGroup deferred annuitiesspecified amounts of deferred annuities are purchased each year on in individual basis.Profit Sharing PlansContributions are made by the employer from the company profits. Each employee gets a % based on their salary. Benefits vary based on profits.Individual Retirement Accounts (IRA)- Can contribute 100% of wages up to the amount set by the IRS - Early withdrawal penalties apply - Required distributions at 70 1/2 yearsRoth IRAs- Contributions are not tax deductible, but distributions are tax free if it has been maintained for 5 years.Keough Plans (HR-10)For self employed individuals and their eligible employees.A policy or rider that pays a face amount if there is an accidental loss of: 2 arms, 2 legs, or the loss of vision in both eyesAccidental Death & Dismemberment (AD&D)Limited/Special Health Insurance Policies **HITABCDH I - hospital income T - travel accident insurance A - accident only B - blanket insurance C - credit insurance D - Dread diseaseBlue Cross & Blue Shield pay benefits on a ________ basis, this means that they pay the ____________ directly.service basis, pays the provider directlyHealth Maintenance Organizations (HMO) focus on routine wellness exams. They pay for other services on a ____________ basis, which is based on what is _________.fee-for-service basis, prices that are usual, reasonable, and customary.The system in which an insured must see their primary care physician for a referral to a specialist.GatekeeperPreferred Provider Organizations (PPOs)Made up of a selected group of independent hospitals and medical practitioners. Fee-for-service basis.Flexible Spending Accounts (FSA)Funded by the employee via salary reduction (pretax $). The $ is used to cover certain medical expenses.Health Savings Accounts (HSAs)For people with high-deductible plans.Insurance agents are appointed by ________.Insurance companiesWhich element is NOT necessary for the formation of a valid contract? A. Consideration B. Competent parties C. Written document D. Legal purposeCorrect answer - C, the contract does NOT need to be written.Joe has only paid 5 payments on his health insurance policy when he is hit by a car. The insurance company pays out nearly half a million to cover treatment for injuries. This is an example of: A. Contract of adhesion B. Aleatory contract C. Unilateral contract D. Utmost good faithCorrect answer - B, it is contingent on an uncertain eventKaren applies for a life insurance policy and pays the initial premium. Carol has : A. Made an offer to the insurer B. Accepted an offer from the insurerCorrect answer - A, made an offer to the insurerThe failure to disclose known facts is _____.ConcealmentExample of an aleatory contractWhen one party may receive much more from the contract than they give in exchange.Simplified issueLife insurance that requires no medical exam and asks only basic medical questionsAndy is a 30 year old man who drinks occasionally, does not smoke, and has no known health problems. What type of risk would he be classified as?Standard riskTo be certain that insurers have the money available to pay claims as they arise, they are required to maintain _______.ReservesTo be eligible to purchase insurance, an association group must: A. Be organized an maintained strictly for the purpose of obtaining insurance. B. Have at least 200 members C. Have a constitution and bylaws D. All of the aboveCorrect answer - C, have a constitution and bylaws. The group must be organized for purposes other than insurance coverage.Kevin starts a new job on March 1, he is not eligible for insurance benefits until July 1. The period between the start date and the eligibility date is the _________.Probationary periodA baker's union and a butcher's union join together to form a trust to provide insurance to their employees. This type of group is called _______.Taft-Hartley trust (Group made of one or more unions)Which of the following underwriting characteristics is generally required by law? A. Employer control B. Predetermined coverage amount C. Insurance incidental to group D. Nondiscriminatory classificationsCorrect answer - D, nondiscriminatory classificationsTrue/False Life insurance can be purchased to guarantee lifetime retirement income.FalseMichael's wife died 3 years ago, leaving him with 2 grade-school aged children. Which income period is Michael in?Family dependency periodTrue/False Life insurance proceeds are generally the only source of income for surviving dependents of a breadwinner.False, Social Security and retirement plans are other potential sources of income.Which of the following is NOT financed using life insurance? A. Buy-sell agreements B. Section 303 stock redemption C. Cross purchase agreement D. Split-dollar planCorrect answer - D, split dollar planKelly fills out an application for life insurance, but does not pay the initial premium. What kind of receipt will she receive?Inspection receiptThis type of receipt is most commonly used in life insuranceConditional receiptThe most common reason why a payment of a death claim would be delayed is because - .The insurer has not received the proper notification of death.True/False Term insurance provides pure insurance protection.TrueWhat type of policy is commonly used to cover a mortgage on a house if the insured were to die before paying it off.Decreasing term insuranceWhole life insurance policies provide all of the following EXCEPT: A. pure insurance protection B. an opportunity for significant investment gains C. cash values D. the ability to take loans against the cash valueCorrect answer - B, an opportunity for significant investment gainsPam has a policy that pays dividends which are used to purchase additional paid-up insurance to increase the face value of the policy. Pam has what type of policy?Economatic policyWhich of the following is NOT flexible in a universal life policy: A. Premium amount B. Premium schedule C. Guaranteed interest rate D. Death benefitsCorrect answer - B, guaranteed interest rateAngela has a universal life policy that she purchased several years ago. At that time, the death benefit of the policy was $250,000. Her cash value is now $50,000. How much is her current death benefit?$250,000, UL policies have a level death benefit despite the cash value accumulationsRyan collects insurance premiums every Wednesday at the home of several policyholders. Which type of policy do these policyholders probably have?Industrial life insuranceIn order to sell variable policies, the producer must possess a state insurance producer license, get a passing score on the appropriate securities exam, and registration with ________.FINRATrue/False Once a year a variable life insurance policy must have a face amount that is higher than the cash value by a certain percentage in order to meet the cereal definition of life insurance.TrueFamily income policyCombines whole life insurance with decreasing term coverageFamily maintenance policyCombines whole life insurance with level term coverageMinimum deposit policies are less popular due to tax regulations, but they can still be used as long as ___ of ___ premium payments are made from sources other than the cash value4 of 7Family protection policyCombines whole life on one family member with term coverage on the other family membersLeslie has a policy that will pay $100,000 if she dies before age 65 and $75,000 if she dies after age 65. She probably has what type of policy?Multiple protection policyHow long is the typical grace period?31 daysIf Ben dies, Joan will receive the death benefit. If Joan had died before Ben, Toby would receive the benefit. Toby is what type of beneficiary?Contingent beneficiaryLiz purchases an immediate annuity. The annuity contract must be a _____ _______ annuity.Single premiumWhich type of annuity is most likely to provide a death benefit?Deferred annuityWhich of the following is NOT used to determine annuity premiums? A. Assumed interest rate B. Annuitant's retirement date C. Income amount and payment guarantee D. Applicant's sexCorrect answer - B, annuitant's retirement dateAn annuity is the opposite of _______.Life insuranceTrue/False An annuity is the distribution of a lifetime income.TrueFixed annuityGuarantees a minimum rate of return.Straight-life annuityAn annuity that will pay a monthly income for the remainder of the annuitant's life and then stop making payments.Carol is eligible fore retirement benefit based on her own earnings as well as her late husband's earnings. What benefits will Carol receive?Only the larger benefitP. I. A.Primary Insurance AmountA person who receives retirement benefits at normal retirement age receives _____% if PIA as a retirement benefit.100%A surviving spouse who is disabled can start receiving survivor benefits at age ____, if the deceased was fully insured.Age 50A surviving spouse who is not disabled can start receiving survivor benefits at age ____, if the deceased was fully insured.Age 60At what age is an individual eligible to receive full Social Security retirement benefits? A. 65 B. Nominal retirement age C. 67 D. Normal retirement ageD. Normal retirement ageTrue/False As a general rule, life insurance and annuity premiums are tax deductible.False, life and annuity premiums are NOT tax deductible.Jan is receiving the proceeds of a life insurance policy as a stream of income over a period of several years. What part of the money is subject to tax? A. None of it; it is life insurance proceeds B. All of it; it is being paid out as income C. Only the part that represents income earned on the original death benefit. D. Only the part that represents the original death benefit.C. Only the part that represents income earned on the original death benefit is subject to tax.True/False Anyone with earned income may contribute to an IRA.TrueQualified plan distributions are likely to receive a tax penalty if the distribution is _____ or _____.Premature or latePremature IRA or qualified plan distributions must be taxed as income and have a penalty tax of ___%10%At what age is an individual no longer subject to early withdrawal penalties under an IRA? A. 65 B. 59 1/2 C. 67 D. 63 1/2B. 59 1/2Jeff has a policy that will pay any expenses he incurs as the result of in-hospital medical treatment, as well as some of the expenses he incurs on an outpatient basis. Jeff probably has a: A. disability income policy B. long-term care policy C. medical expense insurance policy D. hospital income policyC. Medical expense insurance policyJT's HMO requires that he receive health care services from a specified, limited number of health care providers chosen by the HMO. JT's HMO is a ______ panel.ClosedAll of the following are managed care plans EXCEPT: A. Point-of-service plans B. Health maintenance organizations C. Preferred provider organizations D. Indemnity arrangementsD, indemnity arrangementsCapitationA method of payment in which a provider is paid a specific fee monthly for each subscriber is known as capitation.A type of plan where employees can select benefits from a variety of coverage options based on individual and family needs.Cafeteria planUnder workers' compensation, the permanent total disability benefit, which subject to minimum and maximum dollar amounts, is generally ______%66.66%Health insurance coverage never applies until: A. the policy is delivered B. the insured has paid for the policy C. an underwriting decision is made D. the application is reviewed by underwritingB. the insured has paid for the policyOnce health insurance become effective, unless it is cancelled, it will stay in force for: A. an indefinite period B. 6 months C. 1 year D. The length of the termD. the length of the termTrue/False No loss/no gain legislation requires a replacing policy to continue to pay claims ongoing under the policy it replaces.TrueAn entire contract contains all of the following EXCEPT: A. the insurance policy B. the premium payment C. any attachments D. any endorsementsB. the premium paymentAll insurance policies can be cancelled at any time by _______________ only.The insured.If there is no beneficiary listed on a policy, benefits are paid to ________________.The insured's estate.Written proofs of loss must be furnished within ____ days after the loss.90 daysA pro-rata return is one in which the insurer returns ______ of the unearned premium.All of the unearned premium is returned.An insurer has a ____ day window when the insured cannot sue the insurer to recover under a claim since the insurer needs time to be able to respond.60 day windowChristina has a claim for $3,000 and a past due premium of $150. How will the insurer handle the claim?Pay the claim minus the past due premium.If George cancels his health insurance policy, the insurer will issue a ________ refund of _______ unearned premium.short-rate refund of most of the unearned premiumTrue/False Consideration for a health policy includes the statements made in the application and the premium.TrueTo receive benefits from a disability income policy due to sickness, the insured must be: A. totally disabled B. partially disabled C. both A & BA. totally disabledRehabilitation benefitA benefit that enables a disabled insured to learn to work in another occupation.Cost-of-living benefitA benefit that protects agains the erosion of purchasing power for fixed disability benefits.A rider that provides more benefits during the first 6 months or year of a claim is a _________________ rider.Additional monthly benefit riderThe elimination period may be thought of as a ________ deductible.Time deductibleThe longer the benefit period, the _____ the premium.HigherWhich definition of total disability is more favorable to the insured, own occupation or any occupation?Own occupationLong-term disability policies provide benefits: A. For 2-5 years B. to age 65 C. to age 100B. to age 65Disability benefits will generally be paid for the lifetime of the insured if total disability due to sickness begins at age ______ or earlier.Age 55 or earlierThe out of pocket limit is also known as _______.Stop-loss limitFirst dollar coverageNo deductible applies ($0 deductible)Maximum benefitThe dollar limit beyond which the insurer no longer participates in the payment of expenses.Corridor deductibleA deductible that runs between the first dollar coverage of a basic policy and the comprehensive coverage of a supplemental policy.Scheduled benefits are generally ____ than reasonable and customary allowances.Lower, the insured may also have some out of pocket costs.True/False Teeth that are knocked out in an accident will generally not be replaced under a dental policy.False, this is not a common exclusionPrepaid dental plans offer services based on _________.CapitationA hospital income policy will make payments to: A. the hospital B. the insured C. both A&B D. the beneficiaryB. the insuredJosh has a hospital income policy that will pay $1,500 per month for up to 12 months with no elimination period. If Josh is in the hospital for 10 days, how much will the policy pay?$500 ($1,500 per month / 30 days = $50 per day; $50 per day x 10 days = $500)Dread disease policies cover ________ diseases.Specific diseasesAll of the following could be considered dependents EXCEPT the insured's: A. Parents B. Adopted children C. 25-year-old child who became physically disabled at 24 D. 21-year-old child who is attending college full timeC. 25-year-old child who became disabled at 24True/False Under the coordination of benefits rule, the primary health company pays as if there were no other coverage.True, the secondary company will pay whatever the primary company will not pay up to the policy limits.Under Medicare Part B, individuals pay a deductible each _________.YearAfter the deductible is satisfied, Part B pays what % of all approved charges?80%Medicare supplement policies are also known as ______.Medigap policiesFully insured and disability insured are defined by: A. the state legislatures B. Social Security regulations C. Individual insurers D. the state department of insuranceB. Social security regulationsUnder social security benefits, disabled workers receive a benefit equal to their ______ ______ ______.Primary Insurance Amount (PIA)For each benefit period, Medicare will pay the full cost of ___ days of hospital care.60 daysNursing home care is generally covered by: A. Medicare B. Medicare supplements C. Long-term care policies D. All of the aboveC. Long-term care policiesMost people will require _____ or ____ care at some time during their later years.Custodial or residential careMeredith's company pays the entire premium for her group disability coverage. How much of her benefits from this coverage would be subject to tax?All of the benefits are subject to tax since the company can deduct the premium payments. If Meredith paid half of the premium, then only half would be subject to taxes.The Commissioner of Insurance is appointed by the Governor for a term of4 yearsAll of the following are examples of insurance transactions except: A. soliciting applications for insurance B. delivering policies C. licensing of producers D. collecting premiumsCorrect answer: C - licensing of producersA temporary license issued to close the affairs of a deceased producer may be issued for up to _____ days at the discretion of the Commissioner180 daysContinuing Education (CE) ______ hours of CE every two years ______ hours must be in Ethics ______ day grace period to complete CE24 total hours every two years 3 hours in ethics 90 day grace periodMichigan Life and Health Insurance Guaranty AssociationProtects policy holders against failure insolvent insurersControlled businessIt is permitted provided it does not exceed 15% of the premiums written in a 12-month periodTo motivate a buyer to sign an application for insurance, a producer promises a gift equal to 50% of the commission. This is an example of __________.RebatingDefamationA written statement that is false and derogatory that is designed to injure someone's reputation.The maximum fine for knowingly violating a cease and desist order is $________ and __________________.$10,000 and possible license revocationInsurance counselorProvides advice concerning an insurance policy and charges a fee for that advice.An applicant who has been denied an insurance license has _____ days to request a hearing to protest the denial.30 daysTrue / False A producer may share commissions with another licensed producerTrueTrue / False A producer may not share commissions with a licensed nonresident producerFalseIf, after a hearing, the Commissioner believes a producer knowingly violated insurance licensing laws, the Commissioner can:Fine the producer a max of $2,500 per violationA producer has a fiduciary responsibility to all of the following:- Insured on cancelled policies - Insurer, for premiums due - Prospective purchaser of insurance, when the application is rejected.Why can't a producer barter or trade an insurance contract for goods and services?The insurance product is not the producer's to barter; it belongs to the insured.How often must the Commissioner examine the books, records, and documents of domestic insurers?At least once every 5 yearsA producer has _____ days to respond to charges of violating insurance laws.30 days.If a producer is convicted of routinely misrepresenting benefits in insurance policies, he may be fined up to $_______ for all violations.$25,000Under what type of policy does an insured have to be notified if current policy values are insufficient to maintain the policy, given guaranteed interest and expense rates?Universal Life InsuranceAn advertisement for a life insurance policy must include all of the following:- information material to the insurance policy - a description of the type of policy advertised - the identity of the insurerImplying that policy dividends are guaranteed as an inducement for an insured to drop an existing policy and purchase a new policy is an example of _____________.TwistingThe minimum number of lives that must be covered under a group life insurance policy in Michigan is ______.2 lives.The maximum life insurance policy loan interest that may be charged on a fixed interest loan is ______%.8%In life insurance, all advertisements must be kept by the insurer for at least ________ months.48 monthsThe maximum life insurance policy loan interest that may be charged on an adjustable rate loan is ______%.18%True/ False A long-term care policy can exclude all of the following: - Alcoholism - Drug addiction - Alzheimer's disease - Self-inflicted injuryFalse A long-term care policy can exclude all alcoholism, drug addiction, and self-inflicted injury. Alzheimer's disease cannot be excluded.True/False A long-term care application must include questions that reveal when the proposed coverage will replace other existing health or long-term care coverage.TrueTrue/False A Medicare supplement policy can indemnify against losses resulting from accidents on a different basis than losses resulting from sickness.False - Medicare supplements must indemnify the same way for accidents and sickness.True/False A Medicare supplement policy must cover intermediate outpatient care for substance abuse.True - Intermediate care for substance abuse includes inpatient treatment for drug addiction and alcohol abuseIn Michigan, the free-look or trial examination period for a LTC policy is ______ days.30True/False All LTC policy owners must be offered a cost-of-living benefit adjustment option.TrueHealth insurance is in force for newborns from birth and notification must be given within _____ days of birth for coverage to extend beyond that point.31 daysAn individual that is continually insured under a group policy for at least ____ months may convert to an individual policy upon policy termination.3 monthsA person becomes eligible for the federal Medicare program at the age of ____. Coverage must be requested within _____ days before or after the applicant's birthday.65 years old, 90 daysThe Medicare maximum preexisting condition exclusion period is ____ months.6 monthsThe free-look period for Medicare supplements and LTC policies is ____ days.30 daysAn employee who works at least _____ hours weekly must be considered an eligible employee for small employer medical plans.30 hours / weekThe number of eligible full-time employees for small group health plans is _____ to _____.2 to 50 employeesA LTC policy must provide coverage for at least ______ consecutive months.12 consecutive monthsAn insurance company must file a notice of appointment or give notice of appointment termination to a producer within _____ days.15 daysA producer has ______ days to notify the Department of Insurance of any name or address changes.30 daysPerilImmediate specific event causing a lossHazardA factor that gives rise to a loss.The five methods of managing risk are:STARR (sharing, transfer, avoidance, reduction, retention)Elimination periodTotal # of days an insured must be disabled before income benefits will pay out.CoinsuranceShared expenses between the insured and the insurer. The insurer always has the higher %.Participating insurance companyPays dividendsUnauthorized/non-admittedCannot transact insurance within the state.Express authorityExplicit authority that an agent has per the written contractImplied authorityAuthority that is not expressly granted in the contract but is necessary in order to conduct businessApparent authorityAuthority the agent seems to have to the general public based on actions undertaken by the agent.WaiverIntentional giving up of a rightAleatory contractDependent on an uncertain eventContract of adhesionThe insurance company drafts the contract wording and the insured simply follows it.Unilateral contractThe insured makes the premium payments only one party has the responsibility.Loss Ratio % =operating expenses / premiumsContributoryThe insured contributes $ to their group plan____% of eligible employees must participate in a contributory plan.75%Non-contributoryPremium is paid entirely by the employer.____% of eligible employees must participate in a non-contributory plan.100%Enrollment periodTime in which you can enroll in benefits without having to undergo medical underwriting. (No evidence of insurability)Probationary periodThe period of time before an employee is eligible to enroll in benefits.The human life value approach to selling life insurance focuses on an individual's _______________.An individual's future stream of income. (Annual salary, expenses, years remaining until retirement, future value of current dollars)The needs approach to selling life insurance focuses on ___________________.The needs of the survivors. (Funeral expenses, final illness, continuing family income, education)Blackout periodThe pre-retirement period (the time before the insured/spouse is eligible for Social Security)FiduciaryPerson of financial trustReentry Term InsuranceAllows the insured to provide evidence of insurability to qualify for a lower rate.Level Term InsuranceFixed face amount, premium may increase over time.Whole Life - Cash ValueGuaranteed cash value, little cash value in the beginning but increases over time.Universal life InsuranceHas death protection that resembles 1 year renewable term and cash value that is based on interest rates (current annual rate and contract rate)Variable Life InsuranceCash values are not guaranteed and are backed by equity investments. They are regulated as securities by the SEC and FINRA.Equity Indexed Life InsurancePolicies with face amounts that are linked to an equity index such as S&P 500.With credit life insurance, the creditor is both the ________ and the _________.Owner & beneficiary.Individuals with terminal illnesses are able to sell their life insurance policies to __________.Viatical companiesEntire contract clauseThe policy and copy of the application make up the entire insurance contract.Life insurance coverage is granted in consideration of the __________ and the payment of the ______________.Application, initial premiumPayment of premium provisionSpecifies when and how premiums are to be paid. The more frequently the premium mode, the more the policy will cost over time.A life insurance policy contract will permit reinstatement within _____ years of a policy lapsing. Proof of insurability may be required. Reinstatement application must be filed.3 yearsTrue/False When calculating the death benefit for a life insurance policy, any outstanding loans and loan interest must be deducted from the face amount.TruePolicy loans may be taken from _____% of the total cash value from whole life policies and ____% to ____% of the total cash value from variable life policies.90%, 70-90%A life policy's incontestability period is ___ years. After this time, the insurer CANNOT dispute the validity of the contract2 yearsIf the insured dies within the first ___ policy years, there is no coverage. However, premiums that have been paid are refunded to the beneficiary.2 years (Suicide clause)The death benefit is adjusted to the amount that the premium would have been in the instance of ________ __ _____.Misstatement of sexRevocable beneficiaryCan be changed by the insured at any time without notifying the beneficiary.Irrevocable beneficiaryCannot be change without the consent and signature of the beneficiary.Per CapitaPer person, death benefit is only paid to the people listed in the policyPer Stirpes(By way of branches), the death benefit is passed down to the beneficiary's living children.With a ___________ clause, the death benefit is not distributed in a lump sum and cannot go to a creditor when the funds are held by the insurance company.Spendthrift clauseThe ____________ rider ( _____ ________ rider) pays double the face amount if the insured dies due to an accident. (Within 90 days)Accidental death, double indemnityWaiver of premium riderPremium is waived if the insured becomes permanently and totally disabled. Subject to a waiting period. Does not change the face amount of cash value.The __________ __________ rider waives premium payments while the inured is disabled and pays a monthly income.Disability Income RiderThe _______ rider for juvenile policies waives premium payments if the person who pays the premium dies or becomes disabled until the insured is of a certain age.Payor riderAnnuities are ___________ during the accumulation period, but benefit payments are _________ as income.Taxed, not taxedTrue/False The basic function of an annuity is to liquidate funds over a specific period of time in order to protect against living too long.TrueA ___________ is given to each covered person under a group life insurance policy.Certificate of InsuranceSocial security excludes:Railroad workers, federal employees hired before 1984, and employees of state and local government.To be considered fully insured by Social Security, you must have earned ____ quarters of coverage which is equal to _____ years40 quarters, 10 yearsThe elimination period of disability benefits is ____ months and the disability must be expected to result in death or continue for at least 12 months.5 month elimination periodUp to _____% of Social Security benefits are included in a worker's adjusted gross income for taxes.85%Policy proceeds that are paid in a lump sum are ____________. For installment payments, the principal portion is ___________, while the interest portion is __________.Not taxable, not taxable, taxable.Modified Endowment Contracts (MECs) discourage the use of life insurance with high premiums as investments. Policies that fail the test are considered MECs and are subject to _________.Less favorable tax treatmentTrue / False Dividends are taxable as income.False, dividends are not taxable as they are considered to be a return of premium. Interest that dividends earn, however, is taxable.Qualified retirement planMeets federal requirements and receives favorable tax benefits.A defined benefit plan is where the employer agrees to make necessary contributions on behalf of _____________ in order to provide a specific retirement benefit.Eligible employeesGroup deferred annuitiesspecified amounts of deferred annuities are purchased each year on in individual basis.Profit Sharing PlansContributions are made by the employer from the company profits. Each employee gets a % based on their salary. Benefits vary based on profits.Individual Retirement Accounts (IRA)- Can contribute 100% of wages up to the amount set by the IRS - Early withdrawal penalties apply - Required distributions at 70 1/2 yearsRoth IRAs- Contributions are not tax deductible, but distributions are tax free if it has been maintained for 5 years.Keough Plans (HR-10)For self employed individuals and their eligible employees.A policy or rider that pays a face amount if there is an accidental loss of: 2 arms, 2 legs, or the loss of vision in both eyesAccidental Death & Dismemberment (AD&D)Limited/Special Health Insurance Policies **HITABCDH I - hospital income T - travel accident insurance A - accident only B - blanket insurance C - credit insurance D - Dread diseaseBlue Cross & Blue Shield pay benefits on a ________ basis, this means that they pay the ____________ directly.service basis, pays the provider directlyHealth Maintenance Organizations (HMO) focus on routine wellness exams. They pay for other services on a ____________ basis, which is based on what is _________.fee-for-service basis, prices that are usual, reasonable, and customary.The system in which an insured must see their primary care physician for a referral to a specialist.GatekeeperPreferred Provider Organizations (PPOs)Made up of a selected group of independent hospitals and medical practitioners. Fee-for-service basis.Flexible Spending Accounts (FSA)Funded by the employee via salary reduction (pretax $). The $ is used to cover certain medical expenses.Health Savings Accounts (HSAs)For people with high-deductible plans.Insurance agents are appointed by ________.Insurance companiesWhich element is NOT necessary for the formation of a valid contract? A. Consideration B. Competent parties C. Written document D. Legal purposeCorrect answer - C, the contract does NOT need to be written.Joe has only paid 5 payments on his health insurance policy when he is hit by a car. The insurance company pays out nearly half a million to cover treatment for injuries. This is an example of: A. Contract of adhesion B. Aleatory contract C. Unilateral contract D. Utmost good faithCorrect answer - B, it is contingent on an uncertain eventKaren applies for a life insurance policy and pays the initial premium. Carol has : A. Made an offer to the insurer B. Accepted an offer from the insurerCorrect answer - A, made an offer to the insurerThe failure to disclose known facts is _____.ConcealmentExample of an aleatory contractWhen one party may receive much more from the contract than they give in exchange.Simplified issueLife insurance that requires no medical exam and asks only basic medical questionsAndy is a 30 year old man who drinks occasionally, does not smoke, and has no known health problems. What type of risk would he be classified as?Standard riskTo be certain that insurers have the money available to pay claims as they arise, they are required to maintain _______.ReservesTo be eligible to purchase insurance, an association group must: A. Be organized an maintained strictly for the purpose of obtaining insurance. B. Have at least 200 members C. Have a constitution and bylaws D. All of the aboveCorrect answer - C, have a constitution and bylaws. The group must be organized for purposes other than insurance coverage.Kevin starts a new job on March 1, he is not eligible for insurance benefits until July 1. The period between the start date and the eligibility date is the _________.Probationary periodA baker's union and a butcher's union join together to form a trust to provide insurance to their employees. This type of group is called _______.Taft-Hartley trust (Group made of one or more unions)Which of the following underwriting characteristics is generally required by law? A. Employer control B. Predetermined coverage amount C. Insurance incidental to group D. Nondiscriminatory classificationsCorrect answer - D, nondiscriminatory classificationsTrue/False Life insurance can be purchased to guarantee lifetime retirement income.FalseMichael's wife died 3 years ago, leaving him with 2 grade-school aged children. Which income period is Michael in?Family dependency periodTrue/False Life insurance proceeds are generally the only source of income for surviving dependents of a breadwinner.False, Social Security and retirement plans are other potential sources of income.Which of the following is NOT financed using life insurance? A. Buy-sell agreements B. Section 303 stock redemption C. Cross purchase agreement D. Split-dollar planCorrect answer - D, split dollar planKelly fills out an application for life insurance, but does not pay the initial premium. What kind of receipt will she receive?Inspection receiptThis type of receipt is most commonly used in life insuranceConditional receiptThe most common reason why a payment of a death claim would be delayed is because - .The insurer has not received the proper notification of death.True/False Term insurance provides pure insurance protection.TrueWhat type of policy is commonly used to cover a mortgage on a house if the insured were to die before paying it off.Decreasing term insuranceWhole life insurance policies provide all of the following EXCEPT: A. pure insurance protection B. an opportunity for significant investment gains C. cash values D. the ability to take loans against the cash valueCorrect answer - B, an opportunity for significant investment gainsPam has a policy that pays dividends which are used to purchase additional paid-up insurance to increase the face value of the policy. Pam has what type of policy?Economatic policyWhich of the following is NOT flexible in a universal life policy: A. Premium amount B. Premium schedule C. Guaranteed interest rate D. Death benefitsCorrect answer - B, guaranteed interest rateAngela has a universal life policy that she purchased several years ago. At that time, the death benefit of the policy was $250,000. Her cash value is now $50,000. How much is her current death benefit?$250,000, UL policies have a level death benefit despite the cash value accumulationsRyan collects insurance premiums every Wednesday at the home of several policyholders. Which type of policy do these policyholders probably have?Industrial life insuranceIn order to sell variable policies, the producer must possess a state insurance producer license, get a passing score on the appropriate securities exam, and registration with ________.FINRATrue/False Once a year a variable life insurance policy must have a face amount that is higher than the cash value by a certain percentage in order to meet the cereal definition of life insurance.TrueFamily income policyCombines whole life insurance with decreasing term coverageFamily maintenance policyCombines whole life insurance with level term coverageMinimum deposit policies are less popular due to tax regulations, but they can still be used as long as ___ of ___ premium payments are made from sources other than the cash value4 of 7Family protection policyCombines whole life on one family member with term coverage on the other family membersLeslie has a policy that will pay $100,000 if she dies before age 65 and $75,000 if she dies after age 65. She probably has what type of policy?Multiple protection policyHow long is the typical grace period?31 daysIf Ben dies, Joan will receive the death benefit. If Joan had died before Ben, Toby would receive the benefit. Toby is what type of beneficiary?Contingent beneficiaryLiz purchases an immediate annuity. The annuity contract must be a _____ _______ annuity.Single premiumWhich type of annuity is most likely to provide a death benefit?Deferred annuityWhich of the following is NOT used to determine annuity premiums? A. Assumed interest rate B. Annuitant's retirement date C. Income amount and payment guarantee D. Applicant's sexCorrect answer - B, annuitant's retirement dateAn annuity is the opposite of _______.Life insuranceTrue/False An annuity is the distribution of a lifetime income.TrueFixed annuityGuarantees a minimum rate of return.Straight-life annuityAn annuity that will pay a monthly income for the remainder of the annuitant's life and then stop making payments.Carol is eligible fore retirement benefit based on her own earnings as well as her late husband's earnings. What benefits will Carol receive?Only the larger benefitP. I. A.Primary Insurance AmountA person who receives retirement benefits at normal retirement age receives _____% if PIA as a retirement benefit.100%A surviving spouse who is disabled can start receiving survivor benefits at age ____, if the deceased was fully insured.Age 50A surviving spouse who is not disabled can start receiving survivor benefits at age ____, if the deceased was fully insured.Age 60At what age is an individual eligible to receive full Social Security retirement benefits? A. 65 B. Nominal retirement age C. 67 D. Normal retirement ageD. Normal retirement ageTrue/False As a general rule, life insurance and annuity premiums are tax deductible.False, life and annuity premiums are NOT tax deductible.Jan is receiving the proceeds of a life insurance policy as a stream of income over a period of several years. What part of the money is subject to tax? A. None of it; it is life insurance proceeds B. All of it; it is being paid out as income C. Only the part that represents income earned on the original death benefit. D. Only the part that represents the original death benefit.C. Only the part that represents income earned on the original death benefit is subject to tax.True/False Anyone with earned income may contribute to an IRA.TrueQualified plan distributions are likely to receive a tax penalty if the distribution is _____ or _____.Premature or latePremature IRA or qualified plan distributions must be taxed as income and have a penalty tax of ___%10%At what age is an individual no longer subject to early withdrawal penalties under an IRA? A. 65 B. 59 1/2 C. 67 D. 63 1/2B. 59 1/2Jeff has a policy that will pay any expenses he incurs as the result of in-hospital medical treatment, as well as some of the expenses he incurs on an outpatient basis. Jeff probably has a: A. disability income policy B. long-term care policy C. medical expense insurance policy D. hospital income policyC. Medical expense insurance policyJT's HMO requires that he receive health care services from a specified, limited number of health care providers chosen by the HMO. JT's HMO is a ______ panel.ClosedAll of the following are managed care plans EXCEPT: A. Point-of-service plans B. Health maintenance organizations C. Preferred provider organizations D. Indemnity arrangementsD, indemnity arrangementsCapitationA method of payment in which a provider is paid a specific fee monthly for each subscriber is known as capitation.A type of plan where employees can select benefits from a variety of coverage options based on individual and family needs.Cafeteria planUnder workers' compensation, the permanent total disability benefit, which subject to minimum and maximum dollar amounts, is generally ______%66.66%Health insurance coverage never applies until: A. the policy is delivered B. the insured has paid for the policy C. an underwriting decision is made D. the application is reviewed by underwritingB. the insured has paid for the policyOnce health insurance become effective, unless it is cancelled, it will stay in force for: A. an indefinite period B. 6 months C. 1 year D. The length of the termD. the length of the termTrue/False No loss/no gain legislation requires a replacing policy to continue to pay claims ongoing under the policy it replaces.TrueAn entire contract contains all of the following EXCEPT: A. the insurance policy B. the premium payment C. any attachments D. any endorsementsB. the premium paymentAll insurance policies can be cancelled at any time by _______________ only.The insured.If there is no beneficiary listed on a policy, benefits are paid to ________________.The insured's estate.Written proofs of loss must be furnished within ____ days after the loss.90 daysA pro-rata return is one in which the insurer returns ______ of the unearned premium.All of the unearned premium is returned.An insurer has a ____ day window when the insured cannot sue the insurer to recover under a claim since the insurer needs time to be able to respond.60 day windowChristina has a claim for $3,000 and a past due premium of $150. How will the insurer handle the claim?Pay the claim minus the past due premium.If George cancels his health insurance policy, the insurer will issue a ________ refund of _______ unearned premium.short-rate refund of most of the unearned premiumTrue/False Consideration for a health policy includes the statements made in the application and the premium.TrueTo receive benefits from a disability income policy due to sickness, the insured must be: A. totally disabled B. partially disabled C. both A & BA. totally disabledRehabilitation benefitA benefit that enables a disabled insured to learn to work in another occupation.Cost-of-living benefitA benefit that protects agains the erosion of purchasing power for fixed disability benefits.A rider that provides more benefits during the first 6 months or year of a claim is a _________________ rider.Additional monthly benefit riderThe elimination period may be thought of as a ________ deductible.Time deductibleThe longer the benefit period, the _____ the premium.HigherWhich definition of total disability is more favorable to the insured, own occupation or any occupation?Own occupationLong-term disability policies provide benefits: A. For 2-5 years B. to age 65 C. to age 100B. to age 65Disability benefits will generally be paid for the lifetime of the insured if total disability due to sickness begins at age ______ or earlier.Age 55 or earlierThe out of pocket limit is also known as _______.Stop-loss limitFirst dollar coverageNo deductible applies ($0 deductible)Maximum benefitThe dollar limit beyond which the insurer no longer participates in the payment of expenses.Corridor deductibleA deductible that runs between the first dollar coverage of a basic policy and the comprehensive coverage of a supplemental policy.Scheduled benefits are generally ____ than reasonable and customary allowances.Lower, the insured may also have some out of pocket costs.True/False Teeth that are knocked out in an accident will generally not be replaced under a dental policy.False, this is not a common exclusionPrepaid dental plans offer services based on _________.CapitationA hospital income policy will make payments to: A. the hospital B. the insured C. both A&B D. the beneficiaryB. the insuredJosh has a hospital income policy that will pay $1,500 per month for up to 12 months with no elimination period. If Josh is in the hospital for 10 days, how much will the policy pay?$500 ($1,500 per month / 30 days = $50 per day; $50 per day x 10 days = $500)Dread disease policies cover ________ diseases.Specific diseasesAll of the following could be considered dependents EXCEPT the insured's: A. Parents B. Adopted children C. 25-year-old child who became physically disabled at 24 D. 21-year-old child who is attending college full timeC. 25-year-old child who became disabled at 24True/False Under the coordination of benefits rule, the primary health company pays as if there were no other coverage.True, the secondary company will pay whatever the primary company will not pay up to the policy limits.Under Medicare Part B, individuals pay a deductible each _________.YearAfter the deductible is satisfied, Part B pays what % of all approved charges?80%Medicare supplement policies are also known as ______.Medigap policiesFully insured and disability insured are defined by: A. the state legislatures B. Social Security regulations C. Individual insurers D. the state department of insuranceB. Social security regulationsUnder social security benefits, disabled workers receive a benefit equal to their ______ ______ ______.Primary Insurance Amount (PIA)For each benefit period, Medicare will pay the full cost of ___ days of hospital care.60 daysNursing home care is generally covered by: A. Medicare B. Medicare supplements C. Long-term care policies D. All of the aboveC. Long-term care policiesMost people will require _____ or ____ care at some time during their later years.Custodial or residential careMeredith's company pays the entire premium for her group disability coverage. How much of her benefits from this coverage would be subject to tax?All of the benefits are subject to tax since the company can deduct the premium payments. If Meredith paid half of the premium, then only half would be subject to taxes.What is considered to be the primary reason for buying life insurance?Provide death benefitsKaren is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Feguson Act, what is the minimum penalty for this?$10,000 or up to 1 year in jailA nonparticipating company is sometimes called a(n)Stock insurer, because policyholders do not participate in dividends resulting from stock ownership.The Fair Credit and Reporting Act's main purpose is toProtect Consumers with guidelines regarding credit reporting and distributionWhat is the primary purpose of a rating service such as A.M Best?Determine financial strength of an insurance companyFraternal Benefit Society has each of the following characteristics EXCEPT? - Incorporated - Without capital stock - exist for profit - exist for the benefit of its membersExist for profit, FBS are not for profit and exist for the benefit of its members.An insurer's ability to make unpredictable payouts to policyowners is calledLiquidityThe Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT - Charities - Political Organizations - Insurance Sales Calls - SurveysInsurance Sales CallsA plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues is called?A self-funded planAn insurer's claim settlement practices are regulated by theState Insurance DepartmentsWhat is known as the immediate specific event causing loss and giving risk to risk?PerilWhen a house burns down what would the Peril be? When someone dies what would the peril be?Fire, DeathHow do insurers predict the increase of individual risks?Law of Large NumbersInsurance companies determine risk exposure by which of the following?Law of Large Numbers and Risk PoolingInsurance represents the process of risk ________________.TransferenceAll of the following are examples of pure risk EXCEPT -Losing Money at a Casino -Injured while playing football -Falling at a casino and breaking a hip -Jewelry stolen during a home robberyLosing Money at a Casino, because that is speculative risk. Pure risk means loss is the only possible outcome.Insurable interest does NOT occur in which of the following relationships?Business owner and business clientAccording to life insurance contract law, insurable interest existsat the time of applicationAccording to the principle of Utmost Good Faith, the insured will answer questions on the application to the best of their knowledge and pay the required premium, while the insurer will deal fairly with the insured and it'spromises madeWhen the principal gives the agent authority in writing, it's referred to asExpress AuthorityIn an insurance contract, the applicant's "consideration" is theStatements made in the application and the premiumWhich type of clause describes the following statement: "We have issued the policy in consideration of the representations in your applications and payment of the first term premium".Consideration ClauseLegal purpose is a term used in contract law meaningthere must be legal reasons for entering into the contractIn an insurance contract, the element that shows each party is giving something of value is calledConsiderationWhich of the following is an example of the insured's consideration?A paid premiumWhat is implied authority defined as?Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her dutiesAll of the following are elements of an insurance policy EXCEPT - definitions - other insurance - claim forms - conditionsClaim formsIntentional withholding of material facts that would affect an insurance policy's validity is called a(n)?ConcealmentWhich of the following is present when an applicant stands to lose value if the insured dies?Insurable Interest, the applicant is subject to loss upon death, illness, or disability of the insured.The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority?ImpliedWhat are an applicant's statements concerning occupation, hobbies, and personal health history regarded as?RepresentationHow are survivorship life insurance policies helpful in estate planning?Provide funds to help pay taxesRob purchased a standard whole life policy with a $500,000 death benefit when he was age 30. His insurance agent told him the policy would be paid up if he reached age 100. The present cash value of the policy equals $250,000. Rob recently died at age 60. The death benefit would be$500,000Term insurance is appropriate for someone whoseeks temporary protection and lower premiumsWhich of the following policies does NOT build cash value?TermThe premium for a modified whole life policy islower than the typical whole life policy during the first few years and then higher than typical for the remainderWhich type of life insurance is normally associated with a Payor Benefit Rider?Juvenile InsuranceWhich of the following are the premium payments for a Universal life policy NOT used for? - Death Benefits - Cash Value - Loading Costs - Separate Account InvestmentsSeparate Account InvestmentsWhich rider will pay a death benefit if the insured's spouse dies?Family term insurance riderA spouse and child can be added to the primary insured's coverage as what kind of rider?Family TermWhat types of life insurance are normally used for key employee indemnification?Term, Whole, and Universal Life InsuranceDonald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider?Can be converted to permanent coverage without evidence of insurabilityWhich type of life insurance offers flexible premiums, a flexible death benefit, and the choice of how the cash value will be invested?Variable Universal PolicyDecreasing term life insurance is often used toprovide coverage for a home mortgageA renewable Term Life Insurance policy allows the policyowner the right to renew the policyWithout producing proof of insurabilityJoe has a life insurance policy that has a face amount of $300,000. After a number of years, the policy's cash value accumulates to $50,000 and the face amount becomes $350,000. What kind of policy is this?Universal Life PolicyWhat is the automatic continuance of insurance coverage referred to as?RenewalAn Interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is calledPartial SurrenderWhat is a corridor in relation to a Universal Life Insurance Policy?The gap between the total death benefit and the policy's cash valueWhich type of multiple protection policy pays on the death of the last person?Survivorship Life PolicyPre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies becausethe MEC tends to be an investment vehicleWhen a decreasing term policy is purchased, it contains a decreasing death benefit and?Level PremiumsAll of these statements concerning whole life insurance are false EXCEPT - Policyowner can take out a policy loan up to the face amount - When a whole life policy is surrendered, income taxes may be owed - Coverage is normally temporary - The death benefit is not affected by outstanding loansWhen a whole life policy is surrendered, income taxes may be owedIndex whole life insurance contains a securities component that acts as a(n)Hedge against InflationThe type of policy which pays on the death of the last person is called?Survivorship LifeThe statement which best describes the relationship between the premiums of a whole life policy and the premium payment period isThe shorter the payment period, the higher the premium.under a life insurance policy, what does the insuring clause state?The insurer's obligation to pay a death benefit upon an approved death claimThe double indemnity provision in a life insurance policy pertains to an insured's death caused by a(n)AccidentKurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death?ResultsMatt is applying for life insurance and requests a double indemnity rider. A double indemnity benefit will be payable to Matt's beneficiary if Matt? - is killed while committing a felony - dies of a stroke - dies instantly from a car accident - is injured in a skiing accident and dies 18 months laterdies instantly from a car accidentJames is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount?The death benefit paid will be what the premium would have purchased at the correct age.Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?Accumulation at Interest OptionIf an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age.All of the following are considered to be nonforfeiture options available to a policyowner EXCEPT - Extended Term Insurance - Cash Surrender - Reduction of Premium - Reduced Paid Up InsuranceReduction of PremiumA provision in a whole life policy that allows a policyowner to terminate the policy in return for a reduced paid up policy of the same type is called a(n)Nonforfeiture ProvisionThe free-look provision gives the policyownerthe right to return the policy for a full refund within a specified number of daysAll of these are common exclusions to a life insurance policy EXCEPT - accidental death - military service - aviation - hazardous occupationsAccidental DeathIn what part of an insurance policy are policy benefits found?DeclarationsWhich situation accurately describes a reduced paid up nonforfeiture option?Policy has a decreased face amountPat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true?The policy may be paid up early by using policy dividendsA provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a(n)Collateral AssignmentA guaranteed Issue insurance policy has noMedical UnderwritingLife Insurance policies will normally pay for losses arising from - Commercial aviation - war - suicide - hazardous jobsCommercial AviationWhich of these would limit a company's liability to provide insurance coverage? - Waiver - Exclusion - Rider - ProvisionExclusionA whole life insurance policy accumulates cash value that becomesthe policy loan value which the insured may borrow againstAn insurer will accept a premium from the insured and continue the coverage in full force as though it was NOT late during which time period?Grace PeriodAll of these are standard exclusions found in a life insurance policy EXCEPT - hazardous occupations - aviation - disability - warDisabilityJoanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE? - Net Death benefit will be reduced if the loan is not repaid - no interest will be charged on the loan - term life policies are the only type of insurance that allows policy loans - a loan can be taken out for up to the face amount of the policyNet death benefit will be reduced if the loan is not repaidAll of these are valid policy dividend options for a life insurance policyowner EXCEPT - Cash outlay to the policyowner - accumulate without interest - reduction in policy premium - buy additional insurance coverageAccumulate without interestAn error was made on Mary's life insurance application. Which of the following areas do errors commonly occur on applications and for which the incontestable clause does NOT apply? - Marital Status - Age - Address - IncomeAgeWhat is the name of the provision which states that a copy of the application must be attached to the policy when issued?Entire ContractA beneficiary change can occurNormally at any time during the policy termHow is the cost of a policy affected when a policyowner pays premiums more frequently?IncreasesA policyowner can receive an immediate payment before the insured dies by using a(n)Viatical Settlement ContractWhich type of beneficiary should be named if the insured wants to give explicit directions on how the policy proceeds should be paid?IndividualWhich of these is affected by the frequency of an insurance policy's premium payments?CostA tax-free Section 1035 Exchange of a life insurance policy to a different policy is permitted if it occursFrom insurer to insurer and no cash is received by the policyownerA policyowner is prohibited from making any changes to the policy without the beneficiary's written consent under which beneficiary designation?Irrevoccable BeneficiaryMortality is calculated by using a large risk pool ofPeople and TimeWhich of these factors help determine an insured's life insurance premium? - insured's salary - marital status - place of residence - avocation (hobby)Avocation (hobby)If the beneficiary dies from the same accident as the insured individual, the insurer will proceed as ifthe insured outlived the beneficiary, so the proceeds can go to the contingent beneficiaryWhere would policy proceeds be paid if both the insured and primary beneficiary were killed in the same accident?Contingent BeneficiaryNaming a contingent beneficiary as "all living children" is described by which term?Class DesignationPurchasing a life insurance policy in order to avoid the forced sale of assets upon death is calledEstate ConservationPat is insured with a life insurance policy and Karen is his primary beneficiary. They are both involved in an automobile accident where Pat dies instantly and Karen dies 5 days later. Which policy provision will protect the rights of the contingent beneficiary to receive the policy benefits?Common Disaster ClauseInsurance premium is determined by each of the following factors EXCEPT? - Mortality - Interest - Expenses - LiquidityLiquidityWhich of the following pertains to the analysis of an applicant's personal information and determining whether insurance should be issued or declined?UnderwritingAn attending physician's statement would be appropriate for which life insurance purpose?At the request of the insurer to assist in the underwriting decisionWhich of the following is a requirement for ANY change in an insurance application? - Change must be initialed by the agent - change must be initialed by the applicant - change must be approved by the insurer - change must be notorizedChange must be initialed by the applicantAll of these are typically sources of underwriting information for life or health insurance EXCEPT - Consumer reports - medical information bureau (MIB) reports - disclosure authorization response - attending physician's statement (APS)Disclosure authorization responseWhich of these is NOT considered to be a risk factor in life insurance underwriting? - Number of Children - Health History - Hobbies - OccupationNumber of ChildrenAn applicant's character and personal habits can be obtained for underwriting purposes from which source?Investigative consumer reportAn insurer has a right to screen applicants for HIV in which of the following ways? - Blood test for HIV - Inquiring about risky sexual behavior - Inquiring about sexual orientation - automatically declining an applicant due to sexual orientationBlood test for HIVWhich of the following does a life insurance policy summary normally include?The policy's cash valueUnderwriters can acquire information from all of the following sources EXCEPT - Medical Information Bureau (MIB) - consumer reports - attending physician's statements - genetic testingGenetic TestingWhich of the following signatures is not required on an individual insurance application?InsurerWhat is likely to occur when life or health insurance is being applied for?Medical history from the insured may be reviewed and reportedWhat describes a person who is NOT acceptable by an insurer at standard rates because of health history, occupation, or hobbies?Substandard RiskIn which of the following relationships would there NOT be insurable interest? - Parent to Child - Business Partner to Business Partner - Brother to Sister - Business Owner to Business CustomerBusiness Owner to Business CustomerAn insurance producer is often responsible for field underwriting during the application process. All of these are possible field underwriting roles EXCEPT? - Providing disclosure information to the applicant - collecting initial premium - policy delivery - providing commission information to the applicantProviding Commission Information to the ApplicantWhat happens when an insurance policy is backdated?The policy's effective date is earlier than the presentThe conversion privilege under a group life plan allows an employee to convert to a(n)individual plan upon employment terminationWhat does the Group Life underwriting risk selection process help protect insurance companies from?Adverse SelectionThe coverage, conditions, and limitations in the master policy of a group contract can be found in which document?Certificate of coverage and benefitsUnder a group life policy, the insurer will issue an individual _____ to the policyowner for delivery to each person insured.CertificateA non-contributory health insurance plan helps the insurer avoidAdverse SelectionTim is covered under a group plan and would like to change his group coverage to an individual policy with the same insurer because of employment termination. Which of these describes the change that will take place?ConversionAll of the following are characteristics of a Group Life Insurance Plan EXCEPT? - Group Underwriting - Master Contract - Individual Underwriting - Probationary PeriodIndividual UnderwritingWhich of these factors would an insurer consider when determining whether to accept a group life plan? - Number of dependents - Incontestable period - Average Age - grace periodAverage AgeConverting a group plan to permanent life insurance requiresthe conversion being applied within 31 days of terminationAn employee under a group insurance policy has the right to name a beneficiary and the right toConvert to an individual policy in the event of employment terminationAn immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?1 monthHow are annuities given favorable tax treatment?Gains are taxed at distributionAn annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?Refund AnnuityThe taxable portion of each annuity payment is calculated using which method?Exclusion RatioMaria would like an annuity that provides a guaranteed accumulation or payout. The type of annuity she is seeking is calledAnnuity CertainSimon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's _____________.Income PeriodAn annuity is primarily used to provideRetirement incomeWhich annuity payout option allows the policyowner to choose a pre-determined number of benefit payments?Period CertainWhich settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?Life IncomeKathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in?Accumulation PeriodWhich of these annuities require payments that vary from year to year?Flexible premium deferred AnnuityKristi purchases an annuity that will pay her husband an income for 15 years. If he dies, this income will become payable to their children for the remainder of the period. Kristi has what kind of annuity?Temporary Annuity CertainWhat will the beneficiary receive if an annuitant dies during the accumulation period?The greater of the accumulated cash value or the total premiums paidDuring the accumulation period, who can surrender an annuity?PolicyownerWhich market index is normally associated with an indexed annuity's rate of return?S&P 500The period in which there are no Social Security benefits for the surviving spouse is called theblackout periodHow does one qualify as a fully-insured individual under Social Security disability coverage?Individual has been credited with the appropriate number of quarters of coverageAn insured's status under Social Security can be described asFully InsuredHow long must an individual be unable to engage in any gainful activity due to physical or mental disability in order to qualify for Social Security Total Disability?12 MonthsAn example of a tax-qualified retirement plan would be a(n)Defined Contribution PlanA rollover from a Traditional IRA to another IRA MUST be done within____________ days to avoid tax consequences.60Within how many days must a Traditional IRA be rolled over to another IRA in order to avoid tax consequences?60 daysWithin how many days must a rollover be completed in order to avoid being taxed as current income?60 daysRob has a benefit at work which enables him to defer his current receipt of income and have it paid at a later date, when he will probably be in a lower tax bracket. Which benefit fits this description?Deferred Compensation OptionWho were Keogh plans designed to provide pension benefits for?The Self-EmployedWhich of these statements concerning Traditional IRAs is CORRECT? - Earnings are not taxable when withdrawn - Earnings are taxable when withdrawn - Contributions are never tax-deductible - Contributions are always made by the employerEarnings are taxable when withdrawnMike has inherited his father's traditional IRA. As beneficiary, he will pay ____ taxes on any money withdrawn.IncomeWhich of these retirement plans do NOT qualify for a federal income tax deduction? - SIMPLE Plan - Traditional IRA - Keogh Plan - Roth IRARoth IRAA Roth IRA owner must be at least what age in order to make tax-free withdrawals?59 1/2 and owned account for a minimum of 5 yearsUnder a Traditional IRA, interest earned is taxedupon distributionWhich of the following is NOT a federal requirement of a qualified plan? - Must benefit a broad cross-section of employees - employee must be able to make unlimited contributions - vesting schedule must be defined - employer establishes the planEmployee must be able to make unlimited contributionsHow are contributions made to a Roth IRA handled for tax purposes?Not tax deductibleWhich of the following employers is required to follow ERISA regulations? - A local government with 150 employees - A church with 30 employees - A local electrical supply company with 12 employees - a Canadian company with 300 employees working in the USA local electrical supply company with 12 employeesDana is an employee who deposits a percentage of her income into her individual annuity. Her company also contributes a percentage into a separate company pension plan. What kind of annuity is this considered?Qualified Retirement AnnuityWhich approach predicts a person's earning potential and determines how much of that amount would be devoted to dependents?Human Life Value ApproachCraig purchased a life insurance policy for enabling his heirs to pay estate taxes. What is this called?Estate ConservationWhen calculating the amount of life insurance needed for an income earner, what has to be determined when using the Needs Approach?The Family's Financial objectives if the income earner were to die or become disabledAll of the following are examples of a Business Continuation Plan EXCEPT? - Key Person Insurance - Cross-Purchase Agreement - Stock Redemption Plan - Deferred CompensationDeferred CompensationAll of the following are considered appropriate uses of life insurance for business purposes EXCEPT? - Attracting quality employees by offering a group life plan - funding an entity buy-sell agreement - protecting the business by covering key employees with life insurance - protecting the business by covering entry level employees with life insuranceProtecting the Business by covering entry level employees with life insuranceIn an employer-sponsored group accident and health plan, a master contract is issued to the?EmployerWhich of the following decisions would a Health Savings Account (HSA) owner NOT be able to make? - The amount contributed by the employer - The amount contributed by the owner - The underlying account investments used - The medical expenses paid for by the HSAThe amount contributed by the employerWhat is the contract called that is issued to an employer for a Group Medical Insurance plan?Master PolicyWhich of the following would evidence ownership in a participating health insurance contract? - Stock ownership - Irrevocable beneficiary status - Policy Ownership - Collateral AssignmentPolicy OwnershipWhich of the following is INELIGIBLE to participate in a Section 125 Plan? - Key Employee in a C-Corp - Highly Compensated Employee in an S-Corp - A C-Corp Owner with a greater than 2% share - An S-Corp Owner with a greater than 2% shareAn S-Corp Owner with a greater than 2% shareThe purpose of the Coordination of Benefits provision in group accident and health plans is toAvoid overpaying of claimsHow many employees must an employer have for a terminated employee to be eligible for COBRA?20Coordination of Benefits regulation applies to all of the following plans EXCEPT? - Group Vision Plan - Preferred Provider Organization Plan - Self-Funded Group Health Plan - Group Health PlanPreferred Provider Organization PlanUnder the Health Insurance Portability and Accountability Act (HIPAA), the employee's new Group Health Plan will verify Creditable Coverage so that theEmployee's waiting period for coverage of a preexisting condition can be reduced under the new employer's health planWhich of the following does Coordination of Benefits allow?Allows the secondary payor to reduce their benefit payments so no more than 100% of the claim is paidHealth insurance will typically cover which perils?Injury due to accidentCredit Accident and Health plans are designed tohelp pay off existing loans during periods of disabilityRon has a new employer and wishes to enroll in the company's group health plan. In determining whether his pre-existing health condition applies, Ron cannot have more than a ___ day gap without previous health insurance.63Health insurance involves two perils, accident and _________.SicknessWhich type of business insurance is meant to cover the costs of continuing to do business while the owner is disabled?Business overhead expense policyWhich of the following would be considered a possible applicant and contract policyholder for group health benefits?EmployerWhich of the following is typically NOT eligible for coverage in a group health policy? - Full time employee - Temporary employee - Business Owner - Partner in a PartnershipTemporary EmployeeThe election of COBRA for continuation of health coverage willmaintain the same coverage and increase premiumA master contract and certificate of coverage can be found in which type of policy?GroupGroup health plans may deny participation based upon themember part-time employment statusAn accident and health policy that provides reimbursement benefits makes them payable to theinsuredMedicare Part B covers?Doctor's ChargesA 70-year old insured individual has suffered from kidney failure for the past 24 months. She is covered by her spouse's large-group employer plan. How will Medicare be utilized in this situation?Will be the secondary insurer and pay for claims not fully covered by the group planThe Federal Employees Benefit Program consists of two types of health plans for federal civilian employees. The two plans are fee-for-service andprepaidThe open enrollment period for Medicare part B isJanuary 1 through March 31An individual can enroll in a Part C Medicare Advantage Plan at what time?When becoming eligible for MedicareThe role of the federal government was expanded when Medicaid was established by allowing the state toReceive matching funds to expand public assistance programsWhich of the following is NOT taken into consideration when determining eligibility for Medicare benefits? - Chronic Kidney Disease - Income - Age - Social Security DisabilityIncomeWhen a preferred provider organization (PPO) insured goes out-of-network, which of the following actions occur?The insurer will pay a reduced amountWhich of the following is Medicare Part B also known as?Medical InsuranceAn individual covered under a Blue Cross Blue Shield plan is called a(n)SubscriberPaul is an employee who caught a disease unique to the trade in which he was exposed to. Paul has a(n)Occupational DiseaseHow much does Medicare Part B pay for physician fees?80%Which of the following is a legal entity created for the sole purpose of providing affordable group health coverage to its participants? - Multiple Employer Welfare Arrangement (MEWA) - Multiple Trust Arrangement (MTA) - Multiple Purchasing Groups (MPG) - Fraternal Benefit SocietyMultiple Employer Welfare Arrangement (MEWA)Medicaid is a government-funded program designed to provide health care toPoor PeopleComing from an insurance point of view, which of the following is the main risk associated with disability?Loss of IncomeBryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this?Guaranteed insurability riderWhich clause defines total disability as being unable to perform the major duties of the insured's regular occupation?Own occupation clauseA rehabilitation benefit is intended toprepare the insured to return to employmentA disability income policy can prevent an insured from earning a higher income than if he/she were working by utilizing?Benefit LimitsFrank is shopping for a disability income policy. Which of the following would have the HIGHEST premium?14 day waiting period/ 10-year benefit periodThe monthly benefit for an individual disability income policy is usually limited to a percentage of the insured's income in order to avoidOver InsuranceA policyowner suffers an injury that renders him incapable of performing one or more important job duties. Any decrease in income resulting from this injury would make him eligible for benefits under which provision?Partial DisabilityWhat is the elimination period of an individual disability policy?Time period a disabled person must wait before benefits are paidAn example of a presumptive disability would bedeafnessA pharmacy benefit covers prescription drugs derived from a list called a(n)Drug FormularyWhich type of coverage pays an amount per day for hospitalization directly to the insured regardless of the insured's other health insurance?Hospital IndemnityAn indemnity plan provides __________________.the insured a specific dollar amount for services.Medical Expense Insurance would cover?an injury occurring at the insured's residenceWhich of the following is NOT included under a health benefit plan? - Major Medical Policy - Basic Hospital Policy - Hospital Indemnity Plan - Surgical Expense PolicyHospital Indemnity PlanAll of the following plans allow for employee contributions to be taken on a pre-tax basis EXCEPT? - Section 125 Plan - Premium Only Plan - Cafeteria Plan - Health Reimbursement Arrangement PlanHealth Reimbursement Arrangement PlanThe elimination period under a hospital indemnity plan isthe specified number of days an insured must wait before becoming eligible to receive benefits for each hospitalizationWho is the individual paid on a fee-for-service basis?ProviderAll of these are characteristics of an Adjustable Life policy EXCEPT? - Large benefit maximums - deductibles - elimination periods - coinsuranceElimination PeriodsA proposed insured for a health insurance policy was treated for heart disease within the past year. When applying for health insurance, the heart disease treatmentindicates a preexisting conditionAmy has a group medical policy through her employer with a $500 deductible and a 90% coinsurance provision. She incurs $1,500 in covered health care services. How much will her group insurance carrier pay?$900 ((1500-500)*.9)What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?Dread Disease InsuranceHow is a health provider reimbursed if they do NOT have an agreement in place with the insurance company?With a usual, customary, and reasonable feeThe focus of major medical insurance is providing coverage forMedical and Hospitalization ExpensesA policyholder has a major medical plan with a 80%/20% coinsurance and a deductible of $75. If the insured has previously met her deductible and receives a bill for $175, how much will the insurer pay?$140The typical long-term care insurance policy is designed to provide a minimum of _________ year(s) of coverage.1Which situation would qualify an individual for receiving benefits from a qualified long-term care policy?Becoming cognitively impaired (mentally ill)A Medicare Supplement policy must NOT contain benefits whichDuplicate Medicare BenefitsAll of the following are core benefits of Medicare Supplement Plan A EXCEPT? - Deductible payments for the first 60 days of hospitalization under Medicare hospitalization insurance - Medicare Part A hospice coinsurance or copayment - Medicare Part B coinsurance or copayment - The first three pints of blood receivedDeductible payments for the first 60 days of hospitalization under Medicare hospitalization insuranceWhich type of plan would be most appropriate for an individual on Medicare and is concerned that Medicare will NOT pay for charges exceeding the approved amount?Medicare Supplement Plan FWhich of the following is NOT a type of Medicare Advantage Plan? - Health Maintenance Organization (HMO) - Preferred Provider Organization (PPO) - Private Fee-For-Services (PFFS) - Social Security Disability Income (SSDI)Social Security Disability Income (SSDI)A Medicare Supplement basic benefit isthe first 3 pints of blood per yearAll _____ policies must be guaranteed renewable.long term careWhich of these statements about Medicaid is CORRECT? - Pays for Medicare charges exceeding the approved amount - Intended for Senior Citizens - Funded by federal, state, and local taxes - Administer by the Federal GovernmentFunded by Federal, State, and local taxesWhich of these gaps in Medicare coverage is addressed with Medicare Supplemental Insurance? - Medicare in Hospital deductible - Dental Work - Nutritional Supplements - Chiropractic CareMedicare in-hospital deductibleRespite care is able to providetemporary relief to the patient's primary caregiverBill requires some nursing care and supervision but NOT full-time care. Which of these nursing home options would best serve him? - Nursing Home - Assisted living - Congregate Housing - Custodial ResidenceAssisted LivingThe difference between a long term Care Partnership Plan and a Non-Partnership Plan is which of the following?Asset ProtectionSomeone needing custodial care at home would require which type of coverage?Long-term careWhich of the following nursing home options would BEST suit an individual who needs some nursing care and supervision but NOT full-time care? - Custodial Care Homes - Assisted living Facilities - Skilled Nursing Facilities - Congregate HousingAssisted Living FacilitiesIn contrast to a guaranteed renewable policy, a noncancellable policymay never raise premiumsA clause that allows an insurer the right to terminate coverage at any anniversary date is called a(n)Optional Renewability ClauseWhich of the following actions may an insurance company NOT do in a health policy that contains a guaranteed renewable premium benefit?Increase the premiums on an individual basisAll of the following are included as part of a contract in the entire contract provision EXCEPT the? - Riders - Application - Changes made by the producer - PolicyChanges made by the producerThis MANDATORY health policy provision states that the policy, including endorsements and attached papers, constitutesthe entire insurance contract between the partiesIn which of the following situations would the insurer be liable for a loss? - The insured skipped a payment beyond the 31 day grace period - The insured was injured while participating in an illegal occupation - The insured was given a notice of cancellation from the insurer - The insured suffered an injury as an innocent bystander during a bank robberyThe insured suffered an injury as an innocent bystander during a bank robberyA health insurance policy where the insurer has the right to terminate the policy for reasons other than the insured's health is calledConditionally RenewableAfter an insured gives notice of loss, what must he/she do if the insurer does not furnish forms?File written proof of lossThe entire contract includes the actual policy and theapplicationThe time limit for filing claim disputes is addressed in which provision of an accident and health policy?Legal ActionsLorenzo is self employed with an S corporation. He is unmarried and had a net profit for the tax year. What are the tax ramifications of his health insurance premiums paid for the year?100% of his health insurance costs can be deducted from his gross incomeWhich of the following is considered to be a point of service (POS) plan? - Preferred Provider Organization - Managed Care Plan - Protected Care Provider - Restricted Provider OrganizationManaged Care PlanPierre is covered by his employer's group major medical plan. His employer pays for 75% of the premium and he pays for 25%. How much would a $10,000 benefit be taxable as income under this plan?$0XYZ Corp pays the tax-deductible insurance premiums for a key employee disability policy. Which of the following would be the appropriate tax consequence?Benefits are fully taxableThe difference between pre-certification and concurrent review is that pre-certification is considered acost containment measureHow are premiums paid by the insured for personally owned disability income insurance treated for tax purposes?Not tax deductableTara the producer is delivering a specified disease insurance policy to a new policyowner. Upon delivery, she may be expected to collect all of the following EXCEPT a(n)Modified application with a new signatureOne of the most important considerations when replacing health insurance would be theExclusions on a new policyWhich of the following is a requirement for ANY change in an insurance application?Change must be initialed by the applicantWhich of the following is NOT an example of utilization review? - Monitoring length of hospital stays - ongoing inspection of accident-prone individuals - monitoring the appropriateness of care - setting a hospital release date for a patientOngoing inspection of accident-prone individualsTo be eligible for small employer group coverage, an employee must work a MINIMUM of _______ hours in a typical week?17.5A producer may give an insurance applicant an article of merchandise having an invoice value of _____ or less$5An insurer would be committing Unfair Discrimination if coverage was denied based uponSexGina the producer caused financial harm to an insured. Which of these action may the Commissioner take?Revoke Gina's License after a hearing concludes a violation has occuredUnder Michigan Insurance Code, Chapter 45, insurance fraud defines financial loss asLoss of IncomeIn Michigan, a person providing insurance advice to a person or business for a fee is required to hold which license?CounselorA life insurance applicant in Michigan may backdate the application up to _______ month(s)?6In Michigan, legal action may be taken against an insurer for up to __________ years for failing to pay a life insurance claim after proof of loss was submitted.6The act of _________ insurance does not require an individual to hold an insurance producer licenseUnderwritingWhich of these actions would NOT result in a producer's license revocation? - Not Maintaining an adequate level of sales - Making material misrepresentations on the license application - Felony conviction - Failing to pay state income taxNot Maintaining an adequate level of salesIn Michigan, legal action can be taken up to ______ years against an insurer for failure to pay health insurance claims after proof of loss was submitted.3An insurance producer license is required for which of the following? - An office manager who sets sales appointments for agency's producers - An officer of a Fortune 500 insurance company - A business entity soliciting insurance - The head underwriter of a large insurerA business entity soliciting insuranceTim purchases an insurance policy from a producer. The producer must present to Tim a notice detailing privacy policies and practices. After this initial notice. Tim must be provided another noticeAnnuallyAny change of address by a licensee requires notice within 30 days to which of the following?CommissionerA life insurance application may be backdated tosave on premiumsABC Insurance Agency is entering each applicant who purchases insurance through their agency into a drawing to win a free trip. This is an unlawful insurance practice known asIllegal InducementA Universal Life policyowner must receive a notice of cash surrender value at LEAST everyYearAn example of an unfair claims settlement practice isFailing to promptly provide a reasonable explanation for the denial of claimsAn insurer is REQUIRED to offer which of the following to each long-term care applicant at the time of purchase?Inflation ProtectionThe _______ must notify the producer in the event of the producer's insurance appointment being terminated.InsurerWhich of the following is NOT covered under Worker's Compensation? - Medical Bills - Pain and Suffering - Occupation-related sickness - DisabilityPain and SufferingA form of medical health insurance covering the treatment and care of gum disease is calledDental Expense InsuranceWhich of the following actions is REQUIRED by a producer who is replacing an existing life insurance policy?Submit to the replacing insurer a list of the policies to be replacedAn example of endodontic treatment is aroot canalMichigan requires that a licensee complete ___ hours of continuing education on the subject of ethics every reporting period3Which of the following is included in the entire contract according to the entire contract provision? - investigative report - occupational rating - clauses - applicationApplicationA producer has allowed his/her license to lapse by failing to complete the required continuing education credits. The license may be reinstated by completing the requirement within________ days of the renewal date.90An individual applying for a Michigan resident producer license must have completed the required pre-licensing education within _______ months of license application.12If an insured's unmarried child is incapable of self support because of a mental handicap, how long must this child be provided health coverage under the parent's policy?Until policy termination with proof of incapacityA producer's license is required for all of these activities EXCEPT? - Underwriting Insurance - Soliciting Insurance - negotiating insurance - Selling Insuranceunderwriting insuranceUnder which circumstance may a minor receive proceeds from a death benefit?The minor must have an appointed guardianA newborn must be covered under an existing health policyat the moment of birthIn the state of Michigan, a licensed producerrepresents the insurerTo be classified as a small employer in Michigan, an employer must employ __________ - ___________ employees.2-50Which of the following is an example of a producer's fiduciary duty? - Recording receipt and remittance of premiums due to the insurance company - Determine the rate classification of the insured - Reviewing policy summary of benefits - witnessing applicant's signatureRecording receipt and remittance of premiums due to the insurance companyA life insurance policy sold in Michigan may be contested by the insurer ONLY during the first __________ year(s) of the contract.TwoIf a producer diverts funds from an insurer, he/she may be found guilty offraudAn insurer would be committing Unfair Discrimination if coverage was denied based uponMarital StatusProducer commissions may NOT be paid tolicensed producers not appointed by an insurerA baby is born to a husband and wife covered under a family accident and health insurance policy. If the newborn is covered at birth, the first payment for the additional coverage would become due in ___ days31

Michigan Life and Health

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