Life & Health - Practice Exam 4

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  • 1/150 Questions

    A policy is returned to the insurer within 10 days of the date the policy is delivered.  How much of the premium is returned to the applicant ?

    • None
    • 50%
    • 80%
    • 100%
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About This Quiz

This practice exam titled 'Life & Health - Practice Exam 4' assesses knowledge in life and health insurance policies, including understanding of annuities, policy replacement, insurance code, and the legal consequences of non-compliance. It is designed for individuals preparing for a career in insurance.

Life & Health - Practice Exam 4 - Quiz

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  • 2. 

    FYI Company's employee is injured while driving in the employ of the company.  Coverage for the employee comes from:

    • Employee's auto medical payments

    • FYI's Workers Compensation

    • FYI's Genral Liability

    • The employee's health policy

    Correct Answer
    A. FYI's Workers Compensation
    Explanation
    The correct answer is FYI's Workers Compensation. Workers Compensation is a type of insurance that provides coverage for employees who are injured or become ill while performing their job duties. In this scenario, since the employee was injured while driving in the employ of the company, their medical expenses and other related costs would be covered by FYI's Workers Compensation policy. This policy is specifically designed to protect employees and provide them with financial support in case of work-related injuries or illnesses.

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  • 3. 

    A failure to communicate information which a party to an insurance contract knows and should communicate, is called an act of:

    • Concealment

    • Intimidation

    • Warranty

    • Coercion

    Correct Answer
    A. Concealment
    Explanation
    Concealment refers to the act of intentionally withholding or not disclosing important information that one party knows and should communicate to the other party in an insurance contract. This failure to communicate can affect the terms and conditions of the contract, leading to potential issues or disputes in the future.

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  • 4. 

    An individual license is considered terminated:

    • When transferred to another person

    • When transferred to another licensee

    • On the death of the licensee

    • When transferred to a beneficiary

    Correct Answer
    A. On the death of the licensee
    Explanation
    An individual license is considered terminated on the death of the licensee because the license is granted to a specific individual and cannot be transferred to anyone else after their death. This ensures that the license remains valid only for the duration of the licensee's lifetime and cannot be passed on to another person or beneficiary.

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  • 5. 

    An insured bought a $150,000 non-participating whole life policy many years ago.  She is 100 years old today.  She has never borrowed from the policy, and has made all premium payments when due.  The policy cash value is:

    • $0

    • $75,000

    • $100,000

    • $150,000

    Correct Answer
    A. $150,000
    Explanation
    The insured bought a non-participating whole life policy, which means that it does not accumulate cash value over time. Since the insured has never borrowed from the policy and has made all premium payments when due, the policy cash value remains at $0. Therefore, the correct answer is $0.

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  • 6. 

    In order to deal with the financial consequences of the death of a senior sales manager, a corporation could purchase:

    • Group life insurance

    • Key person insurance

    • Business overhead expense insurance

    • Ordinary life insurance

    Correct Answer
    A. Key person insurance
    Explanation
    Key person insurance is a type of life insurance policy that a corporation can purchase to protect itself from the financial consequences of losing a key employee, such as a senior sales manager. This insurance policy provides a death benefit to the corporation in the event of the key person's death. It helps the company cover the costs of hiring and training a replacement, maintaining business operations, and potentially compensating for lost profits. Group life insurance, ordinary life insurance, and business overhead expense insurance do not specifically address the financial impact of losing a key employee and may not provide the necessary coverage in this scenario.

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  • 7. 

    An insurer organized under the laws of the State of California is a:

    • Domestic insurer

    • Foreign insurer

    • Non-alien insurer

    • Non-admitted insurer

    Correct Answer
    A. Domestic insurer
    Explanation
    A domestic insurer refers to an insurance company that is organized and operates within a specific state or country. In this case, since the insurer is organized under the laws of the State of California, it can be classified as a domestic insurer.

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  • 8. 

    Hospice care is for:

    • Persons needing acute care

    • Family caregivers

    • Persons needing custodial care

    • Terminally ill persons

    Correct Answer
    A. Terminally ill persons
    Explanation
    Hospice care is specifically designed for terminally ill persons. It provides comprehensive medical, emotional, and spiritual support to individuals who have a life-limiting illness and are expected to live for six months or less. The goal of hospice care is to improve the quality of life for these individuals and their families by managing pain and symptoms, offering emotional support, and assisting with end-of-life decision-making. Hospice care focuses on providing comfort and dignity to terminally ill patients rather than attempting to cure their illness.

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  • 9. 

    Terminally ill persons would need which of the following ?

    • Skilled nursing care

    • Intermediate care

    • Hospice care

    • Acute care

    Correct Answer
    A. Hospice care
    Explanation
    Terminally ill persons would need hospice care because it focuses on providing comfort and support to individuals who are in the final stages of a terminal illness. Hospice care aims to improve the quality of life for patients by managing their pain and symptoms, as well as addressing their emotional and spiritual needs. It also provides support to the patient's family and loved ones during this difficult time. Skilled nursing care, intermediate care, and acute care may be necessary at different stages of illness, but hospice care specifically caters to the unique needs of terminally ill individuals.

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  • 10. 

    The department responsible for evaluation, selection and distribution of risks is:

    • The marketing and sales department

    • The underwriting department

    • The claims department

    • The actuarial department

    Correct Answer
    A. The underwriting department
    Explanation
    The underwriting department is responsible for evaluating, selecting, and distributing risks. They assess the potential risks associated with insuring a particular individual or entity and determine the appropriate premiums and coverage. This department plays a crucial role in maintaining the financial stability of the insurance company by ensuring that risks are properly managed and balanced. They work closely with the actuarial department to analyze data and make informed decisions about risk assessment. The marketing and sales department focuses on promoting and selling insurance products, while the claims department handles the processing and settlement of claims.

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  • 11. 

    Which two are Activities of Daily Living?

    • Eating and dressing

    • Speaking and Incontinence

    • Sleeping and walking

    • Bathing and hearing

    Correct Answer
    A. Eating and dressing
    Explanation
    The two activities of daily living are eating and dressing. These activities are essential for an individual's self-care and independence. Eating refers to the ability to consume food and maintain proper nutrition, while dressing involves the ability to choose and put on appropriate clothing. Both activities are necessary for maintaining personal hygiene and overall well-being.

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  • 12. 

    The mathematical rule that says that as the number of individual but similar exposure units increases the easier it is to predict losses is which of the following ?

    • Insurable interest standard

    • Contract law

    • The law of large numbers

    • Materiality

    Correct Answer
    A. The law of large numbers
    Explanation
    The law of large numbers is a mathematical rule that states as the number of individual but similar exposure units increases, it becomes easier to predict losses. This means that the larger the sample size, the more accurate and reliable the predictions will be. This principle is widely used in insurance and statistics to assess and manage risk. The other options, such as insurable interest standard, contract law, and materiality, are not directly related to this concept.

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  • 13. 

    Which part has rights in a life insurance policy only after the death of the insured ?

    • The policy owner

    • The beneficiary

    • The applicant

    • The insured

    Correct Answer
    A. The beneficiary
    Explanation
    The beneficiary of a life insurance policy is the person who has rights to the policy only after the death of the insured. They are the individual or entity who will receive the death benefit payout from the insurance company. The policy owner, applicant, and insured may have different roles and responsibilities within the policy, but the beneficiary is the one who ultimately receives the benefits.

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  • 14. 

    Regarding life insurance coverage for a company, the one responsible for obtaining the coverage, maintaining the policy, and paying the premium is:

    • The master policy holder

    • The individuals who make up the group

    • The insurer that provided the group coverage

    • The agent who obtained the group coverage

    Correct Answer
    A. The master policy holder
    Explanation
    The master policy holder is the one responsible for obtaining the coverage, maintaining the policy, and paying the premium for life insurance coverage for a company. They are the individual or entity that holds the main insurance policy and is responsible for managing it. They have the authority to make changes to the policy, add or remove individuals from coverage, and ensure that the premium payments are made on time.

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  • 15. 

    What does the Insurance Commissioner have the right to do if an agent lacks authority from an insurer named on a binder for coverage ?

    • Request his certificate of authority

    • Authorize agent with a certificate of convenience

    • Suspend or revoke the license of the agent

    • Fine the insurance company

    Correct Answer
    A. Suspend or revoke the license of the agent
    Explanation
    The Insurance Commissioner has the right to suspend or revoke the license of the agent if they lack authority from an insurer named on a binder for coverage. This action is taken to ensure that agents are properly authorized and to maintain the integrity of the insurance industry.

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  • 16. 

    Relevant to health insurance, morbidity includes all of the following except:

    • Intelligence

    • Income

    • Sex

    • Age

    Correct Answer
    A. Intelligence
    Explanation
    Morbidity refers to the occurrence of disease or illness in a population. When considering health insurance, factors such as income, sex, and age are typically taken into account as they can influence the likelihood of developing certain health conditions or diseases. However, intelligence is not directly related to morbidity as it does not have a direct impact on the occurrence of diseases or illnesses. Therefore, intelligence is not included when assessing morbidity in the context of health insurance.

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  • 17. 

    Under a disability insurance policy, an insured is eligible for a waiver of premium benefit:

    • Under the age 65

    • After the first six months of disability

    • During maternity leave

    • During delayed retirement

    Correct Answer
    A. After the first six months of disability
    Explanation
    The waiver of premium benefit under a disability insurance policy becomes eligible for the insured individual after the first six months of disability. This means that if the insured becomes disabled and is unable to work for a period of six months or more, they will no longer be required to pay premiums for their insurance coverage. This benefit helps to alleviate the financial burden on the insured during a period of disability when they may already be facing additional expenses and loss of income.

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  • 18. 

    The policy owner, age 50, has been paying the premiums on his whole life policy for 15 years.  He needs the equivalent of 1/3 of the cash value of his policy over the next two years.  He wants to continue to have the policy protection, and can afford to pay the premiums.  Which of the following would appear to be his best curse of action ?

    • Look elsewhere. The insurer is not obligated to make the cash value available to the policy owner unless the policy matures. If they did, most policies would lapse.

    • Look elsewhere. Whole life policies do not develop a cash value

    • Surrender the policy and take the cash value. He can then take the other 2/3 and purchase another policy.

    • Use the policy loan provision to borrow money from the policy, but keep paying the policy premiums to keep the policy in force.

    Correct Answer
    A. Use the policy loan provision to borrow money from the policy, but keep paying the policy premiums to keep the policy in force.
    Explanation
    The policy owner should use the policy loan provision to borrow money from the policy while continuing to pay the premiums to keep the policy in force. This option allows him to access the equivalent of 1/3 of the cash value of his policy over the next two years, while still maintaining the protection provided by the policy. Surrendering the policy and taking the cash value would only provide him with a portion of the funds needed, and he would need to purchase another policy with the remaining amount. The other options, looking elsewhere or stating that whole life policies do not develop a cash value, are not viable solutions.

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  • 19. 

    Any transaction that involves purchasing a life insurance policy and terminating an existing policy is known as:

    • Replacement

    • Reinsurance

    • Reinstatement

    • Assignment

    Correct Answer
    A. Replacement
    Explanation
    When a person purchases a new life insurance policy and cancels or terminates their existing policy, it is referred to as "replacement." This term is used to describe the process of replacing one policy with another. Reinsurance refers to the process where an insurance company transfers some of its risks to another insurance company. Reinstatement refers to the process of resuming a lapsed policy. Assignment refers to the transfer of rights or benefits of a policy to another party.

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  • 20. 

    What does it mean if an agent's license is inactive ?

    • The agent can still transact insurance business in CA, but not in any other states until the license is reactivated

    • The agent can transact any insurance business with another agent's approval

    • The agent can transact any insurance business for which the agent is licensed

    • The agent cannot transact any insurance business for which a license is required.

    Correct Answer
    A. The agent cannot transact any insurance business for which a license is required.
    Explanation
    If an agent's license is inactive, it means that the agent is not authorized to transact any insurance business for which a license is required. This restriction applies to all states, not just CA. The agent would need to reactivate their license in order to resume transacting insurance business.

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  • 21. 

    Deductibles, coinsurance, and co-payments in a health insurance policy are cost-effective choices that have the effect of:

    • Cost sharing

    • Cost avoidance

    • Cost containment

    • Cost evasion

    Correct Answer
    A. Cost sharing
    Explanation
    Deductibles, coinsurance, and co-payments in a health insurance policy are cost-effective choices that encourage individuals to share the costs of their healthcare. By requiring individuals to pay a portion of their medical expenses, it helps distribute the financial burden and promotes responsible healthcare utilization. This cost sharing mechanism ensures that individuals have some financial stake in their healthcare decisions, which can help control overall healthcare costs. Therefore, the correct answer is "Cost sharing."

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  • 22. 

    The main master policy owner of a group health insurance contract is the:

    • Employer

    • Employee members

    • Plan administrator

    • Agent

    Correct Answer
    A. Employer
    Explanation
    The main master policy owner of a group health insurance contract is the employer. The employer is responsible for purchasing and maintaining the group health insurance policy for their employees. They are the ones who negotiate the terms and coverage options with the insurance company. The employer also pays the premiums for the policy and may choose to pass on a portion of the cost to the employee members. The employer acts as the central point of contact for the insurance policy and is responsible for communicating the details and benefits to the employee members.

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  • 23. 

    Which of the following requires a reporting company to respond to a consumer's complaint that his file contains inaccurate information ?

    • Unfair Practices Act

    • Medical Information Act

    • COBRA

    • Fair Credit Reporting Act

    Correct Answer
    A. Fair Credit Reporting Act
    Explanation
    The Fair Credit Reporting Act requires a reporting company to respond to a consumer's complaint that his file contains inaccurate information. This act is designed to protect consumers and ensure that credit reporting agencies maintain accurate and fair information about individuals. It provides consumers with the right to dispute any inaccurate or incomplete information in their credit reports and requires credit reporting agencies to investigate and correct any errors within a reasonable time frame.

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  • 24. 

    In accidental death and dismemberment insurance, which of the following would not be considered accidental ?

    • Employee loses sight in one eye from falling object in the shop

    • Employee severs hand while installing sheet rock at a building site

    • Employee requires abdominal surgery after food poisoning in the lunch room

    • Employee dies while falling from a ceiling hoise

    Correct Answer
    A. Employee requires abdominal surgery after food poisoning in the lunch room
    Explanation
    The employee requiring abdominal surgery after food poisoning in the lunch room would not be considered accidental. Accidental death and dismemberment insurance typically covers injuries or death that result from unexpected and unintentional events. In this case, the food poisoning and subsequent surgery were not caused by an accidental event, but rather by consuming contaminated food.

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  • 25. 

    A single deductible amount for all members of the same family and a right to single family member deductibles is known as:

    • Corridor deductible

    • Flat deductible

    • Family deductible

    • Stop-loss revenue

    Correct Answer
    A. Family deductible
    Explanation
    A family deductible refers to a single deductible amount that applies to all members of the same family. This means that once the total medical expenses for the family reach the deductible amount, the insurance coverage kicks in. It provides a cost-sharing mechanism where the family shares the financial burden until the deductible is met. This is different from individual deductibles, where each family member has to meet their own deductible before the insurance coverage begins.

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  • 26. 

    Usually, in order to join a group insurance plan without proving insurability, an employee must:

    • Join the plan during the enrollment period

    • Join the plan while eligible but after the enrollment period

    • Join the plan during the probationary period

    • Join the plan during the elimination period

    Correct Answer
    A. Join the plan during the enrollment period
    Explanation
    In order to join a group insurance plan without proving insurability, an employee must join the plan during the enrollment period. This is the designated time period in which employees are given the opportunity to sign up for the group insurance plan. Joining the plan during this period allows employees to be automatically accepted into the plan without having to provide any additional information or undergo any medical examinations. It is important for employees to take advantage of this enrollment period to ensure they can access the benefits of the group insurance plan without any complications.

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  • 27. 

    According to the code, all insurers must maintain a department to investigate:

    • Possible abuses of rating laws

    • Possible arson

    • Possible fraudulent claims from insureds

    • Possible fraud by insurers

    Correct Answer
    A. Possible fraudulent claims from insureds
    Explanation
    The code states that all insurers must maintain a department to investigate possible fraudulent claims from insureds. This means that insurers are required to have a department dedicated to looking into any potentially fraudulent claims made by their policyholders. This is important in order to ensure that insurance companies are not being taken advantage of by individuals making false claims, and to protect the integrity of the insurance industry.

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  • 28. 

    What happens to a license after the death of a natural person who holds a valid insurance license?

    • It always terminates

    • It may be transferred to another person

    • The license becomes inactive until the expiration date

    • The license must be returned to the Commisioner to cancel the license

    Correct Answer
    A. It always terminates
    Explanation
    After the death of a natural person who holds a valid insurance license, the license always terminates. This means that the license is no longer valid and cannot be transferred to another person. Additionally, the license does not become inactive until the expiration date, nor does it need to be returned to the Commissioner to cancel it. The termination of the license is a standard procedure that occurs upon the death of the license holder.

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  • 29. 

    Why should a contingent beneficiary be named in a life insurance policy?

    • To determine who receives the policy benefits if the primary beneficiary is deceased

    • To become the policy owner if the primary beneficiary is deceased

    • To allow creditors to receive policy proceeds

    • To share the proceeds with the primary beneficiary

    Correct Answer
    A. To determine who receives the policy benefits if the primary beneficiary is deceased
    Explanation
    A contingent beneficiary should be named in a life insurance policy to determine who will receive the policy benefits if the primary beneficiary is deceased. This ensures that there is a backup plan in place in case the primary beneficiary is unable to receive the proceeds. By naming a contingent beneficiary, the policyholder can have peace of mind knowing that their loved ones will still be taken care of even if something happens to the primary beneficiary.

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  • 30. 

    Which type of life insurance policy gives the policy owner the right to share in the insurer's surplus ?

    • Participating

    • Non-participating

    • Level term

    • Decreasing term

    Correct Answer
    A. Participating
    Explanation
    A participating life insurance policy gives the policy owner the right to share in the insurer's surplus. This means that the policy owner is entitled to receive dividends or additional benefits based on the financial performance of the insurance company. These dividends can be used to reduce premiums, increase the policy's cash value, or be taken as cash. In contrast, a non-participating policy does not provide these benefits and the policy owner does not have a share in the insurer's surplus. Level term and decreasing term policies are types of non-participating policies.

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  • 31. 

    When a claimant is covered by more than one plan the situation is resolved through:

    • Maximum benefit

    • Coinsurance

    • Integration

    • Coordination of benefits

    Correct Answer
    A. Coordination of benefits
    Explanation
    When a claimant is covered by more than one plan, coordination of benefits is used to resolve the situation. This means that the benefits from all the plans are coordinated to ensure that the claimant does not receive more than the maximum allowable amount for a specific medical expense. This process helps to prevent overpayment and ensures that the claimant receives the appropriate benefits from each plan.

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  • 32. 

    Which of the following is a description of a Life and Disability Analyst ?

    • A broker paid fees for service

    • A person licensed to assist an agent in soliciting life insurance

    • A person licensed to advise clients about life and disability insurance for a fee

    • Any agent

    Correct Answer
    A. A person licensed to advise clients about life and disability insurance for a fee
    Explanation
    A Life and Disability Analyst is a person who is licensed to provide advice to clients regarding life and disability insurance in exchange for a fee. They specialize in helping clients understand and choose the right insurance policies that meet their specific needs and goals. This role requires expertise in analyzing the client's financial situation, assessing risks, and recommending suitable insurance coverage. Unlike other options listed, such as a broker or an agent, a Life and Disability Analyst focuses specifically on advising clients about life and disability insurance rather than selling or soliciting insurance products.

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  • 33. 

    The policy provision which prevents an insurer from voiding a policy for misstatements after 2 years is:

    • Incontestability

    • Indemnity

    • Misrepresentation

    • There is no such provision

    Correct Answer
    A. Incontestability
    Explanation
    The correct answer is "Incontestability." This policy provision prevents an insurer from voiding a policy for misstatements made by the insured after a period of 2 years. It provides a certain level of protection to the policyholder by limiting the insurer's ability to retroactively cancel or modify the policy based on misrepresentations. This provision helps ensure that the policy remains valid and enforceable after a specified time, giving the insured peace of mind and stability in their coverage.

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  • 34. 

    An insurer owned by policyholders is:

    • Fraternal insurer

    • Capital stock insurer

    • Mutual insurer

    • Reciprocal exchange

    Correct Answer
    A. Mutual insurer
    Explanation
    A mutual insurer is an insurance company that is owned by its policyholders. This means that the policyholders are also the owners of the company and have a say in the company's operations. The profits of a mutual insurer are typically returned to the policyholders in the form of dividends or lower premiums. This ownership structure allows the company to prioritize the needs and interests of its policyholders rather than external shareholders.

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  • 35. 

    What must an insurer do who accepts an application from an agent who is not specifically appointed by that insurer and then issues a policy from that application ?

    • The agent must become an employee of that company within 30 days or re-submit the application

    • Add the agent's name on the company's list of approved agents

    • Send the agent an employment approval notice within 30 days of policy issuance

    • Forward to the Insurance Commissioner a Notice of Appointment within 14 days of receipt of application

    Correct Answer
    A. Forward to the Insurance Commissioner a Notice of Appointment within 14 days of receipt of application
    Explanation
    When an insurer accepts an application from an agent who is not specifically appointed by that insurer and then issues a policy from that application, they must forward a Notice of Appointment to the Insurance Commissioner within 14 days of receiving the application. This is necessary to inform the Insurance Commissioner about the agent's involvement in the transaction and ensure compliance with regulatory requirements.

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  • 36. 

    After a life insurance policy has been in effect for two years, what keeps it from being rescinded by the insurer ?

    • The grace period provision

    • The right to return provision

    • The incontestability clause

    • The reinstatement clause

    Correct Answer
    A. The incontestability clause
    Explanation
    The incontestability clause prevents the insurer from rescinding a life insurance policy after it has been in effect for two years. This clause ensures that once the policy has been active for a certain period of time, typically two years, the insurer cannot contest or challenge the policy based on any misrepresentations or omissions made by the policyholder during the application process. This provides a level of security and peace of mind for the policyholder, knowing that their coverage cannot be revoked after the specified time period.

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  • 37. 

    An insured bought an annuity ten years ago.  He will retire in five year.  To determine the value of the annuity, the number of accumulation units is multiplied by the value of the separate account.  What type of annuity was purchased ?

    • Variable annuity

    • Fixed premium annuity

    • Tax sheltered annuity

    • Single payment annuity

    Correct Answer
    A. Variable annuity
    Explanation
    The insured purchased a variable annuity. This is because the value of the annuity is determined by multiplying the number of accumulation units by the value of the separate account. In a variable annuity, the separate account is invested in various assets such as stocks and bonds, and the value fluctuates based on the performance of these investments. Therefore, the value of the annuity will vary over time, making it a variable annuity.

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  • 38. 

    Which of the following gives individuals the right to purchase additional life insurance regardless of their insurability ?

    • Incontestability

    • Accelerated death benefit

    • Guaranteed insurability

    • Waiver of premium

    Correct Answer
    A. Guaranteed insurability
    Explanation
    Guaranteed insurability gives individuals the right to purchase additional life insurance regardless of their insurability. This means that even if their health or other factors change, they can still buy more coverage without having to go through the underwriting process again. This option provides flexibility and ensures that individuals can increase their coverage as their needs evolve over time.

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  • 39. 

    Medicare Part A, begins automatically at age:

    • 55

    • 60

    • 62

    • 65

    Correct Answer
    A. 65
    Explanation
    Medicare Part A begins automatically at age 65. This is because Medicare is a federal health insurance program primarily for individuals who are 65 years old or older. It provides coverage for hospital stays, skilled nursing facility care, and some home health care services. Medicare Part A is funded through payroll taxes and individuals who have paid into the system for a certain number of years are eligible for this coverage when they turn 65.

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  • 40. 

    Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), a qualifying event insures that an employee who is covered can:

    • Elect to continue coverage

    • Request a waiver of premium

    • Convert to an interim policy

    • Transfer coverage to another group

    Correct Answer
    A. Elect to continue coverage
    Explanation
    Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), a qualifying event ensures that an employee who is covered has the option to continue their coverage. This means that even if the employee's employment status changes or they experience certain life events, such as termination or reduction in work hours, they can choose to keep their health insurance coverage for a limited period of time. This allows individuals to maintain their healthcare benefits and avoid a gap in coverage during times of transition.

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  • 41. 

    Joe receives a large bonus at wok and decides to purchase an annuity with it.  His monthly income payments from the annuity will begin the following month.  Which of the following has Joe purchased ?

    • A single premium deferred annuity

    • An individual retirement annuity

    • A tax sheltered annuity

    • A single premium immediate annuity

    Correct Answer
    A. A single premium immediate annuity
    Explanation
    Joe has purchased a single premium immediate annuity. This type of annuity allows the purchaser to make a lump sum payment (single premium) and immediately start receiving income payments (immediate annuity). Since Joe's monthly income payments will begin the following month after he purchases the annuity, it aligns with the characteristics of a single premium immediate annuity.

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  • 42. 

    The class beneficiary designation which means that the beneficiaries will receive equal shares fo the death benefit divided among the surviving members of the class is:

    • Class beneficiaries, equal shares

    • Per capita

    • Per stirpes

    • Per diem

    Correct Answer
    A. Per capita
    Explanation
    Per capita is a class beneficiary designation where the beneficiaries receive equal shares of the death benefit divided among the surviving members of the class. This means that each beneficiary in the class will receive an equal portion of the benefit, regardless of their relationship to the deceased. It is a fair and equal distribution method that ensures each member of the class receives an equal share.

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  • 43. 

    As an employer, the sudden death of an employee is considered a:

    • Body loss

    • Personnel loss

    • Personal loss

    • Human loss

    Correct Answer
    A. Personnel loss
    Explanation
    The sudden death of an employee is considered a personnel loss because it refers to the loss of a member of the organization's personnel or workforce. This loss not only affects the individual's family and loved ones but also has an impact on the company as they lose a valuable team member. The term "personnel loss" encompasses the emotional and practical implications of losing an employee, such as the need to find a replacement, reassign tasks, and provide support to the grieving colleagues.

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  • 44. 

    Listed below are descriptions of four types of policies.  Which is the term policy ?

    • The policy premium increases after three years and then it remains the same until the policy is paid up at age 55

    • The policy has a face amount of $100,000. The policy holder pays premiums annually. At the end of 10 years the case value is $25,000

    • The policy premiums must be paid for 20 years. Afterwards, the policy continues with no additional premiums paid. The policy has non-forfeiture values.

    • The policy has a face amount of $100,000. Every five years, the premium paid increases. After ten years, the policy holder stops paying premiums and the coverage stops. The policy has no cash value.

    Correct Answer
    A. The policy has a face amount of $100,000. Every five years, the premium paid increases. After ten years, the policy holder stops paying premiums and the coverage stops. The policy has no cash value.
    Explanation
    This policy is a term policy because it has a specific face amount of $100,000 and the premium paid increases every five years. After ten years, the policy holder stops paying premiums and the coverage stops, indicating that it is a term policy with a set duration. Additionally, the policy has no cash value, further supporting the classification as a term policy.

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  • 45. 

    Each of the following terms is an important characteristic of a major medical policy, except:

    • Deductible

    • Capitation

    • Setting maximum amounts

    • Coinsurance

    Correct Answer
    A. Capitation
    Explanation
    Capitation is not an important characteristic of a major medical policy. Capitation is a payment model where healthcare providers receive a fixed amount per patient, regardless of the services provided. In major medical policies, the focus is on coverage for major medical expenses and sharing the costs between the insurer and the insured. Deductible, setting maximum amounts, and coinsurance are all important characteristics of major medical policies as they determine the cost-sharing between the insured and the insurer for covered medical services.

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  • 46. 

    A beneficiary wants to receive $2,000 per month until the principal and interest are exhausted.  Which settlement option should be chosen ?

    • Fixed amount option

    • Cash option

    • Fixed period option

    • Interest option

    Correct Answer
    A. Fixed amount option
    Explanation
    The beneficiary should choose the fixed amount option. This option allows the beneficiary to receive a fixed amount of $2,000 per month until both the principal and interest are exhausted. This ensures a consistent monthly income for the beneficiary until the funds are depleted.

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  • 47. 

    Which of the following is a true statement regarding the social security (OASDHI) program ?

    • The program is fully funded

    • Except for a few exemptions, it is a voluntary program

    • The program provides a minimum floor of income, and is meant to supplement a retirees own personal program

    • The actuarial value of each person's contribution is equal to the actual value of each persons benefit

    Correct Answer
    A. The program provides a minimum floor of income, and is meant to supplement a retirees own personal program
    Explanation
    The social security (OASDHI) program provides a minimum floor of income and is meant to supplement a retiree's own personal program. This means that the program ensures a certain level of income for retirees, serving as a safety net. However, it is not fully funded and relies on contributions from current workers to provide benefits to retirees. Additionally, the program is not voluntary for most individuals, as they are required to contribute to it through payroll taxes. The actuarial value of each person's contribution is not necessarily equal to the actual value of their benefit, as benefits are calculated based on a formula that takes into account factors such as earnings history and age of retirement.

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  • 48. 

    If one were to receive the principal sum benefit of death in a disability policy, the death must occur:

    • Within a specified number of days after injury occurs

    • Anytime during a rehabilitation period

    • Anytime that total dismemberment falls in the period

    • Within the policy period for any cause

    Correct Answer
    A. Within a specified number of days after injury occurs
    Explanation
    The correct answer is "Within a specified number of days after injury occurs". This means that in order to receive the principal sum benefit of death in a disability policy, the death must happen within a certain number of days after the injury takes place. This indicates that the policy is specifically designed to provide coverage for deaths resulting from injuries and has a time limit within which the death must occur to be eligible for the benefit.

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  • 49. 

    Which of the following is true about life insurance beneficiary designations ?

    • The primary and secondary beneficiary share proceeds equally

    • If the primary beneficiary dies before the insured, the benefits are paid to the estate of the insured even if there is a contingent beneficiary

    • When the insured dies the death benefit is paid to the secondary beneficiary even if there is a primary beneficiary

    • If there is no surviving beneficiary, the death benefit is paid to the Insured's estate

    Correct Answer
    A. If there is no surviving beneficiary, the death benefit is paid to the Insured's estate
    Explanation
    If there is no surviving beneficiary, the death benefit is paid to the Insured's estate. This means that if both the primary and secondary beneficiaries pass away before the insured, the death benefit will be given to the estate of the insured individual.

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Quiz Review Timeline (Updated): May 23, 2023 +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • May 23, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Jan 28, 2010
    Quiz Created by
    Pchinna

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