Life And Health Insurance License Exam Practice Test

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Life And Health Insurance License Exam Practice Test - Quiz

Are you gearing up to conquer the Life and Health Insurance License Exam? Whether you're taking your initial steps into the insurance industry or seeking to advance your career, our "Life and Health Insurance License Exam Practice Test" is your key to success!

Navigating the intricacies of life and health insurance is crucial, and this practice test is designed to assess and enhance your knowledge. It's the ultimate preparation tool for aspiring insurance professionals.

In this comprehensive exam, you'll encounter a wide range of questions that cover essential topics such as policy types, insurance regulations, underwriting, and ethical considerations. From understanding Read moredifferent health plans to deciphering life insurance provisions, this quiz has it all.

Don't leave your success to chance. Join countless others who have used our practice test to gain the confidence and expertise needed to excel in the Life and Health Insurance License Exam. Take the first step toward a successful insurance career today! Dive into our "Life and Health Insurance License Exam Practice Test" and get ready to ace your exam with flying colors!


Questions and Answers
  • 1. 

    A disability income policy social insurance supplement (SIS) benefit rider:

    • A.

      Pays benefits only if it turns out the insured is eligible for benefits from social insurance

    • B.

      Pays a benefit if the insured is injured on the job and qualifies for workers compensation benefits

    • C.

      Provides a payment only when the insured is totally disabled, but not receiving any social insurance benefit plans

    • D.

      Provides for a bonus payment that will match social security disability income benefits, if they are paid

    Correct Answer
    C. Provides a payment only when the insured is totally disabled, but not receiving any social insurance benefit plans
    Explanation
    The disability income policy social insurance supplement (SIS) benefit rider provides a payment only when the insured is totally disabled, but not receiving any social insurance benefit plans. This means that the rider will only pay benefits if the insured is unable to work due to a disability and does not qualify for any other social insurance benefits. It is designed to provide additional financial support to individuals who are disabled and do not have any other sources of income from social insurance programs.

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  • 2. 

    A health maintenance organization (HMO) plan reduces costs by promoting?

    • A.

      After-hours care

    • B.

      Generic care

    • C.

      Preventative care

    • D.

      Fee for service care

    Correct Answer
    C. Preventative care
    Explanation
    An HMO plan contains costs by promoting preventative care. Preventative care refers to measures taken to prevent illness or detect it early, such as regular check-ups, vaccinations, and screenings. By encouraging members to engage in preventative care, HMOs can help identify health issues before they become more serious and costly to treat. This approach can lead to better overall health outcomes and lower healthcare expenses in the long run.

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  • 3. 

    Renewable term insurance can be best described as :

    • A.

      A level death benefit with an increase in premium

    • B.

      A level death benefit with a decrease in premium

    • C.

      A decreasing death benefit with a level premium

    • D.

      An increasing death benefit with a level premium

    Correct Answer
    A. A level death benefit with an increase in premium
    Explanation
    Renewable term insurance refers to a type of insurance policy where the death benefit remains constant throughout the term of the policy, while the premium increases over time. This means that the policyholder pays a higher premium as they age, reflecting the increased risk of mortality. This type of policy allows individuals to obtain coverage at a lower cost initially and then adjust their premium payments as their financial situation improves. The level death benefit ensures that the policyholder's beneficiaries receive a consistent payout in the event of their death.

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  • 4. 

    The basic feature of a managed care indemnity plan is that the participants:

    • A.

      Select a provider and submit claims to the insurance company

    • B.

      Select a provider at work and claims processor

    • C.

      Pre-select a physician and third-party claims administrator

    • D.

      Pre-select a clinic and submit claims to the insurance company

    Correct Answer
    A. Select a provider and submit claims to the insurance company
    Explanation
    In a managed care indemnity plan, participants have the freedom to select a healthcare provider of their choice. They can then receive services from this provider and later submit claims for reimbursement to the insurance company. This means that participants have the flexibility to choose their preferred healthcare provider and have their claims processed by the insurance company.

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  • 5. 

    How do rights of an irrevocable beneficiary differ from those of a revocable beneficiary?

    • A.

      An irrevocable beneficiary may be changed by the policy owner without the beneficiary's consent

    • B.

      An irrevocable beneficiary has a vested right that neither the policy owner nor his creditors can impair without the beneficiary's consent

    • C.

      A revocable beneficiary can become the policy owner at any time by paying the premiums

    • D.

      An irrevocable beneficiary has the right to name a contingent beneficiary for the policy

    Correct Answer
    B. An irrevocable beneficiary has a vested right that neither the policy owner nor his creditors can impair without the beneficiary's consent
    Explanation
    The rights of an irrevocable beneficiary differ from those of a revocable beneficiary because an irrevocable beneficiary has a vested right that cannot be impaired by the policy owner or their creditors without the beneficiary's consent. This means that once designated as an irrevocable beneficiary, their right to receive the benefits cannot be taken away without their permission. In contrast, a revocable beneficiary can have their designation changed by the policy owner without their consent.

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  • 6. 

    What recourse does an insurer have if a violation of a material warranty on the part of the insured is discovered:

    • A.

      A hearing by the insurance commissioner to determine the severity of the the misrepresentation and to determine an appropriate course of action

    • B.

      None, if the policy has been in force for over 12 months

    • C.

      Rescission of the policy

    • D.

      A hearing by a court of law to determine an appropriate course of action an insurer may take

    Correct Answer
    C. Rescission of the policy
    Explanation
    If a violation of a material warranty on the part of the insured is discovered, the insurer has the option to rescind the policy. Rescission means that the insurer can cancel the policy from its inception and treat it as if it never existed. This allows the insurer to avoid any obligations or liabilities under the policy. Rescission is a common recourse for insurers when there has been a misrepresentation or breach of warranty by the insured.

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  • 7. 

    Which of the following describes an insurer who has enough financial resources only to provide for all its liabilities and for all reinsurance of all outstanding risks?

    • A.

      Guaranteed

    • B.

      Insolvent

    • C.

      Solvent

    • D.

      Non-participating

    Correct Answer
    C. Solvent
    Explanation
    An insurer who has enough financial resources only to provide for all its liabilities and for all reinsurance of all outstanding risks is described as "solvent." Solvency means that the insurer has the financial capacity to meet its obligations and cover potential losses without being in a state of insolvency or financial distress.

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  • 8. 

    All of the following statements about the election of a life insurance policy's settlement options are true, except:

    • A.

      The election is made by the policy owner at the time the application is submitted.

    • B.

      When no settlement option is chosen, the proceeds are automatically paid to the policy owner's state.

    • C.

      The policy owner may change the settlement option after it has been chosen.

    • D.

      The election may be made by the beneficiary if no settlement option is in force at the time of death of the insured.

    Correct Answer
    B. When no settlement option is chosen, the proceeds are automatically paid to the policy owner's state.
    Explanation
    The correct answer is "When no settlement option is chosen, the proceeds are automatically paid to the policy owner's state." This statement is not true because when no settlement option is chosen, the proceeds are typically paid to the policy owner's beneficiaries or estate, not to the policy owner's state.

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  • 9. 

    What is the purpose of "key person" insurance?

    • A.

      To provide health insurance benefits to key employees

    • B.

      To give a key employee the ability to purchase the business

    • C.

      To give retirement benefits to key employees

    • D.

      To cover decreased business earnings due to the death of a key employee

    Correct Answer
    D. To cover decreased business earnings due to the death of a key employee
    Explanation
    "Key person" insurance is designed to protect a business from financial losses that may occur due to the death of a key employee. If a key employee, such as a key executive or a highly skilled employee, were to pass away, it could have a significant impact on the business's operations and earnings. This insurance policy helps cover the potential loss of income or decreased business earnings that may result from the absence of the key employee. It provides a financial safety net to the business, allowing it to continue operating and compensating for the loss of the key employee's expertise and contributions.

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  • 10. 

    What would be the Insurance Commissioner's most likely course of action if an applicant for an insurance license had a previous application for a professional license denied for cause by any licensing authority within five years of the date of the filing?

    • A.

      Deny the application probably after a hearing

    • B.

      As long as it was not insurance related, the application will be granted

    • C.

      Approve only after a review by a panel of insurance professionals

    • D.

      Deny the application without a hearing

    Correct Answer
    D. Deny the application without a hearing
    Explanation
    If an applicant for an insurance license had a previous application for a professional license denied for cause by any licensing authority within five years of the date of the filing, the Insurance Commissioner's most likely course of action would be to deny the application without a hearing. This means that the applicant would not have the opportunity to present their case or provide any additional information to support their application. The previous denial of a professional license suggests that there may be issues or concerns with the applicant's qualifications or suitability for holding a license, which would lead to the denial of the insurance license application without further investigation or review.

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  • 11. 

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

    • A.

      $150,000

    • B.

      $100,000

    • C.

      $0

    • D.

      $50,000

    Correct Answer
    A. $150,000
    Explanation
    The insured bought a $150,000 non-participating whole life policy many years ago and has faithfully made all the payments when due. Since he has never borrowed from the policy's cash value, the cash value remains the same as the initial amount of the policy, which is $150,000.

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  • 12. 

    Intentional concealment entitles the injured party to which course of action?

    • A.

      None, due to the fact that the concealment was unintentional

    • B.

      $250 fine to be paid to the injured party

    • C.

      Possible imprisonment to the party who concealed the information

    • D.

      Rescission of the contract

    Correct Answer
    D. Rescission of the contract
    Explanation
    Intentional concealment refers to the act of deliberately hiding or withholding information. In such cases, the injured party has the right to choose the course of action known as rescission of the contract. Rescission allows the injured party to cancel the contract and be relieved of any obligations or consequences that may have arisen from it. This course of action is justified as intentional concealment undermines the trust and fairness essential for a contractual relationship.

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  • 13. 

    Loss retention is an effective risk management technique when all of the following conditions exist except:

    • A.

      The probability of loss is unknown

    • B.

      The losses are highly predictable

    • C.

      The insured chooses to assume the losses involved

    • D.

      The worst possible loss is not serious

    Correct Answer
    A. The probability of loss is unknown
    Explanation
    Loss retention is an effective risk management technique when the losses are highly predictable, the insured chooses to assume the losses involved, and the worst possible loss is not serious. However, if the probability of loss is unknown, it becomes difficult to assess the potential risks and make informed decisions regarding loss retention. Therefore, the absence of knowledge about the probability of loss would make loss retention less effective as a risk management technique.

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  • 14. 

    A disability policy, described as "guaranteed renewable" is one where the insurance company

    • A.

      Surrenders the right to change the premiums

    • B.

      Reserves the right to change any of its terms

    • C.

      Reserves the right to change the premiums, but may not change any of its terms

    • D.

      May not renew the policy if the insured ceases to comply with certain conditions such as continued employment

    Correct Answer
    C. Reserves the right to change the premiums, but may not change any of its terms
    Explanation
    In a disability policy described as "guaranteed renewable," the insurance company reserves the right to change the premiums, which means they can increase the cost of the policy over time. However, they are not allowed to change any of the other terms of the policy, such as coverage limits or benefits. This ensures that the policyholder can rely on the same level of coverage and benefits throughout the policy's term, even if the premiums increase.

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  • 15. 

    When are parties to a contract required to communicate information solely based on personal judgment for a matter in question:

    • A.

      Only when asked

    • B.

      Only when the policy terms require it

    • C.

      Only when relevant

    • D.

      Never

    Correct Answer
    D. Never
    Explanation
    Parties to a contract are never required to communicate information solely based on personal judgment for a matter in question. This means that personal opinions or subjective beliefs are not considered necessary or relevant when it comes to providing information in a contract. Instead, parties are expected to provide factual and objective information that is necessary and relevant to the matter at hand. Personal judgment may introduce biases or inaccuracies, which can undermine the integrity and effectiveness of the contract. Therefore, it is best to rely on objective and verifiable information rather than personal judgment.

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  • 16. 

    Which statement is true regarding Medicare Supplement Insurance plans?

    • A.

      Insurers may offer only broad coverage plans that contain both core benefits and additional benefits

    • B.

      Insurers may freely offer whatever supplemental coverages they prefer to market

    • C.

      Insurers may offer policies that contain only the core benefits

    • D.

      Insurers may create insurance policies for approval by the CA Department of Insurance

    Correct Answer
    C. Insurers may offer policies that contain only the core benefits
    Explanation
    Insurers may offer policies that contain only the core benefits. This means that Medicare Supplement Insurance plans are not required to include additional benefits beyond the core benefits. Insurers have the flexibility to design and offer policies that only provide the basic coverage required by Medicare.

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  • 17. 

    The guaranteed insurability option provides the ability to:

    • A.

      Waive premium payments in the event of disability

    • B.

      Access a portion of the death benefit in the event of serious illness

    • C.

      Double the amount of the death benefit in the event of accidental death

    • D.

      Purchase additional insurance regardless of insurability

    Correct Answer
    D. Purchase additional insurance regardless of insurability
    Explanation
    The guaranteed insurability option allows the policyholder to purchase additional insurance without having to provide evidence of insurability. This means that even if the policyholder's health or other factors have changed since they originally purchased the policy, they can still buy more coverage. This can be useful if the policyholder's needs have increased over time or if they want to ensure they have enough coverage for the future.

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  • 18. 

    Which type of insurance guarantees the right to renew the policy each year, regardless of health but at an increased premium:

    • A.

      Convertible term

    • B.

      Level term

    • C.

      Decreasing term

    • D.

      Renewable term

    Correct Answer
    D. Renewable term
    Explanation
    Renewable term insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium. This means that the policyholder can continue the coverage without having to go through the underwriting process again, even if their health condition deteriorates. However, the premium for renewable term insurance increases with each renewal, reflecting the increased risk associated with the policyholder's age.

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  • 19. 

    The passage of worker's compensation legislation meant

    • A.

      Employees no longer had any legal means of obtaining reimbursement for work injuries

    • B.

      Employees would have to sue their employers to obtain reimbursement for work injuries

    • C.

      Employers would be held responsible for the cost of their employee's work injuries regardless of fault

    • D.

      Employers were no longer responsible for work injuries to employees

    Correct Answer
    C. Employers would be held responsible for the cost of their employee's work injuries regardless of fault
    Explanation
    The correct answer is "Employers would be held responsible for the cost of their employee's work injuries regardless of fault". This means that the passage of worker's compensation legislation made employers accountable for covering the expenses related to their employees' work injuries, regardless of who was at fault for the injury. This implies that employees no longer had to sue their employers to obtain reimbursement for work injuries, and employers were no longer able to escape responsibility for such injuries.

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  • 20. 

    RW and Associates is an agency which represents BLG Insurance Corporation. RW and Associates may leave the name BLG Insurance Corporation in its advertisements by clearly stating the relationship between the two businesses in any of the following ways, except:

    • A.

      RW and Associates who represent BLG Insurance Corporation

    • B.

      RW and Associates underwriting for BLG Insurance Corporation

    • C.

      RW and Associates placing business through BLG Insurance Corporation

    • D.

      RW and Associates using the services of BLG Insurance Corporation

    Correct Answer
    B. RW and Associates underwriting for BLG Insurance Corporation
    Explanation
    The correct answer is "RW and Associates underwriting for BLG Insurance Corporation." This statement implies that RW and Associates is directly involved in the underwriting process for BLG Insurance Corporation, which may not be accurate. The other options correctly state the relationship between RW and Associates and BLG Insurance Corporation, such as representing, placing business through, or using the services of BLG Insurance Corporation.

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  • 21. 

    The probationary period in a group health policy is intended for people

    • A.

      Who joined the group after the policy effective date

    • B.

      Without health coverage after a qualifying event who declined to join the group at the time of eligibility

    • C.

      With a pre-existing condition when they joined the group

    Correct Answer
    A. Who joined the group after the policy effective date
    Explanation
    The probationary period in a group health policy is intended for people who joined the group after the policy effective date. During this period, these individuals may have limited or no coverage for certain pre-existing conditions. This allows the insurance company to assess the health status of new members and determine the level of risk they pose. It also helps prevent adverse selection, where individuals only join the group when they need expensive medical treatments. By imposing a probationary period, the insurance company can ensure the stability and affordability of the group health policy for all members.

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  • 22. 

    Which provision will pay a portion of the death benefit prior to the insured's death due to a serious illness

    • A.

      Waiver of premium

    • B.

      Accelerated death benefit

    • C.

      Cost of living

    • D.

      Disability Income

    Correct Answer
    B. Accelerated death benefit
    Explanation
    The accelerated death benefit provision allows the insured to receive a portion of the death benefit before their actual death if they are diagnosed with a serious illness. This provision is designed to provide financial support to the insured during their lifetime, helping them cover medical expenses and other costs associated with their illness. It can provide a valuable source of funds when needed the most, offering peace of mind and financial stability during a difficult time.

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  • 23. 

    An individual with a low income and high insurance needs should buy

    • A.

      Whole life insurance

    • B.

      Universal life insurance

    • C.

      Endowment insurance

    • D.

      Term insurance

    Correct Answer
    D. Term insurance
    Explanation
    Term insurance is the most suitable option for an individual with a low income and high insurance needs because it provides coverage for a specific term, usually ranging from 10 to 30 years, at a lower premium compared to other types of insurance. Since the individual has high insurance needs, they require a larger coverage amount, which can be obtained at a more affordable rate with term insurance. Additionally, term insurance focuses solely on providing a death benefit and does not accumulate cash value like whole life or universal life insurance, making it a more cost-effective choice for someone with limited financial resources.

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  • 24. 

    An example of a third party administrator is:

    • A.

      An agent's supervisor who takes part of his commission

    • B.

      An employee who handles self-insurance claims

    • C.

      An employee who is responsible for evaluating for relative quality of competing group health and welfare benefits offered to his employer by insurers

    • D.

      An outside organization that processes claims for an employers self-funded plans

    Correct Answer
    D. An outside organization that processes claims for an employers self-funded plans
    Explanation
    The correct answer is an outside organization that processes claims for an employer's self-funded plans. This explanation is supported by the definition of a third-party administrator (TPA), which is an organization that provides administrative services for employee benefit plans. In this case, the TPA processes claims for self-funded plans, meaning that the employer assumes the financial risk for providing healthcare benefits to its employees. This arrangement allows the employer to have more control over the plan and potentially save costs, while the TPA handles the claims processing and other administrative tasks.

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  • 25. 

    A form of rest or relief offered to family members who are caring for a person who requires continual care is

    • A.

      Hospice care

    • B.

      Hospital care

    • C.

      Respite care

    • D.

      Intermediate care

    Correct Answer
    C. Respite care
    Explanation
    Respite care refers to a type of rest or relief provided to family members who are responsible for the ongoing care of an individual. This form of care allows family caregivers to take a break from their caregiving responsibilities, enabling them to recharge and attend to their own needs. Respite care can be provided in various settings, such as in-home care or at a specialized facility, and it offers temporary relief to family caregivers while ensuring that the person receiving care is still looked after.

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  • 26. 

    All of the following statement about contingent beneficiaries are true, except

    • A.

      They receive remaining payments to be made under a settlement agreement upon the primary beneficiary's death

    • B.

      The contingent beneficiary shares death proceeds equally with the primary beneficiary

    • C.

      They receive the death proceeds if the primary beneficiary is deceased at the time of the insured's death

    • D.

      More than one contingent beneficiary may be named

    Correct Answer
    B. The contingent beneficiary shares death proceeds equally with the primary beneficiary
    Explanation
    The correct answer is that the contingent beneficiary shares death proceeds equally with the primary beneficiary. This statement is false because contingent beneficiaries only receive the death proceeds if the primary beneficiary is deceased at the time of the insured's death. They do not share the proceeds equally with the primary beneficiary.

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  • 27. 

    The payer rider on a juvenile life policy provides that if the payor dies or becomes disabled before the insured juvenile reaches the age specified on the policy.

    • A.

      The insurer will make the payments until the insured juvenile reaches the specified age

    • B.

      The insurer will lend money to keep the policy in force

    • C.

      The insured's estate will make the premium payments

    • D.

      The insurer will make all the of the policy payments

    Correct Answer
    A. The insurer will make the payments until the insured juvenile reaches the specified age
    Explanation
    The payor rider on a juvenile life policy provides that if the payor dies or becomes disabled before the insured juvenile reaches the age specified on the policy, the insurer will make the payments until the insured juvenile reaches the specified age. This means that if the person responsible for paying the premiums on the policy (the payor) passes away or becomes disabled, the insurer will step in and continue making the payments until the insured juvenile reaches the specified age. This ensures that the policy remains in force and the benefits are provided as intended.

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  • 28. 

    The insured is totally and permanently disabled. The insured's policy continues in force without the payment of a premium because the policy contains a:

    • A.

      Grace period provision

    • B.

      Guaranteed insurability provision

    • C.

      Reinstatement provision

    • D.

      Waiver of premium provision

    Correct Answer
    D. Waiver of premium provision
    Explanation
    The correct answer is Waiver of premium provision. This provision allows the insured's policy to continue in force without the payment of a premium if the insured becomes totally and permanently disabled. This provision is designed to provide financial relief to the insured during a time of disability, ensuring that their coverage remains in effect without the burden of premium payments.

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  • 29. 

    All of the following statements about survivorship life insurance are true, except

    • A.

      The policy face amounts are usually more than $1,000,000

    • B.

      The policy face amount is paid out only upon the death of the first insured to die

    • C.

      It offers premiums that are quite low compared to what is charged on separate policies

    • D.

      It is particularly well suited to meet the needs of estate taxes

    Correct Answer
    B. The policy face amount is paid out only upon the death of the first insured to die
    Explanation
    Survivorship life insurance, also known as second-to-die insurance, is a type of policy where the death benefit is paid out upon the death of the second insured individual. This means that the policy face amount is not paid out only upon the death of the first insured to die, making this statement false. Survivorship life insurance is commonly used to meet estate tax obligations as it provides a lump sum payout that can be used to cover these expenses. Additionally, survivorship life insurance policies often have lower premiums compared to separate policies covering each individual insured. However, the statement that the policy face amounts are usually more than $1,000,000 is not necessarily true, as the face amount can vary depending on the specific policy and coverage needs.

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  • 30. 

    If an insurer is not able to meet financial obligations when due, the insurer would be considered

    • A.

      Insolvent

    • B.

      Unauthorized

    • C.

      Impaired

    • D.

      Non-admitted

    Correct Answer
    A. Insolvent
    Explanation
    If an insurer is not able to meet their financial obligations when they are due, it means that they do not have enough funds or assets to pay their debts. This situation is called insolvency. Insolvency is a serious financial condition and indicates that the insurer is at risk of being unable to fulfill their contractual obligations to policyholders and other stakeholders.

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  • 31. 

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

    • A.

      Fine the insurance company for non-compliance

    • B.

      Suspend or revoke the license of the agent

    • C.

      Authorize the agent with a certificate of convenience

    • D.

      Request a certificate of authority be issued immediately

    Correct Answer
    B. Suspend or revoke the license of the agent
    Explanation
    The Insurance Commissioner has the right to suspend or revoke the license of an agent if they lack authority from an insurer named on a binder for coverage. This means that if the agent does not have the proper authorization from the insurer to provide coverage, their license can be temporarily suspended or permanently revoked. This action is taken to ensure that agents are operating within the legal boundaries and have the necessary authority to sell insurance policies.

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  • 32. 

    Which definition of disability is the most difficult for an injured worker to satisfy?

    • A.

      The own-occupation definition used by the Social Security Administration

    • B.

      The typical definition of partial disability used by disability income policies

    • C.

      The total disability definition used by the Social Security Administration

    • D.

      The typical definition of temporary disability used by disability income polices

    Correct Answer
    C. The total disability definition used by the Social Security Administration
    Explanation
    The total disability definition used by the Social Security Administration is the most difficult for an injured worker to satisfy because it requires the worker to be completely unable to perform any type of work, not just their own occupation. This means that even if the worker is unable to perform their previous job, they may still be considered able to work in a different capacity, which may make it harder for them to qualify for disability benefits.

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  • 33. 

    People commonly purchase an annuity to protect against the risk of:

    • A.

      Dying before their home mortgage is paid off

    • B.

      Becoming uninsurable

    • C.

      Outliving their financial resources

    • D.

      Dying too soon

    Correct Answer
    C. Outliving their financial resources
    Explanation
    An annuity is a financial product that provides a steady stream of income for a specified period or for the rest of one's life. People commonly purchase annuities to protect against the risk of outliving their financial resources. By investing in an annuity, individuals can ensure a stable income in their retirement years, even if they live longer than expected. This helps to mitigate the fear of running out of money and provides financial security for the future.

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  • 34. 

    In the event of an accidental death, the principal sum in a disability policy will be paid

    • A.

      Over the course of a set period

    • B.

      On a sliding schedule

    • C.

      In one lump sum

    • D.

      As a monthly indemnity

    Correct Answer
    C. In one lump sum
    Explanation
    In the event of an accidental death, the principal sum in a disability policy will be paid in one lump sum. This means that the entire amount of the policy will be paid in a single payment, rather than being spread out over a set period, on a sliding schedule, or as a monthly indemnity. This can provide immediate financial support to the beneficiaries and help cover any immediate expenses or financial obligations that may arise due to the accidental death.

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  • 35. 

    Which of the following statements about the HICAP program is false?

    • A.

      Stands for Health Insurance Counseling Advocacy Program

    • B.

      Serves people needing information about Medicare

    • C.

      Does not sell or endorse any specific types of insurance

    • D.

      Provides assistance for a fee based upon ability to pay

    Correct Answer
    D. Provides assistance for a fee based upon ability to pay
    Explanation
    The false statement about the HICAP program is that it provides assistance for a fee based upon ability to pay. The HICAP program does not charge a fee for its services, as stated in the given options.

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  • 36. 

    Why is having a large number of similar exposure units important to insurers ?

    • A.

      The greater the number insured, the more premium is collected to offset fixed costs

    • B.

      The insurer increases its market share with every insured

    • C.

      The greater the number insured, the greater the amount of premiums collected to help cover losses

    • D.

      The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums

    Correct Answer
    D. The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums
    Explanation
    Having a large number of similar exposure units is important to insurers because it allows them to more accurately predict losses and set appropriate premiums. When there is a larger pool of insured individuals, insurers can gather more data and statistics on potential risks and losses. This enables them to better understand the likelihood and severity of potential claims, which in turn allows them to set premiums that align with the level of risk. With a larger number insured, insurers have a more reliable basis for calculating premiums and can ensure that they are charging an appropriate amount to cover potential losses.

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  • 37. 

    The insured, aged 65, owns a $100,000 non-participating whole life policy.  The policy is paid-up as of today.  When would the cash value reach $100,000?

    • A.

      Today

    • B.

      Age 85

    • C.

      Never

    • D.

      Age 100

    Correct Answer
    D. Age 100
    Explanation
    The cash value of a whole life policy typically increases over time as the policyholder pays premiums and accumulates interest. In this case, the insured's policy is already paid-up, meaning they have finished making premium payments. Therefore, the cash value will continue to grow based on the interest rate specified in the policy until the insured reaches age 100, at which point it will reach $100,000.

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  • 38. 

    A measure for rating an individual's need for LTC benefits is called:

    • A.

      Case management

    • B.

      Activities of daily living

    • C.

      The gatekeeper mechanism

    • D.

      Co-insurance

    Correct Answer
    B. Activities of daily living
    Explanation
    Activities of daily living (ADLs) refers to the basic self-care tasks that individuals typically perform on a daily basis, such as bathing, dressing, eating, toileting, transferring, and continence. ADLs are used as a measure to assess an individual's functional ability and determine their need for long-term care (LTC) benefits. The ability or inability to perform ADLs independently can indicate the level of assistance and support required for an individual to maintain their daily activities and quality of life. Therefore, ADLs serve as a rating measure for an individual's need for LTC benefits.

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  • 39. 

    In order to receive the principal sum benefit for death from a disability policy, the death must occur

    • A.

      Within a specified number of days after injury

    • B.

      Any time during a rehabilitation period

    • C.

      Any time during a total dismemberment period

    • D.

      Within the policy period from any cause

    Correct Answer
    A. Within a specified number of days after injury
    Explanation
    The correct answer is "Within a specified number of days after injury." This means that in order for the beneficiary to receive the principal sum benefit for death from a disability policy, the death must occur within a certain timeframe after the injury. This indicates that there is a specific window of time during which the death must occur in order for the benefit to be paid out.

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  • 40. 

    Which of the following are commonly covered by medical expense policies ?

    • A.

      Elective cosmetic surgeries

    • B.

      Pre-existing conditions

    • C.

      Expenses covered by a workers compensation policy

    • D.

      Accidental injuries

    Correct Answer
    D. Accidental injuries
    Explanation
    Medical expense policies commonly cover accidental injuries. These policies are designed to provide coverage for medical expenses incurred due to unexpected accidents or injuries. This can include emergency room visits, hospital stays, surgeries, and other necessary medical treatments. Accidental injuries are typically covered regardless of whether they occur at home, at work, or in other locations. However, it is important to note that coverage may vary depending on the specific policy and any exclusions or limitations that may apply.

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  • 41. 

    A health insurance deductible is:

    • A.

      The insured's payment for healthcare that is not considered a covered expense

    • B.

      The cost of a covered expense minus the office co-payment

    • C.

      The portion of insurance premium paid for coverage by the insured

    • D.

      The amount of covered expense that the insured pays before the insurer pays

    Correct Answer
    D. The amount of covered expense that the insured pays before the insurer pays
    Explanation
    A health insurance deductible refers to the amount of covered expenses that the insured individual is responsible for paying out of pocket before the insurance company starts covering the costs. This means that the insured must meet the deductible amount before the insurer begins to contribute towards the expenses. Once the deductible is met, the insurance company will then start paying their portion of the covered expenses.

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  • 42. 

    According to the CA insurance code, an insured's policy must specify all the of the following, except:

    • A.

      The risks insured against

    • B.

      The financial rating of the insurer

    • C.

      The property or life being insured

    • D.

      The policy period

    Correct Answer
    B. The financial rating of the insurer
    Explanation
    The correct answer is "The financial rating of the insurer." The CA insurance code requires an insured's policy to specify the risks insured against, the property or life being insured, and the policy period. However, it does not require the policy to include the financial rating of the insurer. This information may be important for the insured to consider, but it is not a legal requirement for the policy.

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  • 43. 

    Which of the following expenses is never covered by a LTC insurance policy ?

    • A.

      Home health care

    • B.

      Adult day care

    • C.

      Hospital acute care unit

    • D.

      Alzheimer's disease

    Correct Answer
    C. Hospital acute care unit
    Explanation
    LTC insurance policies typically cover expenses related to long-term care, such as home health care and adult day care. However, a hospital acute care unit is not considered long-term care and is therefore not covered by LTC insurance. This type of care is usually provided for a short duration in a hospital setting and is typically covered by health insurance or Medicare. Therefore, the correct answer is Hospital acute care unit.

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  • 44. 

    Which of the following is a hazard ?

    • A.

      A large number of similar exposure units

    • B.

      A peril

    • C.

      A condition that might increase the likelihoold of a loss occurring

    • D.

      A speculative risk

    Correct Answer
    C. A condition that might increase the likelihoold of a loss occurring
    Explanation
    A hazard is defined as a condition that increases the likelihood of a loss occurring. This means that it poses a potential danger or risk that could lead to a loss or harm. The other options listed in the question do not fit this definition. A large number of similar exposure units refers to a situation where there are many similar entities or individuals being exposed to a risk, but it does not necessarily indicate a hazard. A peril refers to a specific cause of loss, such as a fire or flood, rather than a condition that increases the likelihood of a loss. Lastly, a speculative risk involves the possibility of gain or loss, rather than a specific condition that increases the likelihood of a loss occurring.

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  • 45. 

    A hospital confinement indemnity insurance policy pays

    • A.

      An indemnity to the insured for all expenses incurrred when the insured is confined to a hospital

    • B.

      The daily benefit coverage amount stated in the policy for each day the insured is confined in the hospital

    • C.

      100% of the covered medical expenses less the deductible and co-insurance percentage

    • D.

      The amount of the actual hospital expenses

    Correct Answer
    B. The daily benefit coverage amount stated in the policy for each day the insured is confined in the hospital
    Explanation
    The correct answer is "the daily benefit coverage amount stated in the policy for each day the insured is confined in the hospital." This means that the insurance policy will provide a fixed daily amount to the insured for each day they are confined in the hospital. This amount is predetermined and specified in the policy. It does not cover all the expenses incurred or the actual hospital expenses, but rather provides a set daily benefit.

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  • 46. 

    When a licensed agent submits a renewal applications with applicable fee on or before the expiration date

    • A.

      The agent will be able to operate if a receipt for payment is returned prior to the license expiration date

    • B.

      The agent will be able to operate for up to 60 days after the specified expiration date

    • C.

      The agent will be able to operate if the agent goes in person to the insurance department to receive a temporary extension of the license

    • D.

      The agent will be able to continue to operate after a 30 day extension to operate without receipt if requested and approved

    Correct Answer
    B. The agent will be able to operate for up to 60 days after the specified expiration date
    Explanation
    When a licensed agent submits a renewal application with the applicable fee on or before the expiration date, they will be able to operate for up to 60 days after the specified expiration date. This means that even if the license has technically expired, the agent is still allowed to continue operating for an additional 60 days. This provides a grace period for the agent to complete the renewal process and ensure that their license remains valid.

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  • 47. 

    A provision stating that health insured's and their insurers will share covered losses in an agreed proportion is called

    • A.

      The stop-loss provision

    • B.

      Comprehensive insurance

    • C.

      Percentage insuring

    • D.

      Co-insurance

    Correct Answer
    D. Co-insurance
    Explanation
    Co-insurance is a provision in health insurance policies where the insured individual and the insurer agree to share the covered losses in a specific proportion. This means that the insured person will be responsible for paying a certain percentage of the covered expenses, while the insurance company will cover the remaining portion. Co-insurance helps to distribute the financial burden between the insured individual and the insurer, ensuring that both parties contribute to the cost of healthcare services.

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  • 48. 

    Common life insurance policy riders include all of the following, except:

    • A.

      Extended term

    • B.

      Guaranteed insurability

    • C.

      Accidental death

    • D.

      Waiver of premium

    Correct Answer
    A. Extended term
    Explanation
    The given answer is "Extended term." Common life insurance policy riders typically include options such as guaranteed insurability, accidental death, and waiver of premium. However, extended term is not typically included as a rider. Extended term is a feature that allows the policyholder to use the cash value of the policy to convert it into a term policy for a specific period. While it is a feature available in some life insurance policies, it is not considered a rider.

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  • 49. 

    Term insurance is typically characterized by

    • A.

      Low premiums and high cash value

    • B.

      High premiums and no cash value

    • C.

      High premiums and high cash value

    • D.

      Low premiums and no cash value

    Correct Answer
    D. Low premiums and no cash value
    Explanation
    Term insurance is a type of life insurance that provides coverage for a specific term or period of time. It is typically characterized by low premiums because it only provides coverage for a specific period and does not accumulate cash value over time. This means that if the insured person survives the term, there is no payout or cash value associated with the policy. The low premiums make term insurance an affordable option for individuals who want temporary coverage without the need for cash value accumulation.

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  • 50. 

    A $50,000 whole life policy with a cash value of $10,000 has been in force for 11 years.  The policy owner is unable to continue the premium payments.  Which of the following describes the reduced paid-up non-forfeiture option

    • A.

      The policy owner begins to receive $200 monthly payments from the insurer that will continue for life

    • B.

      The policy is surrendered and the policy owner is paid $10,000 by the insurer

    • C.

      The cash value is used to purchase a $50,000 term policy that is paid-up for 10 years

    • D.

      The cash value is used to purchase a $20,000 paid-up policy

    Correct Answer
    D. The cash value is used to purchase a $20,000 paid-up policy
    Explanation
    When the policy owner is unable to continue premium payments, the reduced paid-up non-forfeiture option allows them to use the cash value of the policy to purchase a new paid-up policy. In this case, the cash value of $10,000 is used to purchase a new policy with a face value of $20,000. This means that the policy owner will no longer have to make premium payments and the new policy is fully paid-up.

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