State Insurance License Exam Quiz!

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  • 1/29 Questions

    All of the following are classifications of risk EXCEPT

    •  substandard
    • Preferred
    • Declined
    • Non-nicotine
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About This Quiz

Prepare for your State Insurance License Exam with this focused quiz! Covering key topics like Medicare eligibility, insurance riders, and policy provisions, this quiz tests essential knowledge for aspiring insurance professionals, ensuring readiness for licensing exams.

State Insurance License Exam Quiz! - Quiz

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  • 2. 

    If a premium is collected at the time of the application, the producer will issue a:

    • Contestable receipt

    • Guaranteed receipt

    • Conditional receipt

    • Sales receipt

    Correct Answer
    A. Conditional receipt
    Explanation
    A conditional receipt is issued when a premium is collected at the time of the application. This type of receipt indicates that the coverage is not yet in effect and is subject to certain conditions being met. It allows the insurance company to assess the application and determine if the applicant meets the necessary criteria for coverage. If the conditions are met, the coverage becomes effective from the date of the application. However, if the conditions are not met, the premium may be refunded to the applicant.

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  • 3. 

    Legally speaking, a producer has a __________ duty when handling life insurance premiums and applications for an insurer.

    • Fiduciary

    • Undisputed

    • Negotiated

    • Professional

    Correct Answer
    A. Fiduciary
    Explanation
    A producer has a fiduciary duty when handling life insurance premiums and applications for an insurer. This means that the producer is legally obligated to act in the best interests of the insurer and the policyholders. They must handle the premiums and applications with utmost care, honesty, and loyalty, ensuring that they are properly managed and protected. The fiduciary duty requires the producer to prioritize the interests of the insurer and the policyholders above their own personal gain or interests.

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  • 4. 

    Which of the following is characteristic of a non-qualified plan?

    • Defined vesting schedule

    • Plan established by the employer

    • Plan does not meet federal guidelines for tax benefits

    • Employer contributions are deductible business expenses

    Correct Answer
    A. Plan does not meet federal guidelines for tax benefits
    Explanation
    A non-qualified plan is a type of retirement plan that does not meet the federal guidelines for tax benefits. Unlike qualified plans, which offer tax advantages such as tax-deferred contributions and tax-free withdrawals, non-qualified plans do not provide these benefits. Non-qualified plans are typically established by the employer and may have a defined vesting schedule, where employees gradually gain ownership of the employer's contributions over time. However, the lack of tax benefits is the characteristic that distinguishes non-qualified plans from qualified plans.

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  • 5. 

    With a Business Overhead Expense Policy, all of the following are claims that are covered, except:

    • Employee labor

    • The salary or profit of the business owner

    • Utilities

    • Office rent

    Correct Answer
    A. The salary or profit of the business owner
    Explanation
    A Business Overhead Expense Policy is designed to cover the necessary expenses of a business in the event that the owner or key employee becomes disabled and unable to work. The policy typically covers expenses such as employee labor, utilities, and office rent, as these are essential for the operation of the business. However, the salary or profit of the business owner is not typically covered by this policy, as it is considered a personal expense rather than a business expense.

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  • 6. 

    In a home healthcare benefit, all of the following are eligible expenses EXCEPT

    • Intermittent part-time nursing care;

    • Physical, occupational, or speech therapy;

    • Blood transfusions

    • Medical social services;

    Correct Answer
    A. Blood transfusions
    Explanation
    Blood transfusions are not eligible expenses in a home healthcare benefit. This is because blood transfusions are typically performed in a hospital or clinical setting, rather than in the patient's home. The other options - intermittent part-time nursing care, physical, occupational, or speech therapy, and medical social services - are all eligible expenses in a home healthcare benefit as they are services that can be provided in the home to assist with the patient's healthcare needs.

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  • 7. 

    The tendency for poor risks to seek and be covered for insurance more than average risks is known as:

    • Adverse hazard

    • Adverse risk

    • Adverse selection

    • Adverse rating

    Correct Answer
    A. Adverse selection
    Explanation
    Adverse selection refers to the tendency of individuals with higher risks to seek and obtain insurance coverage more than those with average risks. This occurs because individuals with higher risks have a greater need for insurance and are more likely to be willing to pay higher premiums. As a result, insurance companies may face a disproportionate number of high-risk policyholders, which can lead to increased claims and financial losses. To mitigate adverse selection, insurance companies use underwriting processes to assess and price risks appropriately.

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  • 8. 

    A company that is licensed to sell insurance in a particular state is:

    • A domiciled company

    • A non admitted company

    • An authorized company

    • A foreign company that is licensed to sell insurance in a particular state is:

    Correct Answer
    A. An authorized company
    Explanation
    An authorized company refers to a company that has obtained the necessary licenses and permissions to sell insurance in a specific state. This means that the company has met the requirements set by the state's insurance regulatory authority and is legally allowed to operate and sell insurance products within that state.

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  • 9. 

    Under Workers' Compensation, a disability that is a permanent physical impairment leaving the individual incapable of performing the previous regular occupation, but capable of performing some other type of work,

    • Residual disability

    • Permanent partial disability

    • Temporary disability

    • Recurrent disability

    Correct Answer
    A. Permanent partial disability
    Explanation
    Permanent partial disability refers to a disability that is a permanent physical impairment, which prevents the individual from performing their previous regular occupation but still allows them to perform some other type of work. This means that although the person may not be able to do their previous job, they are still capable of working in a different capacity. This type of disability is typically assessed based on the extent of the impairment and its impact on the individual's ability to work.

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  • 10. 

    In order to be valid, a contract must be between individuals considered legally able to enter into an agreement. This principle is known as:

    • Restricted persons

    • Considerations

    • Competent parties

    • Agreement

    Correct Answer
    A. Competent parties
    Explanation
    A valid contract requires that the individuals involved have the legal capacity to enter into an agreement. This means that they must be mentally competent and of legal age. The principle of "competent parties" ensures that both parties have the ability to understand the terms and consequences of the contract, and that their consent is freely given. This principle protects vulnerable individuals from being taken advantage of in contractual agreements.

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  • 11. 

    To address adverse selection what can an insurer legally do?

    • Limit the amount of coverage issued

    • Raise the premium higher than most people can afford to pay

    • Establish and enforce sound underwriting practices

    • Not offer policies to those over age 55

    Correct Answer
    A. Establish and enforce sound underwriting practices
    Explanation
    To address adverse selection, an insurer can establish and enforce sound underwriting practices. This means that the insurer can implement thorough evaluation processes to assess the risk associated with each potential policyholder. By doing so, the insurer can identify and select individuals who are less likely to file claims or pose a higher risk. This helps the insurer to mitigate the adverse selection problem and maintain a balanced risk pool, which ultimately benefits both the insurer and the insured individuals.

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  • 12. 

    Which of the following is exempted from the incontestability provision in insurance policies?

    • Fraudulent misstatements

    • Pre-existing conditions

    • Change in health

    • Changes in the insurance code

    Correct Answer
    A. Fraudulent misstatements
    Explanation
    Fraudulent misstatements are exempted from the incontestability provision in insurance policies because they involve intentional deception or false information provided by the policyholder. Incontestability provisions typically protect policyholders by preventing insurers from cancelling or denying claims based on information provided after a certain period of time. However, fraudulent misstatements are considered a breach of good faith and can lead to the policy being voided or cancelled, regardless of the incontestability provision.

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  • 13. 

    A producer who is acting as an agent is representing:

    • The insured, the applicant and the beneficiary

    • Always the insured

    • The insured and the insurer

    • Always the insurer

    Correct Answer
    A. Always the insurer
    Explanation
    A producer who is acting as an agent is representing the insurer. This means that the producer is working on behalf of the insurance company to sell and service insurance policies. They are responsible for communicating the terms and conditions of the policy to the insured, collecting premiums, and handling any claims or policy changes. The producer's primary duty is to act in the best interest of the insurer and ensure that the policy is properly underwritten and maintained.

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  • 14. 

    The insurer's underwriter may find information about an applicant's moral character, hobbies, work and general reputation from a:

    • Consumer Investigative Report

    • Medical Examination

    • Agent's Report

    • Attending Physician Statement

    Correct Answer
    A. Consumer Investigative Report
    Explanation
    The insurer's underwriter may find information about an applicant's moral character, hobbies, work, and general reputation from a Consumer Investigative Report. This report collects information from various sources such as public records, credit reports, and interviews with acquaintances to provide insight into an individual's background and behavior. This information helps the underwriter assess the applicant's risk profile and determine the appropriate premium for their insurance policy.

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  • 15. 

    The Medicare home health care benefit will provide for which of the following services?

    • Hospitalization care

    • Prescription drugs

    • Groceries

    • Medical supplies

    Correct Answer
    A. Medical supplies
    Explanation
    The Medicare home health care benefit covers a range of services that are essential for individuals receiving care at home. While hospitalization care, prescription drugs, and groceries may be important for overall well-being, they are not specifically included in the home health care benefit. However, medical supplies such as wound dressings, catheters, and oxygen equipment are covered by Medicare to ensure that patients have access to the necessary supplies for their care at home.

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  • 16. 

    All Medicare supplement (or Medigap) policies must:

    • Provide the same benefits as Medicare Part A

    • Provide the same benefits as Medicare Part B

    • Offer a 10 day free look provision

    • Have the same core benefits

    Correct Answer
    A. Have the same core benefits
    Explanation
    All Medicare supplement policies must have the same core benefits. This means that regardless of the insurance company offering the policy, the basic benefits covered by the policy will be the same. The core benefits include coverage for Medicare Part A coinsurance and hospital costs, Medicare Part B coinsurance or copayment, and the first three pints of blood. This ensures that individuals who purchase a Medicare supplement policy will receive the same essential coverage, regardless of the insurance provider they choose.

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  • 17. 

    How long after being entitled to disability benefits will an individual be eligible to receive Medicare benefits?

    • Immediately

    • 1 year

    • 2 years

    • At age 65

    Correct Answer
    A. 2 years
    Explanation
    After being entitled to disability benefits, an individual will be eligible to receive Medicare benefits after a period of 2 years. This means that there is a waiting period of 2 years before they can start receiving Medicare benefits.

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  • 18. 

    An insurance contract is an aleatory contract. This means:

    • Equal value is not given by both parties to the contract

    • The contract must be for a legal purpose

    • Parties to the contract must have the legal capacity to enter into the contract

    • Statements made in the application are guaranteed to be true in all respects

    Correct Answer
    A. Equal value is not given by both parties to the contract
    Explanation
    An insurance contract is considered an aleatory contract because the value exchanged by both parties is not equal. The insured pays premiums to the insurance company, which may be significantly higher than the potential benefits they may receive in case of a claim. On the other hand, the insurance company assumes the risk of potential claims and the obligation to pay out benefits, which may be much higher than the premiums collected. This unequal exchange of value is a characteristic of aleatory contracts.

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  • 19. 

    A Medicare supplement policy may not limit benefits for losses incurred more than ________ from the effective date of coverage because they involve a preexisting condition.

    • 30 days

    • 1 year

    • 6 months

    • 90 days

    Correct Answer
    A. 6 months
    Explanation
    A Medicare supplement policy may not limit benefits for losses incurred more than 6 months from the effective date of coverage because they involve a preexisting condition. This means that if a person has a preexisting condition and incurs losses within the first 6 months of their coverage, the policy cannot restrict or limit the benefits they are entitled to receive. After this initial 6-month period, the policy may have certain limitations or waiting periods for preexisting conditions.

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  • 20. 

    A group conversion option may be used in all the following instances EXCEPT

    •  the termination of the master policy.

    • Loss of coverage due to loss of employment.

    • Loss of eligibility on the part of a class of insureds.

    • A life-changing event, such as marriage, divorce, or childbirth.

    Correct Answer
    A. A life-changing event, such as marriage, divorce, or childbirth.
    Explanation
    A group conversion option allows an insured individual to convert their group life insurance policy to an individual policy without providing evidence of insurability. This option is typically available in situations such as the termination of the master policy, loss of coverage due to loss of employment, or loss of eligibility on the part of a class of insureds. However, a life-changing event such as marriage, divorce, or childbirth does not qualify as a reason to use the group conversion option.

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  • 21. 

    With regard to the waiver of premium rider, after the disability a policyowner normally:

    • Must prove insurability to continue the policy on an annual basis

    • Must reapply for the insurance

    • Need not repay the premiums paid by the company during disability

    • Must repay the premiums paid by the company during disability

    Correct Answer
    A. Need not repay the premiums paid by the company during disability
    Explanation
    The correct answer is "Need not repay the premiums paid by the company during disability." This is because the waiver of premium rider is designed to waive the premium payments for the policy during a period of disability. Therefore, the policyowner does not have to repay the premiums that were paid by the company during the disability. This provision helps to ensure that the policy remains in force even if the policyowner is unable to make premium payments due to a disability.

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  • 22. 

    George, who has a group policy, may upon leaving his place of employment:

    • Convert it to permanent insurance without proof of insurability, within a specified period

    • May continue his current coverage with no change in premium

    • May convert it to permanent insurance provided he does so within 90 days and can prove insurability

    • Convert it to an individual term insurance plan, without proof of insurability

    Correct Answer
    A. Convert it to permanent insurance without proof of insurability, within a specified period
    Explanation
    George, who has a group policy, has the option to convert it to permanent insurance without having to provide proof of insurability. This conversion can be done within a specified period, which means there is a specific timeframe within which George can exercise this option. This allows George to continue his insurance coverage even after leaving his place of employment, ensuring that he maintains the benefits provided by the policy without any changes in premium or the need for additional proof of insurability.

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  • 23. 

    Michelle is 65 and starting to receive Social Security benefits. To receive Medicare Part A, she needs to:

    • Do nothing

    • Complete an open enrollment application

    • Complete an open enrollment application along with the first months premium

    • Enroll in Medicare Part B at the same time

    Correct Answer
    A. Do nothing
    Explanation
    Since Michelle is already starting to receive Social Security benefits, she will automatically be enrolled in Medicare Part A without needing to take any additional action. Therefore, the correct answer is "Do nothing".

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  • 24. 

    What type of disability income policies are most likely used to cover only nonoccupational disability as opposed to both occupational and nonoccupational?

    • Short-term disability policies

    • Workers' Compensation

    • Disability income rider to an individual life policy

    • Long-term disability policies

    Correct Answer
    A. Short-term disability policies
    Explanation
    Short-term disability policies are most likely used to cover only nonoccupational disability because they provide coverage for a limited period of time, typically up to a year, and are designed to replace a portion of an individual's income if they are unable to work due to a temporary disability. Workers' Compensation, on the other hand, covers occupational disabilities that occur as a result of work-related injuries or illnesses. A disability income rider to an individual life policy and long-term disability policies typically provide coverage for both occupational and nonoccupational disabilities.

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  • 25. 

    Which of the following statements is FALSE regarding Medigap policies?

    • Medigap policies may not duplicate benefits provided by Medicare

    • Losses resulting form sickness may not be treated differently than losses resulting from accidents

    • A Medigap policy provides the same coverage as a Medicare policy

    • Except for nonpayment of premium, coverage may not be terminated on a spouse solely because the insurer has reason to terminate coverage on an insured

    Correct Answer
    A. A Medigap policy provides the same coverage as a Medicare policy
    Explanation
    A Medigap policy does not provide the same coverage as a Medicare policy. Medigap policies are designed to fill the "gaps" in coverage that Medicare does not cover, such as deductibles, copayments, and coinsurance. They are supplemental policies that work alongside Medicare to provide additional coverage.

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  • 26. 

    Which of the following provides the basis for the benefit amount paid to an insured under a disability income rider?

    • The length of time income payments are to be paid out

    • The face amount of the policy

    • The elimination period

    • The amount of monthly benefit selected

    Correct Answer
    A. The face amount of the policy
    Explanation
    The face amount of the policy determines the basis for the benefit amount paid to an insured under a disability income rider. This means that the benefit amount will be calculated based on the initial face value of the policy. The higher the face amount, the higher the benefit amount that will be paid out to the insured.

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  • 27. 

    If an insured currently has a policy with a waiver of premium rider and should change to a more hazardous occupation, the insurance company.

    • Void the policy

    • Continue the waiver of premium rider

    • Increase the premium

    • Cancel the waiver of premium rider

    Correct Answer
    A. Continue the waiver of premium rider
    Explanation
    If an insured currently has a policy with a waiver of premium rider and should change to a more hazardous occupation, the insurance company will continue the waiver of premium rider. This means that the insured will still be exempt from paying premiums even though their occupation has become more hazardous. The insurance company recognizes the value of the waiver of premium rider and will honor it despite the change in occupation.

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  • 28. 

    Comprehensive dental plans usually provide:

    • Non-routine dental care without any regard to deductibles or coinsurances

    • Routine dental care services without deductibles or coinsurance

    • Routine care without deductibles, but subject to coinsurance

    • Routine care such as preventative care is provided after satisfying a required deductible

    Correct Answer
    A. Routine dental care services without deductibles or coinsurance
    Explanation
    Comprehensive dental plans usually provide routine dental care services without deductibles or coinsurance. This means that individuals with these plans can receive routine care such as check-ups, cleanings, and X-rays without having to pay any out-of-pocket costs or meet any deductibles. This coverage allows for easier access to preventive dental services, promoting better oral health and potentially reducing the need for more extensive and costly treatments in the future.

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  • 29. 

    What is the return of premium rider?

    • An increasing amount of term insurance that always equals the total of premiums paid up to the current point

    • A provision that allows the insured to cancel the policy in the first two years and have premiums refunded

    • An increasing amount of term insurance that equals the cash value of the policy at any point in time

    • A provision that states the insurer must return any premiums paid during the free-look period

    Correct Answer
    A. An increasing amount of term insurance that always equals the total of premiums paid up to the current point
    Explanation
    The return of premium rider is an additional feature that provides an increasing amount of term insurance coverage equal to the total amount of premiums paid up to the current point. This means that if the policyholder decides to cancel the policy, they will receive a refund of all the premiums they have paid thus far. It essentially offers a way for the insured to recoup their investment in the policy if they no longer wish to continue with it.

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  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Sep 01, 2020
    Quiz Created by
    Mshellmix
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