Insurance Policy Protects Quiz Questions

1. All the following statements pertaining to Medicaid are correct EXCEPT:

It limits financial assistance to persons age 65 or over who are in need of medical services they cannot afford

Its purpose is to help eligible needy persons with medical assistance

Medicaid benefits may be used to pay the deductible and coinsurance amounts to medicare

It provides federal matching funds to states for medical public assistance plans

Medicaid does not limit financial assistance to persons age 65 or over who are in need of medical services they cannot afford. Medicaid is a program that provides medical assistance to eligible needy individuals of all ages, not just those over 65. The program's purpose is to help eligible individuals who cannot afford medical services, regardless of their age. Medicaid benefits can also be used to pay the deductible and coinsurance amounts for Medicare. Additionally, Medicaid provides federal matching funds to states for their medical public assistance plans.

Explanation

Medicaid does not limit financial assistance to persons age 65 or over who are in need of medical services they cannot afford. Medicaid is a program that provides medical assistance to eligible needy individuals of all ages, not just those over 65. The program's purpose is to help eligible individuals who cannot afford medical services, regardless of their age. Medicaid benefits can also be used to pay the deductible and coinsurance amounts for Medicare. Additionally, Medicaid provides federal matching funds to states for their medical public assistance plans.

2. When Donna applied for life insurance and paid the initial premium on August 14, her agent issued a conditional receipt. Donna was killed in an automobile accident on August 22, before the policy was issued. The insurance company found nothing negative in her application and has no reason to reject the risk or classify it other than as standard. In this case, the insurance company will:

Return the premium to Donna's estate ,since it has not obligation to pay the death claim

Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued

Issue the policy anyway and pay the face value to Donna's beneficiary

Negotiate a reduced settlement with Donna's beneficiary due to the unusual circumstances involved

Since Donna paid the initial premium and her application showed no negative factors, the insurance company has no reason to reject the risk or classify it differently. Therefore, they will issue the policy as planned and pay the face value to Donna's beneficiary, despite her unfortunate death before the policy could be issued.

Explanation

Since Donna paid the initial premium and her application showed no negative factors, the insurance company has no reason to reject the risk or classify it differently. Therefore, they will issue the policy as planned and pay the face value to Donna's beneficiary, despite her unfortunate death before the policy could be issued.

3. Each of the following is true about the INSURABLE INTEREST in the life, accident and sickness insurance filed in Georgia, EXCEPT:

An individual always has an insurable interest in his or her own life and health

A corporation has an insurable interest in the life and health of its officers and directors

Insurance procured by a person who does not have an insurable interest in the person insured may be void

Insurable interest must exist at the time a covered loss occurs

Insurable interest refers to the financial or emotional stake that an individual or entity has in the life or health of another person. In the context of life, accident, and sickness insurance in Georgia, it is true that an individual always has an insurable interest in their own life and health. Additionally, a corporation has an insurable interest in the life and health of its officers and directors. Insurance procured by a person who does not have an insurable interest in the insured person may be void. However, the statement that is not true is that insurable interest must exist at the time a covered loss occurs. Insurable interest must exist at the time the insurance policy is purchased, not at the time of loss.

Explanation

Insurable interest refers to the financial or emotional stake that an individual or entity has in the life or health of another person. In the context of life, accident, and sickness insurance in Georgia, it is true that an individual always has an insurable interest in their own life and health. Additionally, a corporation has an insurable interest in the life and health of its officers and directors. Insurance procured by a person who does not have an insurable interest in the insured person may be void. However, the statement that is not true is that insurable interest must exist at the time a covered loss occurs. Insurable interest must exist at the time the insurance policy is purchased, not at the time of loss.

4. You are advising a client about retirement planning. The client is 38 years old and wants to purchase a retirement annuity to supplement future Social Security benefits and a company pension plan. The client does not currently have any significant savings, but insists that he will be able to set something aside each year for annuity payments. Which of the following plan structures would be most appropriate for this client?

Periodic payment immediate results

Single payment deferred annuity

Periodic payment deferred annuity

Single payment immediate annuity

A periodic payment deferred annuity would be the most appropriate plan structure for this client. This is because the client wants to set aside something each year for annuity payments, indicating a preference for periodic payments. Additionally, since the client does not currently have significant savings, a deferred annuity would allow the client to accumulate savings over time before starting to receive annuity payments in the future. This would help supplement their future Social Security benefits and company pension plan.

Explanation

A periodic payment deferred annuity would be the most appropriate plan structure for this client. This is because the client wants to set aside something each year for annuity payments, indicating a preference for periodic payments. Additionally, since the client does not currently have significant savings, a deferred annuity would allow the client to accumulate savings over time before starting to receive annuity payments in the future. This would help supplement their future Social Security benefits and company pension plan.

5. Which clause in a life insurance policy protects the insurer against misrepresentation or falsehoods made by the applicant on the application?

Entire contact clause

Contestable clause

Insuring clause

Consideration clause

The contestable clause in a life insurance policy protects the insurer against misrepresentation or falsehoods made by the applicant on the application. This clause allows the insurer to contest the policy and deny claims if it is discovered that the applicant provided false information or withheld important details during the application process. It gives the insurer a certain period of time, typically within the first two years of the policy, to investigate and verify the accuracy of the information provided by the applicant.

Explanation

The contestable clause in a life insurance policy protects the insurer against misrepresentation or falsehoods made by the applicant on the application. This clause allows the insurer to contest the policy and deny claims if it is discovered that the applicant provided false information or withheld important details during the application process. It gives the insurer a certain period of time, typically within the first two years of the policy, to investigate and verify the accuracy of the information provided by the applicant.

6. Mary knows that her husband Larry is of sound physical health and is expected to have a long life, but Larry has trouble remembering things, has a terrible track record when it comes to managing money, and cannot be relied upon to make sound financial decisions. Which of the following life insurance settlement options should Mary elect under her won policy to guarantee Larry will have lifetime income if she dies first?

Fixed amount installments

Life income option

Fixed period installments

Lump sum settlement

Mary should elect the life income option under her own policy to guarantee Larry will have lifetime income if she dies first. This option provides a regular income stream for the rest of Larry's life, ensuring that he will be financially taken care of even if Mary is no longer alive.

Explanation

Mary should elect the life income option under her own policy to guarantee Larry will have lifetime income if she dies first. This option provides a regular income stream for the rest of Larry's life, ensuring that he will be financially taken care of even if Mary is no longer alive.

7. If a major medical insurance policy has an 80%-20% coinsurance feature and a $250 deductible, how much of a $2,500 medical bill would be insured have to pay?

$700

$7500

$1800

$2000

2500-250=2250 X 20% = 450
250+450 = 700

Explanation

2500-250=2250 X 20% = 450
250+450 = 700

8. In Georgia, the insurance commissioner is elected to a term of :

4 years

5 years

3 years

The insurance commissioner is appointed, not elected

The insurance commissioner in Georgia is elected to a term of 4 years. This means that the commissioner is chosen by the people through a voting process and serves a term of 4 years before the next election. This allows for a democratic process in selecting the insurance commissioner and ensures that there is regular turnover and accountability in the position.

Explanation

The insurance commissioner in Georgia is elected to a term of 4 years. This means that the commissioner is chosen by the people through a voting process and serves a term of 4 years before the next election. This allows for a democratic process in selecting the insurance commissioner and ensures that there is regular turnover and accountability in the position.

9. Victor applied for life insurance on May 2 and received a conditional receipt for his premium payment. The underwriter then discovered that Victor has high blood pressure and both his parents have heart disease. Since the risk was not acceptable as submitted; the insurer issued a policy for the same amount with a 20% premium surcharge, payable upon delivery. When the agent attempted to deliver the policy on June 10, she was informed that Victor had been killed in a construction accident two days earlier. In this case:

The insurer must pay the face amount and accept the original premium as payment in full

The insurer must pay the face amount but it may deduct the premium surcharge from the settlement amount

There is no coverage because the policy does not cover losses resulting form occupational hazards

There is no coverage because the original application was not accepted,and the premium will be returned.

The correct answer is that there is no coverage because the original application was not accepted, and the premium will be returned. This is because the insurer discovered that Victor had high blood pressure and a family history of heart disease, which made the risk unacceptable as submitted. Therefore, the insurer issued a policy with a premium surcharge, but since the policy was not delivered before Victor's death, it is considered that the original application was not accepted, and the premium will be returned.

Explanation

The correct answer is that there is no coverage because the original application was not accepted, and the premium will be returned. This is because the insurer discovered that Victor had high blood pressure and a family history of heart disease, which made the risk unacceptable as submitted. Therefore, the insurer issued a policy with a premium surcharge, but since the policy was not delivered before Victor's death, it is considered that the original application was not accepted, and the premium will be returned.

10. Which of the following life insurance policies has premiums that are lower during the first few policy years then increase before leveling off?

Graded premium whole life

Increasing term

Modified whole term

Decreasing term

Graded premium whole life insurance policies have premiums that start off lower during the first few policy years and then increase before leveling off. This type of policy is designed to provide more affordable premiums for policyholders in the early years when they may have lower income or financial obligations. As the policyholder ages, the premiums gradually increase to reflect the higher risk of insuring an older individual. This allows the policyholder to have consistent coverage while managing their budget effectively.

Explanation

Graded premium whole life insurance policies have premiums that start off lower during the first few policy years and then increase before leveling off. This type of policy is designed to provide more affordable premiums for policyholders in the early years when they may have lower income or financial obligations. As the policyholder ages, the premiums gradually increase to reflect the higher risk of insuring an older individual. This allows the policyholder to have consistent coverage while managing their budget effectively.

11. After terminating employment with a major company, Barry received a large sum as a distribution of his vested benefits in a 401(K)plan. If Barry keeps his money, the entire sum will be taxable as current income. Barry can avoid current taxation by reinvesting the funds in an IRA rollover account but Barry must do so in :

10 days of receiving the distribution

20 days of receiving the distribution

30 days of receiving the distribution

60 days of receiving the distribution

Barry can avoid current taxation by reinvesting the funds in an IRA rollover account within 60 days of receiving the distribution. This means that Barry has a 60-day window to transfer the money from his 401(K) plan to an IRA rollover account without incurring any tax liabilities. If Barry fails to complete the rollover within this timeframe, the entire sum will be taxable as current income. It is important for Barry to be aware of this deadline and take appropriate action to avoid unnecessary taxes.

Explanation

Barry can avoid current taxation by reinvesting the funds in an IRA rollover account within 60 days of receiving the distribution. This means that Barry has a 60-day window to transfer the money from his 401(K) plan to an IRA rollover account without incurring any tax liabilities. If Barry fails to complete the rollover within this timeframe, the entire sum will be taxable as current income. It is important for Barry to be aware of this deadline and take appropriate action to avoid unnecessary taxes.