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Alabama Life & Health Insurance Exam
Questions and Answers
- Insurance is defined as the transfer of risk to the insurance company in consideration for a premium. ANS Pure
- The chance of loss without any chance of gain is called ANS PureRisk
- has the possibility for gain or loss and is not insurable. ANS Speculative Risk
- is defined as the chance of loss. ANS Risk
- A condition that could result in a loss is known as ANS Exposure
- is something that increases the chance of loss. ANS Hazard
- The presence of a increases the chance of a loss occurring.- ANS Physical Hazard
- defined as a cause of loss, such as fire. ANS Peril
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- To be insurable, losses must be. ANS Calculable
- allows insurers to predict claims more accurately. ANS Law of Large Numbers
- The law of large numbers applies to. ANS Groups of people, notindividuals
- The law of large numbers applies to groups of people, not to individuals. The more people in the group. ANS the more accurate the predic-tions are
- Most insurers buy to protect themselves in the event ofa. ANS reinsurance , catastrophic loss
- are not required to be uniform from one state to another. ANS Insurance laws
- dividends to its shareholders (stockholders), but they may not be guaran-teed. ANS Stock insurer may pay
- Stock insurers pay the dividends to its shareholders (stockholders), arethey guaranteed. ANS No
- A reciprocal insurance company is managed by an ANS attorney-in-fact
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- An insurance contract is in that only one of the parties to the contract is legally bound to do anything. ANS unilateral
- insurer ANS If forms are not furnished, written proof of the occurrence, nature of theloss, and extent of loss must be submitted to the
- If a distribution is made for a reason other than to pay for qualified medicalexpenses, the amount withdrawn will be subject to an income tax and an additional ANS 20% tax
- Medicare supplement policies (Medigap) do not cover the cost of ANS extendednursing home care
- to fill the gap in coverage attributable to Medicare's deductibles, copay-ment requirements, and benefit periods. These plans are issued by privateinsurance companies. ANS Medigap plans are designed
- to either continue group coverage and defer Medicare until retirement, orswitch to Medicare. ANS If a person is still employed at the age of 65, he or she maychoose
- non-controlled business ANS The purpose of a license is to primarily write
- When producer was reviewing a potential customers coverage written byanother company the producer made several remarks that were maliciously critical of that other insurer. The producer count be found guilty of (oral or written remarks) ANS Defamation
- What policy characteristics of a Major Medical Expense don't EXCEPT ANS Lowmaximum limits
- Characteristics of a Major Medical Expense ANS High Maximum Limits
- Characteristics of a Major Medical Expense ANS Blanket Coverage
- Characteristics of a Major Medical Expense ANS Coinsurance
- Characteristics of a Major Medical Expense ANS Deductible
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- In franchise insurance, premiums are usually ANS Lower than individual policies,but higher than group policies
- Mandatory provision in individual health insurance policies stating that the insurer, at its own expense, has the right and opportunity and is ANS Physicalexamination and autopsy
- state programs that benefits are payable when workers suffer work-relatedinjury regardless of fault or negligence ANS Workers Compensation
- When does Medicare cover nursing home care? ANS Only if its part of treatmentfor covered illness or injury
- Who is the beneficiary in a credit health policy? ANS The lending institution
- Each insurer should pay a proportionate share of the claim ANS An insured has medical insurance coverage through 2 different provider both covering same
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- According to OBRA, what is the minimum number of employees requiredto constitute a large group? ANS 100
- One individual licensed insurance producer ANS In addition to obtaining an insur- ance producer license, a business entity, in order to transact insurance, must haveat least
- Commissioner ANS Which of the following authorities is authorized to issue a temporary insurance producer's licenses
- Each insurer should pay a proportionate share of the claim. ANS An insured hasmedical insurance coverage through 2 different providers, both covering the sameexpenses on an expense-incurred basis. Neither company knows in advance that the insured has coverage through any other insurers. The insured submits a claim to both insurers. How should the claim be handled
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- Employee benefits are tax deductible the year in which they were received.- ANS Concerning group Medical and Dental insurance, which of the following statements is INCORRECT?
- any premium paid by the employer is deductible as a business expense. premiums provided by the employee are only deductible if certain conditionsare met. Group medical and dental expense benefits are received income taxfree by the employee. ANS For group medical and dental expense insurance
- To help the insured understand all aspects of the contract ANS Why should theproducer personally deliver the policy when the first premium has already been paid?
- cost containment ANS An insured is receiving hospice care. His insurer will pay for painkillers but not for an operation to reduce the size of a tumor. What term best fits this arrangement?
- All plans (A-N) ANS In which Medicare supplemental policies are the core benefits found?
- The premium increases ANS If a policy is rated-up, which of the following is true?
- comprehensive plan ANS A health insurance plan that covers all accidents and sicknesses that are not specifically excluded from the policy is referred to as a
- An employee's group medical benefits are generally exempt from taxationas income. ANS Under which condition would an employee's group medical benefits be exempt from income taxes?
- Policyowner ANS Individuals must have insurable interest in the insured
- To minimize the insured's level of liability in the event of loss ANS Which of thefollowing is NOT a goal of risk retention?
- reduce expenses improve cash flow, to increase control of claim reservingclaims settlements
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- self insurance, deductibles, copayments ANS All of the following are examples ofrisk retention
- Reasonable expectations ANS If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of whichlegal concept?
- for the first 2 years of a disability ANS In disability income insurance, the own occupation definition of disability applies
- nothing ANS If one takes Social Security retirement benefits at age 62, what needsto be done at age 65 to qualify for Medicare?
- Both group health and Medicare ANS A man is still employed at age 65 and is now eligible for Medicare. He wants to know what health insurance coverage he is eligible to receive. Which of the following options are available to him?
- Premiums are deductible and benefits are taxed.
The premiums paid for BOE insurance are tax deductible to the business as a business expense. However, the benefits received are taxable to the business as received. ANS Regarding the taxation of Business Overhead policies,
- Entire Contract ANS The provision that states that both the printed contract and acopy of the application form the contract between the policyowner and the insureris called the
- The insurer ANS An insurer hires a representative to advertise its company at a local convention. The representative lies about the details of some of the policies, in an attempt to secure more business for the company. Who is responsible for therepresentative's claims?
- Service policies that it has issued.File annual reports. Pay fees and taxes. ANS Should an authorized insurance company have their certificate of authority suspended, during the period of the suspension, the insurer must do all of the following
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- Within 90 days or as soon as reasonably possible, but not to exceed 1 year ANS How soon following the occurrence of a covered loss must an insured submitwritten proof of such loss to the insurance company?
- If it is intentional and material ANS When would a misrepresentation on the insur-ance application be considered fraud?
- They cover Medicare deductibles and copayments.They supplement Medicare benefits. They are issued by private insurers ANS All of the following statements about Medicare supplement insurance policies are
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Annuities. Disability income insurance. ANS All of the following are lines of insurance that maybe transacted under a life and accident/health producer license
- Death benefits are paid only if death occurs within 24 hours of an accident
Under an Accidental Death and Dismemberment insurance policy, the deathbenefit will be paid if the accidental death occurs within (90 days)of the
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accident, not 24 hours. ANS All of the following statements concerning AccidentalDeath and Dismemberment coverage are correct EXCEPT
- NAIC ANS A long-term care insurance shopper's guide must be provided in the format developed by which of the following?
- Income benefits Death benefits Medical and rehabilitation benefits ANS Under workers compensation, which of the following benefits are included?
- 0 days
If an employer provides short-term disability benefits for its employees, the elimination period can be nonexistent, and the benefits can last as long as two years. The benefit typically spans 70-80% of the insured's income. ANS Whatis the shortest possible elimination period for group short-term disability benefits provided by an employer?
- Its goal is to channel patients to providers that discount services. ANS Whichof the following is true of a PPO?
- They only cover specific accidents or diseases. ANS Which of the following istrue regarding limited health insurance policies?
- Part B coverage is provided free of charge when an individual turns age 65
Those who desire Part B coverage must enroll and pay a monthly premium.- ANS Which of the following statements is INCORRECT concerning Medicare Part Bcoverage?
- The loss may be intentional
To insure intentional losses would be against public policy. ANS Not all losses are insurable, and there are certain requirements that must be met before a riskis a proper subject for insurance. These requirements include all of the followingEXCEPT
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- Reduction.
Steps taken to prevent losses from occurring are called risk reduction. ANS In- stalling deadbolt locks on the doors of a home is an example of which method ofhandling risk?
- Both the applicant and agent ANS Who must sign the notice regarding replace-ment?
- illegal ANS An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
- 500 ANS An insured is covered under 2 group health plans - under his own andhis spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount, if any, would be paid by the secondary insurer?
- what the first company will not pay, such as deductibles and coinsurance.The insured will, then, be reimbursed for out-of-pocket costs. ANS Once the primaryinsurer has paid the full available benefit, the secondary insurer will cover
- perpetual ANS In Alabama, an insurance company certificate of authority is issuedfor what period of time?
- Conformity with State Statutes ANS Which of the following provisions requires that any policy language that is in conflict with the state statutes of the state in whichthe insured resides is automatically amended to conform with those of the state of residence?
- workers compensation ANS An employee is injured in a construction accident, rendering him unable to work for a year. Which of the following plans would providehim with medical expense coverage and income assistance?
- A method used by insurers to protect against catastrophic losses. ANS Rein-surance System
- Independent Agency System General Agency System Direct Response Marketing System ANS All of the following are marketing arrange-ments
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used by insurers
- is issued on those groups that have members that are constantly chang-ing. ANS Blanket insurance
- A joining together by employers to provide health benefits for employee
MEWA provides benefits for a number of member groups. ANS Which statementbest defines a Multiple Employer Welfare Arrangement (MEWA)?
- 100% ANS For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense?
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following does NOT have to be disclosedin a long-term care (LTC) policy?
- Each violation will be punished as a separate violation of the insurancecode. ANS With respect to multiple violations of the insurance code, which of the following is correct?
- Overinsurance ANS When an individual is covered under two health insurance policies that have duplicate benefits which could make a claim for benefits becauseof an injury or illness profitable, it is called
- Benefits are considered taxable income to the business. ANS Which of the following is not true of Disability Buy-Sell coverage?
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- tax free. ANS The buy-sell coverage benefits are
- Insurers are barred from requesting HIV testing. ANS Which of the following statements regarding HIV testing for life insurance purposes is NOT true?
- Platinum ANS According to the PPACA metal levels classification, if a health plan is expected to cover 90% of the cost for an average population, and the participantswould cover the remaining 10%, what type of plan is that?
- covers 90% of the benefit costs ANS Platinum Plan
- covers 80% of the benefit costs ANS Gold Plan
- covers 60% of the benefit costs ANS Bronze Plan
- covers 70% of the benefit cost ANS Silvers plan
- The pre-existing condition waiting period fulfilled in the old policy will betransferred to the new policy, the new one picking up where the old one left off. ANS An individual purchased a Medicare supplement policy in March and decided to replace it 2 months later. His history of coronary artery disease is considered a pre-existing condition. Which of the following is true?
- is a term used to describe the situation that is created when an individual purchases duplicating coverage with the intent to collect from each policy for a single loss. ANS Overinsurance
- Pay the claim.
Because the accident occurred during the grace period, the insurance com- pany will pay the claim. ANS An insured pays her Major Medical Insurance premium annually on March 1. Last March she forgot to mail her premium to the company. OnMarch 19, she had an accident and broke her leg. The insurance company would
- grace period ANS Because the accident occurred during the , the insurance company will pay the claim.