Download Alabama Life & Health InsuranceExam Questions and Answers and more Exams Health, psychology in PDF only on Docsity!
1 / 19
Alabama Life & Health InsuranceExam
Questions and Answers
- Which of the following would be considered a speculative risk ANS The possi-bility the painting you bought might be a long-lost masterpiece
A speculative risk is one in which there is a chance for either loss or gain. Example:Gambling, Casino's, Lottery, etc. All of the other choices describe pure risk, wherethere is no chance of gain, only a chance of loss exists.
- Which is the proper term for a company owned by its policy owners ANS Amutual insurance company
- A producer who is acting as an agent is representing ANS Always the insurer
- All of the following are elements of a contract, except ANS Authority
All enforceable contracts must include these characteristics: offer and acceptance (agreement), considerations, competent parties, and legal purpose. Authority is not considered one of the elements of a legal contract.
- Each of the following would be an element in the definition of fraud, except:- : An individual warrants a fact stated on the application
A warranted fact is one guaranteed to be true. Although no statement on an application is
2 / 19
regarded as warranty, no fraud is involved if a statement is guaranteedto be true.
- Examples of Fraud: Intentional material misrepresentation with the intent ofcausing injury to another party
Withholding of known material facts
A false statement on the application that is material to the acceptance of the risk
- A company that is licensed to sell insurance in a particular state is ANS Anauthorized Company
- In order to be valid, a contract must be between individuals considered legally able to enter into an agreement.This principle is known as ANS Competentparties
- An insurance contract is an aleatory contract.This means ANS Equal value is notgiven by both parties to the contract
Aleatory: contract of unequal values exchanged
- The market is a private source of coverage of last resort for individuals or businesses that have been rejected by voluntary market insurers ANS Residual
4 / 19
ANS Producer
The producer is in the field soliciting applications for insurance and in effect is another pair of eyes and ears for the insurer in helping to issue policies to insurableprospects.
- Third-party ownership refers to ANS A situation where the policyowner is some- one other than the insured
- Which statement best describes the term reserve ANS That amount that, whenincreased by future premiums on outstanding policies, and interest on those premi-ums will enable the company to meet future death claims
- The applicant, if other than the proposed insured, must have ANS An insurableinterest in the life of the insured
- Controlled business may be defined as insurance sold ANS To the producer, theproducer's family and friends, and the producer's business associates
- With regard to life insurance policies, loading refers to ANS Assignment of the appropriate share of the company's operating expenses to each policy
5 / 19
- Which of the following statements about the average number of peoplewho die each year is true ANS It is called the mortality rate
Mortality Rate: which is the statistical probability of death in a large population ofinsureds.
- Which of the following is NOT a characteristic of life insurance as proper-ty ANS It requires a fund portfolio manager
Characteristics:
It creates an immediate estate It requires no physical maintenanceIt may be paid for in installments
- The most effective way to ensure that the applicant will accept the policywhen it is issued is ANS To have the applicant pay the initial premium at the time ofapplication
- Allen purchases an estate builder (jumping juvenile) policy for his 5-yearold son, Donald. Suppose that when Donald reaches age 21 his father pre- sents him with the policy as a gift. Which of the following statements is NOTcorrect ANS Donald must change the beneficiaries immediately
CORRECT:
The premium will continue to be based on his original age of 5 Donald has enjoyed protection against the problems of premature deathThe face value of Donald's policy has increased by 5 times
- Term insurance differs from permanent insurance in that term ANS Builds nocash value, pays a death benefit only
- An indeterminate premium policy offers ANS A low initial premium with succeed-ing
7 / 19
- Loan values and retirement income are ANS Called the living benefits of life insurance
- With a modified premium whole life contract, premium payments ANS Arelower in the early years of the contract
- A variable life policy ANS Death benefit varies to reflect the investment results ofthe underlying separate account, but never falls below a guaranteed minimum
- The type of policy that can be changed from one that does not accumulatecash values to one that does is a ANS Convertible term policy
- A limited pay life policy ANS Requires premium payments for a specified numberof years or until a specified age is reached
- Should an insured become totally and permanently disabled two monthsbefore the cut- off date for the waiver of premium rider ANS The insured remains eligible for all provisions
- Warren and Wilma have a joint life policy. Warren dies and the policy paysnothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a ANS Survivorship or second-to-die policy
- A whole life policy ANS Requires the insured to pay premiums for life and endowsat age 100
- If Greg's policy on his own life has a guaranteed insurability rider, it meansthat he can purchase more insurance ANS On his own life at certain specified ages without proof of insurability
- Any extra premium charged for the waiver of premium rider ANS Does not applyto the policy's cash value
- If a policyowner has a $100,000 policy with an accumulated cash value of $6,000, the policyowner can borrow up to ANS The entire accumulated cash valueof $6,000, less interest for 1 year
8 / 19
- An insured allows a permanent policy to lapse. Unless otherwise instruct- ed, the insurance company ANS Will automatically institute the extended term option
- Each of the following statements about policy loans is correct, except ANS - Policy loans may be made on any type of policy
- What is a postmortem dividend ANS A dividend earned, but not yet paid, in theyear of the insured's death and paid with the death claim
- The factors that determine the amount of each payment under the fixed period settlement option are ANS Length of the fixed period, face amount of the policyand interest
- Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any proceeds if Wilma dies before Fred, or if she dies after Fred, but before receiving all the policy proceeds. Fred elected the interest settlement option for Wilma, with the right
10 / 19
- A client purchases an individual disability income policy and receives thepolicy from the insurer 45 days after application. Upon receipt of the policy, the client typically hasdays to review and return the policy to receivea full refund for any reason ANS 10
- An annuitant has a temporary annuity certain, and dies shortly after thepayments start but before the certain period of 10 years has elapsed. Any money remaining is ANS Paid to the beneficiary for the rest of the certain period
- The type of annuity that guarantees to pay total income at least equal tothe purchase price of the contract is a ANS Refund life annuity
11 / 19
- 'Annuity Period' refers to which of the following ANS The time during whichpayments are made to the annuitant
The annuity period begins when the annuitant starts to receive payments from the accumulated funds in the annuity policy. This is also referred to as 'the Annuitizationperiod'.
- An annuity owner can change all of the following in an annuity, except ANS - Mortality Table
- Which of the following will receive the smallest monthly income benefitcheck if an annuity is annuitized ANS 50 year old female
- Which of the following Annuities is generally not backed by the insurer'sgeneral account assets ANS Variable
- When converting a group life policy to an individual policy, the departinggroup member's new policy must be a ANS Permanent or whole life policy
- When underwriting group life insurance ANS The underwriter generally focuseson the group as a whole, rather than on individual members
- Which of the following statements is NOT true about the tax treatment of Social Security ANS Employee paid payroll deductions for Social Security are tax deductible to the employee
- Split-dollar plan: Divides the cost of additional insurance for an employeebetween that employee and the company
- George, who has a group policy, may upon leaving his place of employ-ment ANS Convert it to permanent insurance without proof of insurability, within a specified period
- The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who served as senior executives.This benefit is not available to otherretirees of the company. This is an example of a ANS Non-qualified plan
- Incidental limitations refer to which of the following ANS The amount of lifeinsurance
13 / 19
When a group deferred annuity is used to fund a defined benefit plan, specified amounts of deferred annuity are bought by the employer each year to provide the 'defined benefit' for the employee at retirement, thus providing a guaranteed definedbenefit at retirement.
- Defined Contribution Plan:
- Which of the following would NOT be permitted as a Section 1035 policyexchange ANS An annuity contract exchanged for a life contract
- TSAs are tax-sheltered retirement programs for employees of all the fol-lowing kinds of organizations, except ANS Corporations
- How are employer paid premiums on a group life insurance plan treated fortax purposes ANS As an ordinary and necessary business expense
- With a Profit Sharing Plan contributions must generally be made in at least consecutive years ANS 3 out of last 5
- A stay at home father wants to open up an IRA. What is required in orderfor him to do so ANS Be married to a spouse that has earned income
- The tendency for poor risks to seek and be covered for insurance morethan average risks is known as ANS Adverse Selection
- What type of policy pays weekly or monthly benefits for loss of income dueto sickness or injury ANS Disability Income
Disability income pays benefits either weekly or monthly when an insured becomesdisabled and unable to perform some or all of their job duties, due to a sickness orinjury.
- The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following ANS Probationary Period
- All of the following statements regarding an insurance application arecorrect, except ANS It is not included as part of the contract
14 / 19
Correct: It is a formal written request by an applicant to an insurer requesting a policyIt is the primary source of information for underwriting purposes It must be signed by at least the applicant and producer
- If a policy was issued at a higher premium due to a higher risk exposure,all of the following can be used to reflect the higher risk, except ANS Declined
- Information about an applicant's work behavior or character gathered fromneighbors or co-workers would be included on an ANS Inspection Report
16 / 19
regardless of the cause of death
- Which provision allows medical expenses from the last 3 months of a calendar year to be used during the next calendar year to meet a deductible?- : Carryover provision
- For nonroutine treatments, a comprehensive policy generally pays ANS Aspecified percentage of the reasonable and customary charges
- A certain major medical policy states a maximum number of days for whichconvalescent care will be paid as well as a maximum number of X-rays that
17 / 19
will be paid for under any one claim. These are examples of ANS Inside Limits
The limits sometimes placed on specific coverages in a major medical policy are called inside or internal limits. These limits resemble scheduled benefits, as to thefact that they are stated in the policy as either maximum lifetime limits or limits perpolicy period. Either way they are stated inside the policy.
- Which of the following is true about a policy that pays for room and boardexpenses on a indemnity basis ANS The policy pays a specified, pre-established amount per day for a maximum number of days
- Before Cranston was disabled, he was a full time engineer earning about $70,000 annually. Now, two years later, he is able to work part-time, earning about $25,000 annually. It is likely that Cranston would be classified as ANS Par-tially Disabled
- As compared to individual disability income policies, group disabilityincome policies are generally ANS Less costly and have more liberal provisions
- Which of the following is NOT one of the categories of benefits incorporat-ed by State Workers' Compensation Laws ANS Long-term care coverage
All state Workers' Compensation laws incorporate for categories of benefits: disabil-ity (loss of income), benefits, medical bills, survivor (death) benefits, and rehabilita-tion benefits. No long-term care coverage applies.
- Under Workers' Compensation, a disability that is a permanent physi- cal impairment leaving the individual incapable of performing the previousregular occupation, but capable of performing some other type of work, isa ANS Permanent partial disability
- What type of disability income policies are most likely used to cover only nonoccupational disability as opposed to both occupational and nonoccupa- tional ANS Short-term disability policies
19 / 19
- For hospital stays of over 90 days, patients can draw from a pool of 60reserve days that may be used ANS Once in a lifetime
- Which of the following statements is FALSE regarding Medigap policies?- : A Medigap policy provides the same coverage as a Medicare policy
A Medigap policy supplements and fills the gaps of Medicare, it never duplicates Medicare.
- Medicare supplement policies must provide a 'free look' period of ANS 30days
- The Medicare home health care benefit will provide for which of thefollowing services ANS Medical Supplies
- A Medicare SELECT policy differs from a regular Medicare Supplement (Medigap) policy in that it ANS Is a managed care version of the traditional MedicareSupplement policy
- Which part of Medicare requires premium payments by most eligibleparticipants ANS Part B Medical Insurance/ Outpatient
- All Medicare supplement (or Medigap) policies must ANS Have the same corebenefits
- The first year commission for the sale of a Medicare supplement policy may be no more than of the commission paid for selling or servicingthe policy in the second year ANS 200%
- Michelle is 65 and starting to receive Social Security benefits. To receiveMedicare Part A, she needs to ANS Do nothing
- A Medicare supplement policy may not limit benefits for losses incurred more than from the effective date of coverage because they involvea preexisting condition ANS 6 months
- Primary support for Medicare Part A comes from ANS Social Security payrolltaxes
- Part B of Medicare excludes which of the following medical expenses ANS A regular
20 / 19
dental checkup
- Which of the following is true of Medicare Part A, in terms of coverage ANS -Helps pay for hospital care and skilled nursing facility care as an inpatient plus homeor hospice care
- Policies are considered incontestable after ANS 2 years
- All of the following statements about noncancellable policies are true,except ANS The insurer may choose not to renew the policy, but only on the policy renewal or anniversary date
The only right to cancel a noncancellable policy is nonpayment of premium, because
