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Life Insurance Exam - Comprehensive Test Questions
with Solutions
1. what is a change of ownership of life insurance in exchange for compensa- tion to
take advantage of the tax-free status of the policy's death benefits? What type of assignment is it?: Transfer for value Because it requires a transfer to a new owner, it is made through an absolute assignment (a permanent transfer),
2. are transfer for value taxable?: The rule states that the amount of the death benefit
that exceeds the value of consideration and any additional premium paid will be taxed as ordinary income.
3. The allows an insurer to pay death benefits anyone it deems to be
entitled in the absence of a designated beneficiary. Next of Kin Clause Facility of Payment Clause Creditor Collection Clause Policy's Settlement Option: Facility of Payment Clause
4. Facility of Payment Clause: A Facility of Payment Clause allows the insurer to pay the
death benefit to a relative or anyone it deems is entitled in the absence of a designated beneficiary.
5. modified endowment contract: When a contract does not pass the 7-pay test, it is
deemed a MEC. It compares premiums paid for the policy during the first 7 years with the net level premiums that would have been paid on a 7-year pay whole life policy providing the same death benefit. single life premium, universal (because flexible premiums)
6. Do the below all sign life insurance application?
Producer Beneficiary Insured Policyowner: not beneficiary
7. medicare supplement / medigap: is a private health insurance policy designed to
cover certain costs not covered by Original Medicare (Parts A and B) Eligibility: You must be enrolled in Medicare Part A and Part B. Medigap policies are sold by private insurers and can help reduce out-of-pocket costs for those on Medicare.
8. are allowed as a way to access annuity values without having
to elect a settlement option or surrender the contract. A
A
A written statement must be submitted to the Superintendent each year B A cybersecurity program designed to protect the confidentiality, integrity, and availability of the covered entity's information systems must be maintained C Each covered entity must maintain records for 3 years D Each covered entity must have documentation available for inspection by the Superintendent: C - 5 years is the correct #
15. When gathering information about an applicant from third parties, an
insurance company must adhere to the: A Truth in Underwriting Regulations B Medical Information Bureau Rules C Federal Trade Commission Act (FTCA) D Fair Credit Reporting Act (FCRA): D
16. does term ever have cash value?: no
17. Whenever an employer pays for an employee's LTC insurance premiums, the
premium is XXX, regardless of whether it is a group or individual policy. The benefits received by employees are XXX: deductible taxable (unless they paid for a portion or it is qualified)
18. An employee's share of premiums paid for group health insurance are
deductible only to the extent that all premiums, as well as unreimbursed medical expenses, exceed 7.5% of their AGI: reminder slide
19. Benefits received under any medical expense and dental plan, regardless of the
premium payer, are not taxable True or False: true they are only taxable on LTC
20. Self-employed persons may deduct up to 100% of the cost of health
insurance (medical & dental) for themselves and their dependents T or F: T
21. T owns an individual accident and health insurance policy. In the event of an
accident, T is required to prove only that the injury itself is unforeseen and unintended. T's policy is based on which of the following definitions of accident? A Accidental injury B Accidental dismemberment C Accidental means D Accidental death: A
22. If a medical expense policy requires the payment of an additional premium for the
continuation of coverage for a newborn, the insurer must typically be notified within a month after... and when does coverage begin
the preceding year and must be verified by at least 2 of the insurer's principal officers.
24. The XXX provision automatically becomes effective at the end of the grace period
to prevent the policy from lapsing. There is no charge for having this provision in a cash value policy. Though this specific loan is automatic, it is otherwise treated like cash loans in that interest is charged annually until the loan is repaid.: Automatic Premium Loan The APL is treated like any other policy loan It is only available on cash value policies It is designed to prevent unintentional policy lapse
25. After leaving a job, a worker elects to continue group health insurance cov- erage
under COBRA. To receive benefits, the former employee must pay up to what percentage of their portion of the group premium to the employer?: 102%
26. What is a collateral assignment? temporary or permanent type of assign- ment?: A
collateral assignment is when an insurance policy is used as collateral for a loan. This is a temporary assignment until the debt is paid in full.
27. When must an insurer provide a Medicare Supplement Buyer's Guide and an
Outline of Coverage? A At the time of issuance B At the time of initial solicitation C At the time of delivery D At the time of application: D
28. What is the net amount at risk in a whole life insurance policy?
A
The face amount minus the cash values B The face amount plus the cash values C
B
45 days C 60 days D 180 days: C
32. Medicare Part B, which covers physician treatment and XXX medical costs, is
subject to coinsurance after the annual deductible is met. Typically, Medicare pays XX % of allowable charges, while the insured pays XXX%. Inpatient or Outpatient? premium? Required?: Outpatient 80% | 20% - no maximum out of pocket Yes No
33. coinsurance: the sharing of expenses by the policyholder and the insurance
company
34. All Part B recipients are required to pay a monthly premium.
True or False?: true
35. COBRA allows coverage to continue for XXXX months for employees and
dependents in most cases. If the qualified beneficiary has a qualified disability, coverage can continue for XX months. Dependent coverage can continue for XXX months for certain qualifying events, such as death of the employee or loss of dependent status.: 18 29 36
36. It is important that the individual understand that upon annuitization, the number of
units used to calculate the benefit amount will XXXX. It will be the unit value that XXX according to the performance of the separate account(s).- : be the same flucuates think of it like mf shares... the # of shares / unit is the same but the value is different
37. Which of the following is NOT a common rating classification when clas- sifying
health insurance applicants? A Subrated B Substandard C
Individual disability C Workers' Compensation D Social Security disability: C Because Workers' Compensation benefits are mandated by state (or federal) law, they are primary to any other insurance benefits.
42. In a joint life policy, when is the death benefit paid?: Joint Life pays on the death of
the first insured.
43. attained age: current age
44. Acceptance Approval Conditional Receipt: The coverage becomes effective once
the application is approved. If the company doesn't approve the application, coverage never goes into effect.
45. Conditional Receipt
be specific - when does it go into effect: If the premium is paid, coverage will be in effect on the date of application or completion of the medical exam, whichever is later, as long as the policy would have been issued as applied for.
46. Binding (Unconditional) Receipt: If the premium is paid, coverage will begin
immediately, for a specific length of time, regardless of whether the applicant is ultimately approved by the insurer. This may also be referred to as a temporary
insurance agreement.
47. Trial Application: A trial application is one submitted without a premium. The policy
does not take effect until the policy is issued by the insurer, delivered by the agent, and the premium is paid.
48. Reciprocal Insurance Company A
Reciprocal companies may only transact liability insurance B Each subscriber assumes a share of the risk of all other subscribers C It allows individuals and corporations to self-insure D If funds are insufficient to pay claims, the claimant pays the remaining claim- : Each subscriber assumes a share of the risk of all other subscribers Reciprocal insurers are unincorporated, group-owned insurers wherein an aggrega- tion of individuals, firms, businesses, and corporations can exchange insurance on one another's risks. I
49. Life Income (Pure or Straight Life): Life Income (Pure or Straight Life) - Annuity is
payable for as long as the annuitant lives, and upon death all payments cease. This option provides the highest monthly income compared to any of the other options.
50. Life Income Period Certain: Annuity is payable for life, or for a specified period of
time, whichever is longer. If the annuitant lives beyond the stated period, benefits continue for life of the annuitant. If the annuitant dies prior to the end of the period
the balance of the payments. An annuity guaranteed to pay out for a specific number of years (such as a typical, state lottery prize) is called a fixed period. If the periodic amount is specified, but not the number of payments needed to pay out, or liquidate, the sum in question, then the annuity certain is called a fixed amount. Both forms are often used in settlement options
55. Death must occur within XXX days of the accident for the Accidental Death (Double
Indemnity) Rider benefit to be paid.: 90 Days
56. waiver of premium... what happens once it expires?: optional insurance policy
clause that waives insurance premium payments if the policyholder becomes critically ill or physically impaired. premiums go down
57. guaranteed insurability rider, option to buy insurance how many years?: -
every 3
58. All employer-paid premiums for amounts above $X are reported as taxable income
to the employee.: $50k
59. Who has the primary responsibility for ensuring that the application is filled out
completely?: producer
60. All of the following are examples of government health insurance, except:
A
CHIP - Children's Health Insurance Program B Medicare C TRICARE - Military D Private insurance: D
61. Human Life Value: This approach is a measure of the projected future earnings of a
person at risk in the event of their premature death. The objective is to provide the proper amount of coverage, as determined by the value of the individual to their dependents, using the rate of inflation and the individual's: Age and gender Occupation Annual wage and employment benefits Planned retirement age
62. Recurrent disability: is when an insured suffers a second disability from the same
cause within a certain period (usually 6 months). The elimination period will not apply, and the disability will be considered continuous.
63. can you transact in NY without a certificate of authority? Yes or
The policy will be used as collateral for a loan from the insurer for which interest will be charged D The death benefit or cash accumulation will be reduced by the partial with- drawal: D
67. surrender charges: are fees charged to a policyholder when they cancel spe- cific
types of life insurance policies or annuities before the end of the surrender period, typically between 10 and 15 years. The surrender charge amount is usually a percentage of the policy's cash value and decreases yearly.
68. Annuities and life insurance are similar in all of the following ways, except:
A
Both use the same term to identify the person whose life is the subject of the contract B Both provide some form of death benefit C Both provide owners with all of the contractual rights D Both may have a named beneficiary: A - Annuities have annuitants, life insurance policies have insureds.
69. A school needs accident-only coverage to cover all of its students partic- ipating in
track and field activities. This coverage is best provided by which type of policy? A
Accidental death and dismemberment policy B Blanket health insurance policy C Long-term medical expense policy D Hospital indemnity policy: B Good Job! Blanket insurance is issued to organizations to cover groups of people participating in certain activities. Blanket insurance is commonly issued to schools, amusement parks, camps, and athletic teams.
70. Partial Disability: Disability resulting in an inability to perform 1 or more of the
regular duties of an occupation. The benefit usually pays up to 50% of a total disability benefit for 3 to 6 months.
71. Residual Disability: Provides benefits for loss of income after the insured re- turns
to work, usually following a total disability. Benefits are based on the reduction of earnings as a result of the disability. Both partial and residual disability benefits are referred to as "at-work" benefits since the insured is able to work and continue to receive benefits. All other disability benefits are considered "24 hour" benefits.
72. Recurrent Disability: When a second disability is suffered due to the same cause
within a certain period of time, usually 6 months, the elimination period will not apply and the disability will be considered continuous.
