Health and Life Comprehensive Exam MCQs

Which of the following would be considered a speculative risk?

The possibility your car is totaled in an auto accident
The possibility you will die on the job at a young age
The possibility the painting you bought might be a long-lost masterpiece
The possibility you will become disabled

If the insurer issues a health insurance policy without the initial premium, the producer must obtain a signed:

Statement of increased health risk
Rider that the policy is accepted
Statement of Good Health
Standard provisions endorsement

In Alabama, the Commissioner of insurance is:

Appointed by the house of representatives
Voted into office by primary elections
Appointed by the president of the United States
Appointed by the governor

An annuity or pure endowment contract must provide a grace period of:

20 days
15 days
4 weeks
1 month of at least 30 days

A minor aged ______ years or older may contract for insurance on his or her own life.

15
10
14
12

Comprehensive dental plans usually provide:

Non-routine dental care without any regard to deductibles or coinsurances
Routine care such as preventative care is provided after satisfying a required deductible
Routine dental care services without deductibles or coinsurance
Routine care without deductibles, but subject to coinsurance

To reduce its exposure to claims from a substandard disability risk, an insurer may take all of the following actions, except:

Charge additional premium
Reduce the amount of benefit
Increase the elimination period
Remove all of the exclusion riders

Which of the following statements is FALSE regarding credit health insurance?

Credit health insurance may be sold as either group or individual insurance
Even if the creditor pays the full cost of the insurance, the debtor must be made aware of the coverage
Credit health insurance operates like an HMO and provides death benefit protection regardless of the cause of death
The accidental death benefit may not exceed the total amount of indebtedness, nor may the monthly disability benefit exceed the monthly loan payment amount

Timothy owns an individual A&H policy, and in the event of an accident, he is required to prove only that the injury itself is unforeseen and unin...

Accidental Death
Accidental Dismemberment
Accidental Means
Accidental Bodily Injury

Which of the following are included in Part I of a Health Insurance Application?

Medical background
Present health
The gender of the applicant
Family health history

In the event a policy is delivered by an agent to the insured, and the premium payment is to be collected at the time of this delivery, normally what ...

Postage and handling fees
Additional payment reflecting lost interest
An affidavit from the applicant
A statement of good health

Which of the following is required to sign the application for insurance?

Producer only
Insurer only
Producer and the applicant
Producer and the insurer

How are employer paid premiums on a group life insurance plan treated for tax purposes?

A barter transaction
As an ordinary and necessary business expense
As compensation in lieu of cash
As a personal expense paid on behalf of the employee

All of the following statements regarding an insurance application are correct, except:

It is the primary source of information for underwriting purposes
It must be signed by at least the applicant and producer
It is a formal written request by an applicant to an insurer requesting a policy
It is not included as part of the contract

A qualified plan pre-mature withdrawal tax penalty can be waived in all of the following circumstances, except:

Qualified educational expenses
Death
Disability
Buying a first vacation home

Failure to take a required minimum distribution (RMD) can lead to a ________ tax penalty.

20%
50%
15%
10%

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

Convert it to an individual term insurance plan, without proof of insurability
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 permanent insurance without proof of insurability, within a specified period

A split-dollar plan:

Is part of an entity buy-sell agreement
Insures key employees and is for the sole benefit of the employer in the event of the employees death
Divides the cost of additional insurance for an employee between that employee and the company
Is a qualified retirement plan for the employee with which premiums are split between both the employer and employee

Which product, offered by insurers is specifically designed to allow an individual's savings to be distributed to him/her periodically over his/h...

Universal Life Insurance
Participating Whole Life
Annuities
Variable Life Insurance

Which of the following Annuities is generally not backed by the insurer's general account assets?

Variable
Indexed
Fixed
Market Value Adjustment

How can an annuity payout an income benefit income tax free?

Purchase the annuity within a Roth IRA account
When the annuity payout is going to the estate of the deceased
When the annuitant is over age 70 1/2
When the annuity was purchased as a Traditional IRA with premiums tax deductible

All of the following are life insurance policy prohibited provisions, except:

Limiting the time to bring legal action against an insurer to less than 1 year
Backdating a policy more than 6 months to save age in order to lower the policy premium
Voiding a policy for failing to repay any policy loan or loan interest when the total outstanding policy debt is greater than the policyâ€™s cash value
Settlements for less than the face amount plus dividends minus the sum of outstanding policy loans, loan interest, and unpaid premium

The situation below that most likely calls for the purchase of term insurance is:

Mary is 44 years old, is a career school teacher and has no children
Roger is age 62 and is approaching retirement after working for a corporation for 30 years
George has two years of medical school to complete; he and his wife have one child
Kathy, age 60 and married, has two adult children, both of which are married

A client purchases an individual disability income policy and receives the policy from the insurer 45 days after application. Upon receipt of the poli...

35
20
45
10

The relationship of a person who acts on behalf of a company whereby the person's actions can bind the company is known as:

Surplus lines or excess insurance
The law of agency
The law of large numbers
Brokerage business

The reinsurance agreement that allows the reinsurer an opportunity to reject coverage for individual risks or price them higher due to their higher ri...

Facultative
Residual
Treaty
Reciprocal

Which of the following is considered not to be an Essential Health Benefit?

Behavioral health treatment
Personal care
Mental health services
Ambulatory patient services

Which of the following policies could be expected to have the lowest premium?

Endowment to age 65
Whole life
10-pay life
Single pay life

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

Competent parties
Restricted persons
Considerations
Agreement

All of the following are elements of a contract, except:

Offer and acceptance
Authority
Consideration
Legal purpose

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

A foreign company
A nonadmitted company
An authorized company
A domiciled company

Which is the proper term for a company owned by its policyowners?

A mutual insurance company
A domestic insurance company
A reciprocal insurance company
A charitable insurance company

A producer who is acting as an agent is representing:

The insured and the insurer
Always the insured
Always the insurer
The insured, the applicant and the beneficiary

In a universal life policy, the two adjustments usually made to the cash value account are:

Cost of insurance protection is charged and current interest is credited
Premiums and guaranteed interest are charged
Guaranteed interest is credited as long as the insurer has had a favorable investment return
Cost of insurance protection is credited and current interest is charged

A whole life policy:

Requires the insured to pay premiums to age 65 and endows at age 120
Requires the insured to pay premiums for life and endows at age 100
Is a single premium policy that endows at a specific age specified in the contract
Requires the insured to pay premiums to age 90 and endows at age 100

Each of the following would be an element in the definition of fraud, except:

Withholding of known material facts
Intentional material misrepresentation with the intent of causing injury to another party
An individual warrants a fact stated on the application
A false statement on the application that is material to the acceptance of the risk

An insurance contract is an aleatory contract. This means:

Statements made in the application are guaranteed to be true in all respects
Parties to the contract must have the legal capacity to enter into the contract
Equal value is not given by both parties to the contract
The contract must be for a legal purpose

A limited pay life policy:

Requires premium payments for a specified number of years or until a specified age is reached
Start off with small premium payments and then they increase, but only up to a specified limit
Is offered in limited face amounts only
Can only be purchased by individuals on a specified limited income

The field underwriter is the _________ and is not a determiner of insurability.

Paramedical examiner
Medical doctor
Actuary
Producer

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

The elimination period
The face amount of the policy
The length of time income payments are to be paid out
The amount of monthly benefit selected

An insurer which is formed under the laws of another country is a(n):

Alien insurer
Domestic insurer
Non-authorized insurer
Foreign insurer

A contract that is drafted by an insurer and receives no input or alteration from the insured, is considered a(n):

Contract of Adhesion
Aleatory Contract
Conditional Contract
Unilateral Contract

A document that provides information to the home office of an insurer for underwriting purposes is called a(n):

Rider
Claim Form
Application
Amendment

The ____________ market is a private source of coverage of last resort for individuals or businesses that have been rejected by voluntary market insur...

Self-insured
Reciprocal
Residual
Reinsurance

With a modified premium whole life contract, premium payments:

Are invested in the stock market
Are lower in the early years of the contract
Are modified throughout the life of the plan and may fluctuate at the insurer's discretion
Never change for the life of the policy

It is the _________ who issues a Certificate of Authority enabling an insurer to conduct insurance business within a particular state.

Secretary of State
State Senate
State Insurance Commissioner
State Congress

With regard to life insurance policies, loading refers to:

Surrender charges applied to the cash surrender of the policy
The amount of money the insurance company reserves for expected mortality costs
Assignment of the appropriate share of the companyâ€™s operating expenses to each policy
The amount the company anticipates for dividend payout

Why should a policyowner be especially careful when deciding to increase the amount of an outstanding policy loan?

If the loan amount, plus interest charged exceeds the face amount at death, the beneficiary would owe the insurance company the balance of the loan
A policyowner is not allowed to increase an existing policy loan
If the outstanding loan balance, plus interest, equals or exceeds the cash value of the policy, the company could cancel the insurance
If a loan payment is not established within one year, the insurance company may cancel the policy

Which statement best describes the term reserve?

That amount insurer's maintain in reserve to guarantee that they can profit from future death claims
That amount that enables the insurer to provide sales bonuses and incentives for their commissioned sales staff
That amount that, when increased by future premiums on outstanding policies, and interest on those premiums will enable the company to meet future death claims
That amount, required by law, that the company must hold in reserve to pay only cash value accumulations on permanent insurance policies

The applicant, if other than the proposed insured, must have:

A relationship to the insured's named beneficiary
A valid state issued drivers license
The insured's permission to be the applicant
An insurable interest in the life of the insured

Which of the following statements about the average number of people who die each year is true?

It is called the predictability rate
It is called the principle of indemnity
It is called the mortality rate
It is called the principle of life insurance

An insured should receive necessary claim forms within _____ days after notice of claim.

5
15
20
10

Which of the following is NOT a characteristic of life insurance as property?

It may be paid for in installments
It requires a fund portfolio manager
It requires no physical maintenance
It creates an immediate estate

The most effective way to ensure that the applicant will accept the policy when it is issued is:

To collect the initial premium upon policy delivery, not at the time of application
To have the applicant pay the initial premium at the time of application
To deliver the policy with a gift certificate to a local restaurant
Offer to pay the first premium for them

Insurers generally calculate premiums on:

A monthly basis
An annual basis
A weekly basis
A daily basis

An indeterminate premium policy offers:

A low initial premium with succeeding premiums based on the companyâ€™s investment return, mortality and expenses
Whole life insurance with a flexible payment schedule of premiums and flexible face amount of coverage
An interest sensitive premium on a whole life policy
A limited payment schedule

Term insurance differs from permanent insurance in that term:

Builds cash value and provides limited death benefit options only
Builds no cash value, pays a death benefit only
Provides a variety of living benefits
Costs more than permanent insurance

Any extra premium charged for the waiver of premium rider:

Must be paid separately and in addition to the primary premium
Does not apply to the policyâ€™s cash value
Earns interest and increases the cash value of the policy
Increases the face amount of the policy

If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance:

On his own life at specified periods, but must prove insurability
Anytime before the age of 65
On his own life at specified periods of time at a fixed guaranteed premium
On his own life at certain specified ages without proof of insurability

A variable life policy:

Death benefit varies to reflect the investment results of the underlying separate account, but never falls below a guaranteed minimum
Guarantees a minimum return on the cash value account
Has a fixed death benefit
Has flexible premiums that can be changed as well as frequency

The type of policy that can be changed from one that does not accumulate cash values to one that does is

Convertible term policy
Permanent policy
Universal life policy
Variable life policy

Loan values and retirement income are:

Considered part of the final expenses of life insurance
Features that are only available on term policies
Not available from any type of life insurance policy
Called the living benefits of life insurance

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

Need not repay the premiums paid by the company during disability
Must reapply for the insurance
Must prove insurability to continue the policy on an annual basis
Must repay the premiums paid by the company during disability

Should an insured become totally and permanently disabled two months before the cut-off date for the waiver of premium rider:

The insured remains eligible for all provisions
All provisions in the policy are now voided
No benefits would be available due to the 6 month elimination period usually required, which would exceed the 2 months remaining on the rider
The waiver of premium will only continue for the remaining two months

In many jurisdictions, permanent policies are required to have some cash value by the end of:

The second year
The third year
The fourth year
The first year

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
Cancel the waiver of premium rider
Void the policy
Increase the premium

Allen purchases an estate builder (jumping juvenile) policy for his 5-year old son, Donald. Suppose that when Donald reaches age 21 his father present...

Donald has enjoyed protection against the problems of premature death
The face value of Donald's policy has increased by 5 times
The premium will continue to be based on his original age of 5
Donald must change the beneficiaries immediately

The waiver of premium rider normally expires at age:

70
65
55
60

The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of the following, except:

Transferring the proceeds of the policy
Encumbering the proceeds of the policy
Commuting the proceeds of the policy
Purchasing a new car once the claim has been settled and proceeds have been paid out according to the beneficiary designations

An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company:

Applies the remaining cash values into a deferred annuity
May apply the cash values to purchase additional paid up insurance
Will automatically institute the extended term option
May exercise any nonforfeiture option it deems appropriate

Warren and Wilma have a joint life policy. Warren dies and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the b...

Level term policy
Survivorship or second-to-die policy
Reduced paid up policy
Variable life policy

Controlled business may be defined as insurance sold:

To existing clients only
To anyone willing to buy
To individuals needing an increased amount of term insurance
To the producer, the producerâ€™s family and friends, and the producerâ€™s business associates

Each of the following is a source of life insurance policy dividends, except:

Guaranteed cash value accumulations
Additional interest earnings
Reductions in operating expenses
Savings in mortality

The nonforfeiture option that provides the most life insurance protection is the:

Reduced paid-up option
Cash surrender option
Extended term option
Paid up additions option

Collateral for a policy loan is:

The premiums applied to the cash value account minus the load
Not required at all
The cash value of the policy itself
Provided by the policy's death benefit

If a policyowner has a $100,000 policy with an accumulated cash value of $6,000, the policyowner can borrow up to:

The entire accumulated cash value of $6,000, less interest for 1 year
The total amount of premiums paid into the policy
50% of the accumulated cash value
Never more than the full face amount of the policy

The settlement option that provides for the proceeds plus interest to be paid in installments for a specified period of time is called the:

Fixed amount option
Life income period certain option
Joint life option
Fixed period option

Each of the following statements about policy loans is correct, except:

The loan value of a policy cannot exceed the current cash value
Policy loans may be made on any type of policy
If a policy has cash value, the insurance company cannot refuse to lend the policyowner money
A policy loan cannot be made on a policy until it has been in force long enough to accumulate some cash value

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 be...

Interest in periodic payments to Wilma
Equal lump sum payments to both Wilma and Pebbles immediately
$100,000 total death benefit amount to Wilma immediately
Nothing, until a period of 5 years has elapsed

What is a postmortem dividend?

A second dividend declared after the initial dividend had been paid out
A dividend declared and paid out at least one year after an insured's death
A dividend earned, but not yet paid, in the year of the insuredâ€™s death and paid with the death claim
A dividend declared but held for future payout

The factors that determine the amount of each payment under the fixed period settlement option are:

Age of the beneficiary only
Length of the fixed period payout only
Length of the fixed period, face amount of the policy and interest
Length of the fixed period, face amount of the policy, interest, and age of the beneficiary

If an insured has an outstanding loan of $5,000 on a policy with a face amount of $25,000, at death the company will:

Pay the beneficiary $20,000, after subtracting the amount of the outstanding loan
Cancel the policy
Pay the beneficiary the full $25,000 face amount
Institute a required loan repayment schedule before allowing the death claim to be processed

Jerry has selected a Life Income 10 year Period Certain. What happens to the income payments if he dies in year 4 after starting to receive income ben...

The payments are increased by 60% and paid out for the balance of the time remaining on the guaranteed benefit
The payments are reduced by 40% then paid out to the surviving beneficiary for the remainder of their life
The payments end immediately with any residual values retained by the insurer
The payments continue for the balance of the Period Certain to a named beneficiary

'Annuity Period' refers to which of the following?

The time during which payments are made to the annuitant
The process in determining the cost basis of an annuity
The time in which the annuity is accumulating and earning interest
The period of time in which an annuity is subject to a 10% premature withdrawal penalty

The type of annuity that guarantees to pay total income at least equal to the purchase price of the contract is a:

Joint life and survivorship annuity
Refund life annuity
Pure life annuity
Joint life annuity

An annuitant has a temporary annuity certain, and dies shortly after the payments start but before the certain period of 10 years has elapsed. Any mon...

Paid out for the beneficiary's entire life
Placed into an insurance trust account
Paid to the beneficiary for the rest of the certain period
Subject to probate and will be disbursed according to state law

What is the name of the person named in the annuity policy to potentially receive any residual benefits?

Annuitant
Beneficiary
Owner
Insured

Which of the following would not be a situation in which the annuity premium dollars would qualify for an income tax deduction for the premium payor?

An employed individual purchasing a traditional IRA flexible premium deferred annuity each year from discretionary dollars
An employee purchasing a flexible premium deferred variable annuity within a traditional 401(k) plan through payroll deduction
A school teacher purchasing a periodic premium tax sheltered annuity (TSA) through payroll deduction
A married couple purchasing a flexible premium non-qualified deferred annuity to supplement their future retirement income

Which of the following statements is NOT true about the tax treatment of Social Security?

Employee paid payroll deductions for Social Security are tax deductible to the employee
Taxes to finance Social Security benefits are paid equally by employees and employers
Employers may take a tax deduction for contributing on behalf of their employees
Self-employed people must pay both the employer and the employee share of Social Security taxes

In group insurance, the evidence of a contract between the insurer and the employer or association is:

The underwriting certificate of completion
The certificate of insurance
The policy
The approval certification

When converting a group life policy to an individual policy, the departing group member's new policy must be a:

Fixed deferred annuity
Permanent or whole life policy
Decreasing term policy
20 year term life policy

When underwriting group life insurance:

The underwriter requires complete family history from each employee
The underwriter requires each employee to have a paramedical exam
The underwriter generally focuses on the group as a whole, rather than on individual members
The underwriter generally focuses on individual members of the group, rather than the group as a whole

The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who served as senior executives. This benefit is not available to other ret...

Nonqualified plan
Qualified plan
401(k)
Keogh Plan

_______ income benefits received by an employee are subject to taxation in proportion to the amount of premium that the employer paid. That income att...

Dental
Disability
Medical
Long-Term Care

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Health and Life Comprehensive Exam MCQs