Texas Life And Health Insurance Exam (Questions) Flashcards
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the
Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty
Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated
1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called
representations
The Consideration clause of an insurance contract includes
the schedule and amount of premium payments
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
In this situation, the proceeds from E's life insurance policy will go to F.
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life InsuranceInvestor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.
Insurable interest must exist at what time?
at the time of application
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
Which of the following actions require a policy owner to provide proof of insurability in an Adjustable Life policy?
increase face amount
When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
All of these statements about Equity Indexed Life Insurance are correct EXCEPT Cash value has a minimum rate of accumulation If the gain on the index goes beyond the policy's minimum rate of return, the cash value will mirror that of the index The premiums can be lowered or raised, based on investment performance Tied to an equity index such as the S&P 500
The premiums can be lowered or raised, based on investment performance
Which of these is an element of a Variable Life policy?
A fixed, level premium
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint Life Policy
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called
Limited-Pay Life
Which is true concerning a Variable Universal Life policy? Policyowner controls where the investment will go and selects the amount of the premium payment Policyowner has no say where the investment will go but can choose the premium mode The investment vehicle for this type of policy is held in the insurer's general portfolio The death benefit can vary but the policyowner has no say in the premium amount paid
Policyowner controls where the investment will go and selects the amount of the premium payment
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance policy
Which of the following statements about a Variable Whole Life policy is CORRECT? It provides a minimum guaranteed Death benefit It is a combination of a Limited Period Endowment and a Decreasing Term policy Its premiums and benefits are variable It has a guaranteed rate of return
It provides a minimum guaranteed Death benefit
Credit Life insurance is
issued in an amount not to exceed the amount of the loan
The amount of coverage on a group credit life policy is limited to
the insured's total loan value
Term insurance has which of the following characteristics?
Expires at the end of the policy period
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
exclusions
Which statement regarding the Misstatement of Age provision is considered to be true? Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered Requires that a new policy must be applied for if a misstatement of age is found on the current policy Misstatement of Age provision is valid only during the contestable period Insurer may void the policy if a misstatement of age is discovered
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE? Coverage can be added at specific events such as marriage or having a child Evidence of insurability is not required when the option is exercised Evidence of insurability is required when the option is exercised Coverage can be added at specific ages
Evidence of insurability is required when the option is exercised
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
Policy Loan provision
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
What does the insuring agreement in a Life insurance contract establish?
An insurer's basic promise
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?
Paid-Up Additional Insurance
Which of the following statements is CORRECT about accumulated interest earned on dividends from an insurance policy?
It is taxed as ordinary income
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be paid to P's estate
Which statement regarding the Change of Beneficiary provision is true?
The policyowner can change the beneficiary
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
A level premium indicates
the premium is fixed for the entire duration of the contract
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?The gross premium is higher on a monthly payment mode as compared to being paid annually The gross premium is lower on a monthly payment mode as compared to being paid annually The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis The face amount of a life policy paid on a monthly basis is higher than one paid on an annual basis
The gross premium is higher on a monthly payment mode as compared to being paid annually
An incomplete life insurance application submitted to an insurer will result in which of these actions?
Application will be returned to the writing agent
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
At the time of application
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n)
exclusion for the medical condition
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and
the initial premium
Why is an applicant's signature required on a life insurance application?
To attest that the statements on the application are accurate to the best of the applicant's knowledge
Before a life insurance policy is issued, which of these components of the contract is required?
Applicant's signature on application
P completes an application for a $10,000 life policy, but does not give the producer the initial premium. P's coverage becomes effective when
P receives the policy and pays the premium
What type of group plan involves employees sharing the cost?
contributory plan
A noncontributory group term life plan is characterized by
the entire cost of the plan is paid for by the employer
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
Life Annuity with Period Certain
Which of these is an element of a Single Premium annuity?
Lump-sum payment
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight Life annuity
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
Which of the following annuities pays benefits based on units rather than specific dollar amounts?
A Variable annuity
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
An immediate annuity
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA)
Which plan is intended to be used by a sole proprietor and the employees of that business?
Keogh Plan
Which of the following is TRUE about a qualified retirement that is "top heavy"?
More than 60% of plan assets are in key employee accounts
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners
Which statement regarding a Key Employee Life policy is NOT true?
The beneficiary is named by the key employee
The premiums paid by an employer for his employee's group life insurance are usually considered to be
tax-deductible to the employer
The difference between group insurance and blanket health policies is
Blanket health policies do not issue certificates
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
Disability Buy-Sell
A Business Overhead Expense policy
reimburses the company for any reduction in sales due to the owner's disability
All students attending a large university could be covered by
a blanket policy
To obtain group Major Medical insurance from an employer, a new employee MUST perform which of the following actions during the open enrollment period?
Sign an enrollment card
The benefits under a Disability Buy-Out policy are
payable to the company or another shareholder
The Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for
health information
The Coordination of Benefits provision
prevents an insured covered by two health plans from making a profit on a covered loss
Which type of provider is known for stressing preventative medical care?
Health Maintenance Organizations (HMO's)
The individual who provides general medical care for a patient as well as the referral for specialized care is known as a
Primary Care Physician
A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary?
Her group health plan
Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures?
Commercial insurer
What does Medicare Parts A and B cover?
Part A covers hospitalization; Part B covers doctor's services
Medicare
is a hospital and medical expense insurance program
Medicaid was designed to assist individuals who are
below a specific income limit
Which of the following does Social Security NOT provide benefits for?Survivorship Dismemberment Disability Retirement
Dismemberment
J's Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay
In this situation, ($2,000) + 20% of $8,000 the remaining bill ($1,600) = $3,600.
Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?
The maximum amount considered eligible for reimbursement by an insurance company under a health plan
An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause. How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred?
$7,000". In this situation, $5,000 + 20% of the remaining bill = $7,000
T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition?
Insurer will likely treat as a pre-existing condition which may not be covered for one year
Which of the following BEST describes a Hospital Indemnity policy?
Coverage that pays a stated amount per day of a covered hospitalization
Which of the following costs would a Basic Hospital/Surgical policy likely cover?
Surgically removing a facial birthmarkcosmetic surgery
All of the following statements about Major Medical benefits are true EXCEPT
Benefits have no maximum limit
In order to establish a Health Reimbursement Arrangement (HRA), it MUST
be established by the employer
All of the following are limited benefit plans EXCEPTcancer policies life insurance policies dental policies critical illness policies
life insurance policies
K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?
Disability Income
What does a Guaranteed Insurability rider provide a Disability Income policyowner?
The ability to periodically increase the amount of coverage without evidence of insurability
An insured owns an individual Disability Income policy with a 30-day Elimination Period for sickness and accidents and a monthly indemnity benefit of $500. If the insured is disabled for 3 1/2 months, what is the MAXIMUM amount he would receive for an approved claim?
$1,250 3.5 months - 1 month elimination period = 2.5 months. 2.5 months X $500 monthly indemnity = $1,250.
D is an architect receiving Disability Income benefits who is not able to return to work full time, but can work on a part-time basis. Which of these features would allow D to continue receiving benefits?
Residual Benefit clause
If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital expenses?
Medicare Supplement
The individual most likely to buy a Medicare Supplement policy would be a(n)
68-year old male covered by Medicare
Health insurance benefits NOT covered due to an act of war are
excluded by the insurer in the contract provisions
Which Accident and Health policy provision addresses preexisting conditions?
Time Limit on Certain Defenses
When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the
Entire Contract provision
A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim?
Claim will be paid and coverage will remain in force
In health insurance policies, a waiver of premium provision keeps the coverage in force without premium payments
After an insured has become totally disabled as defined in the policy
An insurer must provide an insured with claim forms within __ days after receiving notice of a loss.
15
An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the
insurer dates the policy
What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?
Waiver of Premium rider
Which of the following are NOT managed care organizations?
Medical Information Bureau (MIB)
An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to
determine if the applicant is an acceptable risk by completing standard underwriting procedures
Which of the following BEST describes how pre-admission certifications are used?
Used to prevent nonessential medical costs
A life insurance illustration is NOT required to include the
company's mortality table
An insurance company must do which of the following to terminate an agent's appointment?
Send notice of the termination to the Texas Department of Insurance
Group life policies MUST include all of the following provisions EXCEPT
Right to Loan Proceeds
An organization that solicits insurance only among its members is known as a
fraternal benefit society
The Insurance Commissioner may examine the records of an insurance company in order to
determine the solvency of the company
What MUST an insurance company use in its advertising?
Its true corporate name
A group life insurance policy may NOT insure groups consisting exclusively of persons who are
related by marriage, blood or legal adoption
If an insurance company is organized under the laws of New Jersey and licensed to do business here, it is considered which of the following in Texas?
a foreign company
In Texas, a domestic insurance company is defined as a company that
is incorporated and formed in Texas
All of the following are defined as doing insurance business EXCEPT
selling mutual funds
A certificate of authority does which of the following?
Permits an insurance company to transact business in Texas
An agent MUST do which of the following during a sales presentation for a participating life insurance policy?
Include a statement that dividends are not guaranteed
If, at the time of an insured's death, the insurance company discovers that the insured's age was misstated on the application for life insurance, the company will most likely
pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age
Which of the following circumstances would cause a Medicare Supplement policy to be cancelled?
The insured fails to pay the premium
An applicant for an agent's license must meet which of the following requirements?
Be honest, trustworthy, and reliable
A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has been approved by the
Commissioner of Insurance
A foreign insurance company is one that is incorporated
under the laws of another state
The Commissioner of Insurance has the power and duty to take all of the following actions EXCEPT
activate insurance companies' financial reserves
Who can purchase a plan through the Marketplace?
Any legal resident except those incarcerated
Boycott, coercion, and intimidation that result in the unreasonable restraint of trade are prohibited under the Texas Insurance Code covering
unfair methods of competition
An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for which of the following reasons?
Failure to pay for coverage
Under the Texas insurance code, which of the following statements about the Suicide clause is CORRECT?
Suicide may not be a defense against payment after the second year
Which of the following statements is NOT CORRECT about the Commissioner of Insurance?
The Commissioner must be elected in a general election
An agent MUST give a prospective insured an Outline of Coverage when taking an application for a
Medicare Supplement policy
Under Texas insurance law, the term "transacting business" includes
collecting premiums
All of the following statements about health coverage for newborns are correct EXCEPT
coverage during the first year is limited to congenital defects
Benefits for drug and alcohol treatment under a group health policy must include all of the following services EXCEPT
transportation to and from an outpatient facility
Which of the following is an example of rebating?
returning a portion of a premium as inducement to purchase insurance
A stock insurance company is owned by it's
stockholders
An insurance company may be judged guilty of false advertising if it
An insurance company may be judged guilty of false advertising if it
Which of the following actions by an insurance company is considered an unfair claims settlement practice?
Denying an insured's claim without indicating the basis of denial under the policy
Which of the following BEST describes Credit Life insurance?
Insurance issued on a debtor to cover outstanding balances on installment loans
All of the following may charge fees for insurance advice EXCEPT
Legal reserve agents
An agent may legally share commissions only with
another agent who is licensed in the same line of insurance
An agent whose license has been revoked is required to
wait at least five years before applying for a new license
The Commissioner of Insurance may issue a temporary agent's license for a maximum of how many days?
90
Insurance company agent appointments remain in force for which of the following maximum periods of time, if any?
Until terminated or withdrawn
The Commissioner of insurance may suspend, revoke, or refuse to renew the license of an agent who
is found guilty of misrepresentation or fraud in obtaining the license
If an insured sustains a loss on a policy sold by an agent through an insurance company that is not authorized to do business in Texas, which of the following would be liable?
The agent and the company
The Misstatement of Age provision requires that if the age of the insured is misstated, then any amount payable is
an amount that the premiums paid would have purchased at the current age or ages