Test practice

question

Which of the following are NOT fundable by annuities? a) Death benefits b) Cash accumulation for any reason c) A person’s retirement d) Estate liquidation
answer

a) Death benefits Annuities are most commonly used to fund a person’s retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.
question

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a) Those who have no history of claims b) Those who have been insured under the plan for at least 5 years c) Those who have worked in the company for at least 3 years d) Those who have dependents
answer

b) Those who have been insured under the plan for at least 5 years If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.
question

An employee insured under a group health plan has been paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would be his maximum monthly premium for COBRA coverage? a) $100 b) $102 c) $25 d) $25.50
answer

b) $102 The employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual’s group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is to cover the employer’s administrative costs.
question

In which of the following scenarios will repayment of funds take place per the Medicaid Estate Recovery Act? a) The mother of a 10-year-old died after receiving 8 months of Medicaid payments b) Before her death, a 23-year-old was living in a long-term nursing facility paid for with Medicaid funds c) A Medicaid recipient is survived by his wife d) The 22-year-old son of a Medicaid recipient is blind
answer

b) Before her death, a 23-year-old was living in a long-term nursing facility paid for with Medicaid funds Estate recovery cannot take place if the Medicaid recipient, at the time of his or her death, has a surviving spouse, a child younger than 21 or a child who is blind or permanently disabled.
question

The Patient Protection and Affordable Care Act includes all of the following provisions EXCEPT a) Coverage for preventive benefits. b) Individual tax deduction for premiums paid. c) Right to appeal. d) No lifetime dollar limits.
answer

b) Individual tax deduction for premiums paid. The Act does not offer tax deductions for health insurance premiums. All the other provisions are included in the Act.
question

Who can request changes in premium payments, face value, loans, and policy plans? a) Agent b) Policyowner c) Contingent Beneficiary d) Beneficiary
answer

b) Policyowner Mandatory provisions give these rights to the policyowner.
question

When a health insurance policy is purchased in the state of New York, the insured may cancel the policy and receive a premium refund within a) 90 days. b) 10 days. c) 20 days. d) 30 days.
answer

c) 20 days. The Free Look Provision allows for an insured to review his/her policy once it has been delivered; if the insured decides to return it within a certain time period, the premium will be refunded. The Free Look time period varies from state to state. In New York the insured can review the policy from anywhere between 10 and 20 days.
question

Which of the following individuals must pass the written examination to be licensed as an agent? a) A ticket selling airline representative for one-time issuance of baggage or accident insurance. b) An individual seeking to be a representative of a fraternal benefit society as its agent. c) A producer previously licensed in New Jersey who is applying for a New York license 120 days after becoming a resident of this state. d) A licensee who was licensed on July 1, 1987, to represent any assessment corporation.
answer

c) A producer previously licensed in New Jersey who is applying for a New York license 120 days after becoming a resident of this state. Each of the above do not need to take the written examination, except for a previously licensed agent in New Jersey who has allowed more than 90 days to lapse since becoming a resident of New York.
question

When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT a) Include a policy summary on the proposed life insurance in the communication with the existing company. b) Obtain from the producer a list of the applicant’s life insurance or annuity contracts to be replaced. c) Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. d) Send the existing insurance company a written notice of replacement.
answer

c) Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. Providing a copy of the Important Notice Regarding Replacement is a producer’s responsibility.
question

The purpose of managed care health insurance plans is to a) Control health insurance claims expenses. b) Provide for the continuation of coverage when an employee leaves the plan. c) Provide access to the largest number of physicians as possible. d) Coordinate benefits.
answer

a) Control health insurance claims expenses. Managed care is a system of delivering health care and health care services, characterized by arrangements with selected providers, programs of ongoing quality control and utilization review and financial incentives for members to use providers and procedures covered by the plan.
question

What amount can co-insurance not exceed in New York’s major medical plans? a) 25% b) 35% c) 40% d) 50%
answer

a) 25% In the state of New York, co-insurance cannot exceed 25% for major medical plans.
question

How are funds contributed to a tax-sheltered annuity treated for taxation? a) The contributions are taxed as income for the employee, but are tax free upon withdrawal. b) The contributions are not included as income for the employee, but are taxable upon distribution. c) The contributions are never taxed. d) The contributions are taxed as income for the employee.
answer

b) The contributions are not included as income for the employee, but are taxable upon distribution. Funds contributed are excluded from the employee’s current taxable income, but are taxable upon withdrawal.
question

A policy which covers medical costs related to a specific condition is called a a) Dread Disease Policy. b) Condition-Specific Policy. c) Specific Condition Policy. d) Limited Coverage Policy.
answer

a) Dread Disease Policy. Dread Disease policies cover medical expenses for a particular medical condition, such as cancer or heart disease.
question

How long must insurers keep records of claims? a) 3 years b) 4 years c) 5 years d) 6 years
answer

d) 6 years Insurers must keep records for at least 6 years or until the filing of a review of the record, whichever is longer.
question

Any licensed person who knowingly makes false material statements related to the business of insurance may be fined and imprisoned for up to a) 3 years. b) 5 years. c) 10 years. d) 12 years.
answer

c) 10 years. Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.
question

An insured’s premium increases as a result of her age. Which type of policy does she have? a) Age-Oriented b) Increasing Term c) Age-Based d) Attained Age
answer

d) Attained Age Attained Age policies allow the insurer to increase premiums as the insured ages.
question

The Omnibus Budget Reconciliation Act of 1990 requires the employer health plan to provide primary coverage for individuals with end-stage renal (kidney) disease before Medicare becomes primary for how many months? a) 36 months b) 12 months c) 30 months d) 24 months
answer

c) 30 months The Omnibus Budget Reconciliation Act of 1990 as amended by the Balanced Budget Act of 1997 requires the employer health plan to provide primary coverage for 30 months for individuals with end-stage renal (kidney) disease before Medicare becomes primary.
question

Which of the following factors would be an underwriting consideration for a small employer carrier? a) Health status b) Medical history of the employees c) Percentage of participation d) Claims experience
answer

c) Percentage of participation Coverage under a small employer health benefit plan is generally available only if at least 75% of eligible employees elect to be covered.
question

While you are reviewing Patrick’s employer’s contributions to his Health Savings Account with him, he asks you how the contributions affect his taxes. You should advise him that HSA contributions are a) Excluded from corporate tax calculations. b) Not included in the individual taxable income. c) Taxed at the same rate as the Social Security tax rate. d) Taxed at the personal income tax rate.
answer

b) Not included in the individual taxable income. HSA contributions made by an employer are not included in the determination of an individual’s taxable income.
question

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following? a) It is not possible to surrender an annuity before the annuitization period. b) Nonforfeiture option guarantees that the owner will receive a surrender value of the contract. c) The owner will receive some of the money back, which will depend on the surrender value established by the insurer at the time that the contract is terminated. d) The insurance company will apply the money to another annuity or a life insurance policy, but the money cannot be returned.
answer

b) Nonforfeiture option guarantees that the owner will receive a surrender value of the contract. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed (e.g. 100% of the premium paid, less any prior withdrawals and related surrender charges) due to the nonforfeiture provision.
question

Which of the following riders would NOT cause the Death Benefit to increase? a) Accidental Death Rider b) Payor Benefit Rider c) Guaranteed Insurability Rider d) Cost of Living Rider
answer

b) Payor Benefit Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.
question

When a person applies for Medicare supplement insurance, whose responsibility is it to confirm that the applicant does not already have accident or sickness insurance already in force? a) Federal government b) Agent c) Insurer d) State government
answer

c) Insurer Although it is illegal for an applicant to intentionally misrepresent himself in an insurance application, it is the insurer’s ultimate responsibility to make sure that the applicant does not already have another accident or sickness policy in force.
question

Who can provide skilled nursing care? a) Doctor b) Spouse c) Family Member d) Community volunteer
answer

a) Doctor Skilled nursing care is daily nursing and rehabilitative care that can only be provided by medical personnel, under the direction of a physician. Skilled care is almost always provided in an institutional setting.
question

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? a) Nothing, since the insured was killed as a result of a war b) The full death benefit c) The policy’s cash value d) A refund of premiums
answer

b) The full death benefit War or Military Service Clause specifically excludes or limits the insurer’s liability for losses caused by war or active military service. If a life insurance policy does not have that exclusion, the benefits are paid to the beneficiary, as if the insured died of any other cause.
question

In a life settlement transaction, the owner must be made aware of his or her right to rescind the contract within how many days after the receipt of the life settlement proceeds? a) 10 days b) 15 days c) 30 days d) 90 days
answer

b) 15 days The life settlement provider or broker must disclose that the owner has the right to change his or her mind. In other words, the owner may rescind a life settlement contract within 15 days after the receipt of the life settlement proceeds by the owner.
question

What types of services may not be provided under LTC’s Assisted Living? a) Linens and personal laundry service b) Assistance with dressing and bathing c) Reminders regarding medication d) Visits by a registered nurse
answer

d) Visits by a registered nurse The following services may be provided: Linens and personal laundry service, assistance with dressing and bathing, reminders regarding medication, assistance with eating. Assisted living offers non-medical assistance.
question

Which of the following is NOT among the goals of a Medicare Supplement application? a) Presuming the applicant is eligible for Medicaid, based on the nature of the policy b) Determining whether or not an applicant has an existing Medicare Supplement policy c) Determining whether or not the policy will replace another accident and health policy d) Advising applicants regarding the availability of counseling services
answer

a) Presuming the applicant is eligible for Medicaid, based on the nature of the policy Medicare Supplement policies must ask the applicant if they are eligible for Medicaid.
question

Who is the owner of the policy and who pays the premium in an Executive Bonus plan? a) Company is the owner, but the executive pays the premium. b) Board of directors is the owner, and the board of directors pays the premium. c) Company is the owner, and the company pays the premium. d) Executive is the owner, and the executive pays the premium.
answer

d) Executive is the owner, and the executive pays the premium. Executive buys the policy and pays the premium, and the employer reimburses the executive for cost (or pays a bonus in the amount of the premium). Since the executive is receiving compensation, the amount paid by the employer would be considered taxable income.
question

What option allows the insured to periodically increase benefit levels without providing evidence of insurability? a) Level premium b) Guarantee of insurability c) Guarantee renewable d) Annual increase
answer

b) Guarantee of insurability Guarantee of insurability option allows the insured to periodically increase benefit levels without providing evidence of insurability. The amount is usually limited to allowing a 5% compounded annual increase.
question

What is the elimination period for Social Security disability benefits? a) 12 months b) 3 months c) 5 months d) 6 months
answer

c) 5 months The elimination period for Social Security disability benefits is 5 months.
question

When a group health insurance plan is terminated, how long is an extension of benefits provided for any totally disabled employee or dependent? a) 18 months b) 3 months c) 6 months d) 12 months
answer

d) 12 months Group insurance plans, which are terminated generally, provide for an extension of benefits to any totally disabled employee or dependent. This extension of benefits is generally provided up to a period of 12 months or until the individual is no longer totally or continuously disabled.
question

Which of the following is NOT a prerequisite for an insurance license in New York? a) Complete prelicensing education b) File a written application for an insurance license c) Pass the required examination d) Be at least 21 years of age
answer

d) Be at least 21 years of age The Insurance Code states the minimum age for obtaining an insurance license at 18 years.
question

Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives? a) Full b) 50% c) 25% d) None
answer

d) None General disability policies do not cover losses caused by war, military service, intentionally self-inflicted injuries, overseas residence, or injuries suffered while committing or attempting to commit a felony.
question

Regarding the COB provision, how can the order of payment be determined? a) Unilateral rule b) Birthday rule c) Contact rule d) Continuation rule
answer

b) Birthday rule (Coordination of Benefits) If both parents name their children as dependents under their group policies, then the order of payment will usually be determined in one of two ways depending on the applicable state law. Under the gender rule, the father’s coverage is always considered primary. Under the birthday rule, the coverage of the parent whose birthday is earliest in the year will be considered primary.
question

Under the 401(k) bonus or thrift plan, the employer will contribute a) 30% of what the employee contributes. b) 75% of what the employee contributes. c) An undetermined percentage for each dollar contributed by the employee. d) All of the money to the plan.
answer

c) An undetermined percentage for each dollar contributed by the employee. Under the bonus or thrift plan, the employer will contribute certain amount or percentage for each dollar contributed by the employee. There is no specific rule as to how much the employer must contribute.
question

A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis? a) Noncancellable b) Nondiscriminatory c) Indemnity d) Guaranteed
answer

d) Guaranteed If a new employee is eligible, under HIPAA regulations, the new employer must offer coverage on a guaranteed issue basis.
question

Which statement is NOT true regarding a Straight Life policy? a) It has the lowest annual premium of the three types of Whole Life policies. b) Its premium steadily decreases over time, in response to its growing cash value. c) The face value of the policy is paid to the insured at age 100. d) It usually develops cash value by the end of the third policy year.
answer

b) Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured’s lifetime and provide a level, guaranteed death benefit.
question

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Limited pay whole life insurance b) 10-year endowment c) Life annuity, period certain d) Increasing term insurance
answer

a) Limited pay whole life insurance Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
question

To be eligible to convert a group policy to an individual policy, a person must have been covered by the group policy for at least a) 12 months b) 3 months. c) 6 months. d) 9 months.
answer

b) 3 months. A person must have been insured under the group policy for at least 3 months at the point when coverage ends to be allowed to convert it to an individual policy.
question

An insured submitted a notice of claim to the insurer, but never received claims forms. He later submits proof of loss, and explains the nature and extent of loss in a hand-written letter to the insurer. Which of the following would be true? a) The insurer will be fined for not providing the claims forms. b) The insured must submit proof of loss to the Department of Insurance. c) The insured was in compliance with the policy requirements regarding claims. d) The claim most likely will not be paid since the official claims form was not submitted.
answer

c) The insured was in compliance with the policy requirements regarding claims. If claims forms are not furnished to the insured, the claimant is deemed to have complied with the requirements of the policy if he or she submits written proof of the occurrence, nature of the loss, and extent of loss to the insurer
question

Which of the following provisions must be included on the first page of a Medicare supplement policy, which states the insurer’s right to change premium amounts? a) Coverage Limitations b) Continuation Provision c) Premium Provision d) Insurer’s Rights
answer

b) Continuation Provision The Renewal Provision, also known as a “Continuation Provision”, must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts.
question

Sally purchases an individual health insurance policy on September 1. On September 7 her doctor informs her that she is four months pregnant. Her coverage will most likely pay a) All expenses except those related to the pregnancy. b) Only expenses related to the pregnancy. c) Nothing. d) All expenses.
answer

a) All expenses except those related to the pregnancy. The pregnancy would not be considered a pre-existing condition if part of a group policy because of HIPAA, but since she has purchased an individual policy, all expenses would be covered except those relating to the pregnancy.
question

If the insurance provided on an individual ceases because of termination of employment or of membership in the class eligible for coverage, the individual will be entitled to have an individual life policy issued without evidence of insurability, if application is made within what time period after termination? a) 31 days b) 45 days c) 1 year d) 10 days
answer

b) 45 days New York law grants individuals whose group policies cease because of termination of employment or membership the right, if application is made and premium paid within 45 days, to request an individual policy on any form customarily issued by the insurer at the age and in the amount applied for without evidence of insurability.
question

All other factors being equal, the least expensive first-year premium payment is found in a) Level Term. b) Annually Renewable Term. c) Increasing Term. d) Decreasing Term.
answer

b) Annually Renewable Term. Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured’s attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
question

Mike is still employed at age 60 and wants to know what health insurance coverage he is eligible to receive. Which of the following options are available to Mike? a) Reapplication for group health b) Medicare c) Both group health and Medicare d) Continuation of group health
answer

d) Continuation of group health If a person is still employed at the age of 65, he may choose to either continue group coverage and defer Medicare until retirement, or he may choose to switch to Medicare. The employer cannot provide incentives for switching to Medicare. In this case, Mike is five years too young to qualify for Medicare, so he will have to continue his group health coverage.
question

What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant’s life and ceases at the annuitant’s death? a) Joint and survivor b) Pure life c) Life with guaranteed minimum d) Installment refund
answer

b) Pure life A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.
question

All of the following information about a customer must be used in determining annuity suitability EXCEPT a) Beneficiary’s age. b) Tax status. c) Financial experience. d) Annual income.
answer

a) Beneficiary’s age. To ensure suitability of annuity products, producers must obtain relevant information about the consumer’s age, income, financial status, tax status, financial experience and objectives. Beneficiary’s age is not a suitability factor.
question

Which of the following is NOT true regarding Equity Indexed Annuities? a) They have guaranteed minimum interest rates. b) They are less risky than variable annuities. c) They earn lower interest rates than fixed annuities. d) The insurance company keeps a percentage of the returns.
answer

c) They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.
question

If a life insurance policy has an irrevocable beneficiary designation, a) The beneficiary can only be changed with written permission of the beneficiary. b) The beneficiary cannot be changed for at least 2 years. c) The owner can always change the beneficiary at will. d) The beneficiary cannot be changed.
answer

a) The beneficiary can only be changed with written permission of the beneficiary. If a policy has an irrevocable beneficiary designation the beneficiary can only be changed with written permission of the beneficiary.
question

A pre-existing condition is one a) Which occurs during the waiting period. b) That must be covered in a health policy. c) That is excluded for 24 months. d) For which the insured has been treated in the past.
answer

d) For which the insured has been treated in the past. Pre-existing conditions are defined as conditions for which the insured has received diagnosis, advice, care, or treatment during a specific time period prior to the application. Time periods vary from state to state, company to company, and plan to plan.
question

Which of the following is an example of apparent authority? a) The agent accepts a premium payment during the grace period. b) The agent has business cards and stationery printed. c) The agent puts up a sign with the logo of the insurance company without express permission. d) The agent accepts a premium payment after the end of the grace period An agent who accepts a premium after the end of the grace period appears to the client to have the authority to prevent the policy from lapsing. In fact, the agent has no such power. The power to use business cards, stationery and signage may be either express (written) or implied (not written), but in either case, it is allowed.
answer

d) The agent accepts a premium payment after the end of the grace period An agent who accepts a premium after the end of the grace period appears to the client to have the authority to prevent the policy from lapsing. In fact, the agent has no such power. The power to use business cards, stationery and signage may be either express (written) or implied (not written), but in either case, it is allowed.
question

Who controls changes in premium payments, face value, loans, and policy plans? a) Insurer b) Beneficiary c) Agent d) Policyowner
answer

d) Policyowner Mandatory provisions give these rights to the policyowner.
question

A Universal Life insurance policy has two types of interest rate that are called a) Guaranteed and Current b) Option A and Option B c) Fixed and Variable d) Minimum and Target
answer

a) Guaranteed and Current The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.
question

When does Medicare cover nursing home care? a) Medicare covers all nursing home care for eligible policyholders b) Only if it is part of treatment for a covered illness or injury c) Only if the deductible has been met d) Only for those age 80 and older
answer

b) Only if it is part of treatment for a covered illness or injury Medicare will not cover long-term care or nursing home care unless it is part of the treatment for a covered illness or injury.
question

What type of benefit helps to pay for accidental injuries that are not severe enough to qualify as disabilities? a) Medical Reimbursement Benefit b) Partial Disability c) Basic Accidental Injury d) Accidental Death & Dismemberment
answer

a) Medical Reimbursement Benefit Medical Reimbursement Benefits help to pay medical costs for accidental injuries that are not considered to be disabling.
question

Concerning Medicare Part B, which statement is INCORRECT? a) An individual must reject Medicare Part B or he will be enrolled in it automatically. b) Medicare Part B provides partial coverage and benefits for medical expenses not covered completely by Part A. c) Medicare Part B is fully funded by Social Security taxes (FICA). d) If a person initially declines Part B, he or she must wait until the next general enrollment period to enroll.
answer

c) Medicare Part B is fully funded by Social Security taxes (FICA). Medicare Part B has an annual deductible and copayment by the enrollee.
question

When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis? a) Limited b) Scheduled c) Reimbursement d) Service
answer

c) Reimbursement The insured is responsible to pay the provider, and the policy reimburses the insured for covered expenses.
question

Janie is on bed rest for a brain injury. She is finally released to return to some of her normal activities but is only allowed to work on a part-time basis. Which of the following could help Janie recover the portion of income lost by working only part-time? a) Recovering Worker’s Compensation b) Residual Disability Benefit c) Income Compensation d) Disability Income Differential
answer

b) Residual Disability Benefit A Residual Policy Benefit is written for those individuals who are returning to work after a period of disability but are only able to work on a part-time basis. The benefit compensates the insured for the amount of monthly income lost by the reduced number of working hours. For instance, if Janie earns $2500 per month but, because of her reduced hours, only earns $1500 per month, she will receive a $1000 benefit payment.
question

How is the amount of Social Security disability benefits calculated? a) It is based on age, number of quarters worked in the last 20 years (minimum of 60) and the number of health claims made during that period of time. b) It is based upon the worker’s Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 35 years. c) It is based upon the worker’s Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 30 years. d) It is based on age, number of quarters worked in the last 25 years (minimum of 80) and the number of health claims made during that period of time.
answer

b) It is based upon the worker’s Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 35 years. The amount of Social Security disability benefits is based upon the worker’s Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 35 years. The lowest 5 years of income may be deleted from calculation.
question

Which of the following statements is true regarding LTC insurance? a) Every policy must offer reduced paid-up insurance to the applicant. b) LTC policies may not include any riders. c) LTC policies must allow a 60-day free-look period. d) Every policy must offer nonforfeiture benefits to the applicant.
answer

d) Every policy must offer nonforfeiture benefits to the applicant. Long-term care policies or certificates issued or delivered in this state must offer to the applicant nonforfeiture benefits. Reduced paid-up insurance is one of the possible nonforfeiture options, but it is not necessarily required. LTC policies may contain riders, and must offer a 30-day free-look period.
question

Mike Armstrong is an agent and wants to operate under the name The Insurance Palace. What kind of license would this require? a) Alias b) Transidentification c) Association d) Agency
answer

d) Agency This state requires an agency license when you are operating under a name other than your own. An example is Ralph Smith and Associates.
question

All of the following are considered to be supplemental benefits under an HMO plan EXCEPT a) Prescription drugs. b) Preventive services. c) Long-term care. d) Mental health care.
answer

b) Preventive services. HMOs have the option of providing one or more of the following supplemental benefits: long-term care, nursing services, home health care, prescription drugs, dental care, vision care, mental health care, and substance abuse services.
question

Can an individual who belongs to a POS plan use an out-of-network physician? a) No b) Yes, but they must use the POS physician first c) Yes, but they must use the HMO physician first d) Yes, and they may use any preferred physician, even if not part of the HMO
answer

d) Yes, and they may use any preferred physician, even if not part of the HMO In a POS plan the individuals can visit an in-network provider at their discretion. If they decide to use an out-of-network physician, they may do so.
question

At what point must an Outline of Coverage be delivered? a) At any point up to 30 days after policy delivery b) At the time of application only c) Upon delivery of the policy only d) At the time of application or upon delivery of the policy
answer

d) At the time of application or upon delivery of the policy An Outline of Coverage must be delivered at the time of application or upon delivery of the policy.
question

An insured’s long-term care policy is scheduled to pay a fixed amount of coverage of $120 per day. The long-term care facility only charged a $100 per day. How much will the insurance company pay? a) 20% of the total cost b) $120 a day c) $100 a day d) 80% of the total cost
answer

b) $120 a day Most LTC policies will pay the benefit amount in a specific fixed dollar amount per day, regardless of the actual cost of care.
question

What is the maximum fine for violating the Insurance Code regarding life settlements? a) $2,000 a day b) $10,000 a day c) $50,000 for each settled policy d) $100,000 for each settled policy
answer

d) $100,000 for each settled policy Violating the code in relation to life settlements may result in fines of up to $100,000 for each settled policy.

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