California Life, Accident, and Health Insurance Practice Questions and Answers, Exams of Insurance law

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CALIFORNIA LIFE, ACCIDENT, AND

HEALTH INSURANCE| 300+

PRACTICE QUESTIONS AND

ANSWERS A+ GRADE

California Life, Accident, and

Health Insurance| 300+ Questions

and Answers

1. An annuitant would like to determine the amount of an annuity distribution that is exempt from taxation. What is used to calculate this? - Correct Answer - exclusion ratio
2. Cindy buys a 10-year certain annuity with an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary? - Correct Answer - 60 payments
3. A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called - Correct Answer - Deferred annuity
4. Which of the following is not a feature of equity-indexed annuities? - Correct Answer - Offers maximum interest rate that increased annually
5. An annuity which is backed by a life insurer's separate account is called a(n) - Correct Answer - variable annuity

12. Which of the following is NOT a benefit of insurance? - Correct Answer - Losses due to fraud are eliminated
13. A participating company is also referred to as which type of insurer? - Correct Answer - Mutual insurer
14. Manuel is considered to be a disabled person as defined by the Americans with Disabilities Act (ADA). As such, he is unable to perform any of the following life activities EXCEPT - Correct Answer - Driving
15. What are the residual disability income insurance payments based on? - Correct Answer - The amount of the insured's income is reduced by the disability
16. Which of these statements is NOT true concerning recurrent disabilities? - Correct Answer - The insurer continues coverage after a new elimination period
17. Allen has a disability income policy with a $2, monthly benefit and a 30-day elimination period. He is unable to work 90 days following an automobile accident. What will the policy pay? - Correct Answer - 5,

18. Which of the following is NOT a provision in a disability income policy? - Correct Answer - Deductible and coinsurance provision
19. The elimination period in disability income policy serves the same purpose as - Correct Answer - A deductible
20. Dyan is considered partially disabled by her insurance company. Which of the following BEST describes her situation? - Correct Answer - She is working part-time and receiving lost income under her long-term disability benefit
21. Who is financially liable for the payment of covered claims in a fully insured group health plan? - Correct Answer - Insurer
22. In regards to a group health insurance plan, which statement is CORRECT? - Correct Answer - A non- contributory group health plan must cover all eligible memebers
23. When a claimant has coverage under more than one health plan, which group medical plan provision applies? - Correct Answer - Coordination of benefits

30. The insurer has the option of terminating a health insurance policy on a date stated in the contract. What type of policy is this? - Correct Answer - Optionally renewable
31. Which type of health insurance policy cannot be canceled by the insurer nor increase the premiums? - Correct Answer - Noncancellable
32. The conditions, times, and circumstances under which an insured is NOT covered by a health policy are called? - Correct Answer - Exclusions
33. The misstatement of age provision in a health policy states that if an insured gives the wrong age at the time of application, what action can the insurance company take? - Correct Answer - Benefits can be adjusted
34. Bruce is involved in an accident and becomes totally and permanently disabled. His insurance policy continues in force without payment of further premiums. Which policy provision is responsible for this? - Correct Answer - Waiver of premium provision
35. In what situation does a waiver of premium provision keep a health insurance policy in force without premium

payments? - Correct Answer - When an insured becomes totally disabled

36. Which of these factors do NOT affect the rates of medical insurance? - Correct Answer - Race
37. How does rising morbidity rates affect health insurance? - Correct Answer - Increased premiums
38. Which of these is NOT a relevant factor in the health insurance principle of morbidity? - Correct Answer - Intelligence
39. Which of the following is NOT a factor in determining the morbidity of a group individuals? - Correct Answer - Race
40. If a material warranty violation on the part of the insured is found, what recourse does an insurer have? - Correct Answer - Rescind the policy
41. Restoring an insured to the same condition as before a loss is an example of the principle of - Correct Answer - Indemnity

49. What is the price of insurance for each exposure unit? - Correct Answer - Rate
50. When calculating life insurance premium rates, which component would an agent's commission fall under? - Correct Answer - Insurer's expenses
51. A spendthrift clause in a life insurance policy - Correct Answer - restricts the ability of the beneficiary to assign benefits
52. How are death benefits that are received by a beneficiary normally treated for tax purposes? - Correct Answer - Exempt from federal income taxes
53. Which of the following is NOT a life insurance settlement option? - Correct Answer - Extended term option
54. When calculation life insurance premium rates, which component affected by an insured's age and gender? - Correct Answer - Mortality
55. A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen? - Correct Answer - The insured's estate

56. Pam is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should she choose? - Correct Answer - Interest option
57. Which provision will pay a portion of the death benefits prior to the insured's death due to a serious illness? - Correct Answer - Accelerated death benefit
58. What does the grace period allow a life insurance policy owner to do? - Correct Answer - Make a premium payment after the due date without any loss of coverage
59. Which of the following does a policy owner NOT have a right to change? - Correct Answer - Dividend schedule
60. What does the guaranteed insurability option allow an insured to do? - Correct Answer - Purchase additional coverage with no evidence of insurability required
61. A life insurance policy can be surrendered for its cash value under which policy provision? - Correct Answer - Nonforfeiture options

69. An insurance policy written after 1988 that fails to pass the seven-pay test is known as - Correct Answer - A modified endowment contract
70. What is the proper order of initial life insurance premiums, from lowest to highest? - Correct Answer - Modified premium, ordinary life, single premium
71. Which of the following is NOT true regarding a family policy that covers children? - Correct Answer - Conversion of child's coverage to permanent insurance does NOT require evidence of insurability
72. Scott has just purchased a new house. He is now shopping for a life insurance policy that provides a death benefit that matches the projected outstanding debt of his mortgage. Which life policy would best suit his needs? - Correct Answer - Mortgage redemption
73. Which of the following is NOT a true description of non- medical life insurance? - Correct Answer - Applicants are not required to answer medical questions on the application
74. John and Mary have a handicapped child that is financially dependent upon them. The death of one of the

parents would not be financially disastrous, however the death of both likely would be. Which policy would be best suited for them? - Correct Answer - Second-to-die policy

75. Which of the following statements do NOT apply to a child coverage in a family policy? - Correct Answer - Only children born prior to policy's issue date may be included
76. Lynn owns a life policy that guarantees the right to renew the policy each year, regardless of health, but at an increased premium. What kind of policy is this? - Correct Answer - Renewable term
77. A life insurance policy that pays the face amount if the insured survives to a specified period of the time called - Correct Answer - Endowment insurance
78. In a renewable term life insurance policy, the contract will usually - Correct Answer - Require a higher premium payable at each renewal
79. In a modified endowment contract, the penalty tax imposed on premature withdrawals is - Correct Answer - 10%

87. Which of the following is NOT a risk classification that an underwriter would use? - Correct Answer - Dividend risk
88. The objective of underwriting is to - Correct Answer - Avoid selecting a disproportionate number of bad risks
89. Which of the following terms is NOT associated with a Major Medical policy? - Correct Answer - Capitation
90. All of these are examples of cost sharing in a health insurance policy EXCEPT - Correct Answer - Coordination
91. The elimination period in a disability income policy serves the same purpose as a(n)_______ in a medical expense policy. - Correct Answer - Deductible
92. Medical expense policies will typically cover which of the following? - Correct Answer - Injuries caused by accidents
93. At what point does a self-insured group qualify for the stop-loss coverage? - Correct Answer - When claims exceed a specified limit in a set period of time

94. An insured is protected from the expense of a catastrophic illness by which of the following health insurance provisions? - Correct Answer - Stop-loss
95. Which of the following does specified disease insurance NOT cover? - Correct Answer - Costs covered by medical expense insurance
96. Which of the following types of policies pays a stated amount of each day an individual is hospitalized - Correct Answer - Hospital confinement indemnity
97. Major medical expense plans typically use a cost containment measure for emergency hospital care. This is referred to as a(n) - Correct Answer - Deductible
98. What is considered the most common type of specified disease insurance policy? - Correct Answer - Cancer
99. An insurer having a large number of similar exposure units is considered important because - Correct Answer - The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums

107. Which of the following is any situation that presents the possibility of a loss? - Correct Answer - Loss exposure
108. Which of the following best describes the statement "The more times an event is repeated, the more predictable the outcome becomes"? - Correct Answer - Law of large numbers
109. ESOPs are typically invested in - Correct Answer - employer stock
110. How are Roth IRA's treated for tax purposes? - Correct Answer - Non-deductible contributions and tax-free distributions
111. What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)? - Correct Answer - Disclosure and reporting
112. Employer contributions qualified plans are - Correct Answer - Tax deductible by the employer
113. Under a 10 year- vesting schedule, what percentage of employer contributions must be vested after 10 years of service? - Correct Answer - 100%

114. Which of the following is NOT included under long-term care insurance? - Correct Answer - Hospital acute care
115. Which of the following plans will cover medical costs that Medicare doesn't cover? - Correct Answer - Medicare supplement
116. What type of coverage pays a benefit for part-time nursing care that can be provided in a patient's home? - Correct Answer - Home health care
117. Which of the following would be considered an activity of daily living under a long term care policy? - Correct Answer - bathing
118. Under a long-term care insurance policy, adult day care coverage will provide for - Correct Answer - part time care at a facility for elderly individuals who live at home
119. Which type of worker has Social Security benefits available to them? - Correct Answer - Fully insured
120. The reason for social insurance is to - Correct Answer - protect certain vulnerable segments of the population