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Alabama Life & Health Insurance XCEL Testing Solutions
1. The life and health insurance marketing system utilizing non-employee agents that represent just one insurance company and are often paid an allowance to cover office expense and staffing is known as what? ANS the generalagency system. 2. Dividends payable to a policyowner are declared by? ANS the insurance company 3. A nonprofit incorporated society that doesn't have capital stock and oper-ates for the sole benefit of its members is known as what? ANS fraternal benefit society 4. Insurance policies issued by companies which are owned by stockholders and do not pay policy dividends are known as what? ANS non-participating policies 5. Insurance policies issued by companies which allow their policyowners toparticipate in the favorable experience of the company through payment of dividends are known as what? ANS participating policies 6. A life insurance producer's agency agreement normally authorizes the li-censee to do what? ANS Solicit and sell insurance, collect premiums 7. Who issues policies? ANS the insurer
8. People with higher loss exposure have the tendency to purchase insurancemore often than those at average risk. This is called? ANS adverse selection 9. With respect to an insurance application.... ANS a representation is valid as longas its true. 10. Pat the producer just sold an insurance policy to a client, explaining that hehas authority to issue the policy. Pat was not specifically granted this power from the insurance company. Pat is exercising what? ANS implied authority 11. Why are insurance contracts said to be contracts of adhesion? ANS One partywrites the contract, and the other party must accept the contract as written. 12. The agreement between a producer and the insurance company specifiesthe authority given to a producer to act on behalf of the insurer. What is this called? ANS Expressed authority 13. How do term life insurance and whole life insurance differ? ANS Term insurancedoes not build cash value. 14. Who can collect the face amount on an endowment policy? ANS the policyown-er. 15. A policyowner can collect the face amount on what kind of policy? ANS endow-ment
18. With an initial face amount of $50,000, and a value of $5,000, the actualdeath benefit would be? ANS $55, 19. Which option would the beneficiary receive the death benefit plus the accumulated cash value? ANS increasing death benefit option 20. At what age does a whole life policy endow? ANS 100 21. Tim has a Universal Life policy. What is the cash value growth in hispolicy? ANS interest sensitive 22. In an adjustable life policy, what may be adjusted to meet the policyholder'sneeds? ANS frequency of premium payments, amount of payment, policy's face amount 23. What can NOT be adjusted in an adjustable life policy? ANS the insured 24. Which of the following combines insurance protection with a cash accu-mulation? ANS permanent insurance 25. With term life insurance, what remains the same throughout the policyperiod? ANS a level premium
26. The premium and the protection remain constant for the term of the policy.What kind of policy does this describe? ANS Level term policy 27. Albert surrenders his Whole Life policy ten years after it was purchased. What can he expect? ANS to pay taxes on the cash value in excess of premium paid. 28. An insurance policy that has a guaranteed minimum cash value, a guaran-teed death benefit, fixed premiums, and grows at a rate reflected by a selectedfund index is known as what? ANS Equity indexed life policy 29. With what kind of insurance does the premium increase at renewal? ANS re- newable term insurance 30. With renewable term insurance, the premium...? ANS increases at renewal 31. A policyowner with an automatic premium loan provision must do what?- ANS pay back the loan amount to keep the policy's cash value at its maximum. 32. When can an insurance company cancel a life insurance policy? ANS when the outstanding policy loan exceeds the cash value of the policy. 33. Which of the following allows a policyowner to assign a portion of thepolicy proceeds to the assignee? ANS a collateral assignment
38. The person who pays the premiums, retains all rights, values, and optionsof a policy is? ANS the policyowner 39. After a policyowner cancels his/her permanent policy, the cash value accumulation must be made available to the policyowner. This is an exampleof what? ANS nonforfeiture value 40. An accidental death rider claim is usually paid under what condition? ANS ifthe insured dies within 90 days of the accident. 41. Which option allows a policyowner to use his/her dividends to buy lifeinsurance on a single premium basis? ANS paid-up additions option 42. What is considered the "automatic" nonforfeiture option that most insur-ers use? ANS Extended term 43. Which of the following waives the premiums when the policyowner be-comes totally disabled? ANS waiver of premium 44. A waiver of premium will waive the premium under what condition? ANS the policyowner becomes totally disabled. 45. The proceeds of a life insurance policy can be paid in a form other than a lump- sum payment. What are these forms of payment called? ANS Settlementoptions 46. A beneficiary in which the policyowner may change at any time without no- tifying/getting permission from the beneficiary is known as what? ANS Revocable Beneficiary 47. The policyowner needs permission from the beneficiary to borrow thepolicy's loan value. This is known as what? ANS Irrevocable beneficiary 48. Jan is named irrevocable beneficiary of Jim's life insurance policy. What will Jim need to borrow the policy's loan value? ANS Jim needs Jan's permission toborrow the policy's loan value.
49. When an estate is named beneficiary to a life insurance policy, the policyproceeds are? ANS distributed according to state law. 50. The premium payment made that results in highest total premium is? ANS - Monthly 51. What option provides that the principal amount gradually decreases tozero? ANS Fixed period option 52. What type of risk classification would require a higher premium? ANS Substan-dard Risk classification 53. When attached to the policy, the application becomes part of the what? ANS - insurance contract 54. The receipt for the first premium is called what? ANS Conditional receipt 55. On delivery of a policy, a signed statement of good health is typicallyrequested if? ANS the application was submitted without the initial premium.
68. Which of the following does NOT affect the underwriting of a life insurancepolicy? ANS marital status. 69. Which Federal law allows an insurer to obtain an inspection report on apotential insured? ANS The Fair Credit Reporting Act 70. In order for coverage on a non-medical insurance application to take effect the same day, the producer must do what? ANS collect a signed application and the initial premium. 71. What percent of eligible employees must be covered by non-contributory group insurance plans? ANS 100% 72. When an employee is terminated, policy proceeds will be paid if the em-ployee dies during what period? ANS Conversion period 73. Ann is an employee covered by a Group Life plan through her employer. When Ann is terminated, her employer fails to inform her about the plan's
conversion option. Two weeks later, Ann dies in an automobile accident. Howwill this situation be handled? ANS Full benefits must be paid by the insurer.
74. All individuals covered under a group contract will receive what? ANS certifi-cate 75. Group Life Insurance is usually in the form of what? ANS Term life insurance 76. What provision is NOT required in a group life policy? ANS AD&D/Accidental provision 77. What is the basic function of an annuity? ANS The systematic liquidation of accumulated funds 78. The monthly benefit of an Annuity Certain is determined by? ANS The annui-tant's payout period selection. 79. What is Equity indexed annuities typically invested in? ANS S&P 500 80. Kris is receiving annuity payments that has not yet paid an amount whichis equal to the purchase price of the annuity. If she were to die, her benefi- ciary would continue receiving annuity payments until this amount has been reached. What type of annuity is this? ANS Refund Life Annuity 81. Bert bought an immediate annuity with quarterly payments. When will thisannuity start making payments? ANS 3 months after annuity is bought. 82. The payment on Q's annuity is no less than $250 quarterly. What kind ofannuity does Q own? ANS Flexible installment deferred annuity. 83. A hubby and wife are receiving annuity payments. When the husband dies,the wife still receives annuity payments for life. What kind of annuity does this describe? ANS Joint and Survivor life annuity. 84. If an annuitant with a 20-year life annuity certain dies before the 20-year period has elapsed, what will happen? ANS Any monies left are paid to the beneficiaryfor the rest of the certain period.
92. The max number of employees (earning at least $15,000) that an employercan have in order to start a SIMPLE retirement plan is? ANS 100 93. At what age can an IRA owner start making withdrawals and not be subjected to a tax penalty? ANS 59 1/ 94. A trustee-to-trustee transfer of Rollover funds in a qualified plan allows a participant to avoid what? ANS mandatory income tax withholding on the transfer amount. 95. The employee's right to the employer's contributions or benefits attribut- able. This is called? ANS Vesting 96. All students attending a large college would most likely be covered bywhich type of Health policy? ANS Blanket policy 97. Concerning a key employee life policy, who pays the premium and namesthe beneficiary? ANS the company 98. A cross-purchase buy and sell agreement is in place for ABC company's 4 founding partners. What would this agreement require if the agreement is funded with individual life insurance? ANS Each partner must own a policy on the other partners. 99. An architecture firm would lose a lot of money in the event of the death ofits project manager. What should the firm purchase on its project manager?- ANS Key person life policy 100. What is a life insurance policy owned by a 3rd party used for? ANS estate planning and business situations 101. Name 3 costs that are considered to be associated with an individual's death? ANS Funeral expense, tax liability, probate costs. 102. ABC Company takes out a Key Employee policy on its CEO. The CEO leaves ABC Company and begins working for XYZ Company five years later. If this person were to die
and the policy is still in force and unchanged, wherewould the death proceeds be directed to? ANS ABC company
103. 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? ANS Each partner must own a policy on the otherpartner. 104. Don and Marie are married, and each have a Major Medical plan providedby their employers. Don was born in August of 1969 and Marie was born in March of 1976. For their two dependent children, who's plan is primary? ANS - Marie's plan is primary, Don's plan is secondary. 105. Regarding health insurance plans, who is the primary? ANS the one that be-longs to the parent whose birthday comes up first in the calendar year.
Accidental Death and Dismemberment (AD&D) policy and Q's sister Ris the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to? ANS Ponly. P survived the accident and is the primary beneficiary.
119. Under a Health Maintenance Organization (HMO), service providers are paid a fixed monthly fee for each member. This concept is called? ANS Capitation 120. What is Medicare eligibility typically based on? ANS age 121. A Preferred Provider Organization (PPO) contract typically uses whichpayment arrangement? ANS Negotiated fee-for-service 122. What is the major purpose of a Health Maintenance Organization (HMO)?- ANS provide full medical services with an emphasis on preventative medicine. 123. Who may the benefits under a health insurance policy (with the insured's written request) be payable to? ANS hospital, physician, or surgeon.
124. What welfare program provides assistance to the needy? ANS Medicaid 125. Medicare would not be available to? ANS 61 - year old Medicaid recipient 126. What are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) both considered to be? ANS managed health caresystems 127. J is a subscriber to a plan which contracts with doctors and hospitals toprovide medical benefits at a preset price. What type of plan does J belong to? ANS Health Maintenance Organization (HMO) 128. The percentage of an individual's Primary Insurance Amount (PIA) deter-mines the benefits paid in which of the following programs? ANS Social Security Disability Income 129. What do Major Medical policies typically cover? ANS Usual, customary, and necessary expenses 130. What do major Medical policies typically contain? ANS deductible and coinsur-ance 131. What limits an insurance company's total exposure under a major med-ical policy? ANS Max. lifetime benefit and a coinsurance provision 132. If an insured under a Major Medical insurance policy with a $200 de- ductible and an 80% coinsurance clause incurred the following covered ex-penses Hospital room and board $2,000; Surgeon's fee $1,500. How much would the policy pay? ANS $2640 (2,000+1500=3500-200=3300 x .80) 133. What type of deductible provision waives the deductible for all family members after some of them have satisfied individual deductibles within thesame year? ANS family max. deductible 134. A Health Reimbursement Arrangement MUST be established by? ANS the employer 135. AJ has a major medical insurance policy with a $500 deductible and an 80% coinsurance clause. he incurs the following covered expenses under a recent
139. Paul has a major medical policy that begins with basic first dollar cov-erage that pays up to its limits, then he must pay a certain dollar amount of covered expenses before the major medical portion steps in. The dollar amount Paul must pay is called? ANS corridor deductible 140. When medical expenses reach a certain dollar amount, the insured is nolonger responsible for sharing the cost of expenses. The insurance companythen pays 100% of the covered expenses. What is this major medical policy provision is called? ANS stop- loss limit 141. What is NOT covered under Major Medical policies? ANS pain and suffering 142. Major Medical benefits usually have..? ANS No max limit 143. B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type ofpolicy does B have? ANS Disability income 144. Total disability can be defined as "the insured's inability to perform the occupation for which they are reasonably qualified by education, training, orexperience." For disability income insurance purposes, what is this definitionknown as? ANS own occupation 145. What is a disability income policy designed to do? ANS pay benefits to maintainthe insureds current standard of living 146. Individual disability income policies normally have a premium that? ANS ad-justs annually 147. Which provision allows a disability income policy to remain in force with-out further payments when the insured has become totally and permanently disabled? ANS Waiver of premium 148. what can prevent a policy from lapsing for nonpayment of premiums whilethe
insured is totally disabled and unable to work? ANS waiver of premium
149. The max. amount of coverage placed on a disability income policy isbased on the insured's..? ANS earned income from the previous year 150. At certain ages or dates, an insured can increase the stated benefit (within limits) under their disability income policy, regardless of health. Which policy rider does this describe? ANS Future income option 151. Who does a disability income policy normally cover? ANS wage earners 152. How frequently does a disability income policy typically pay benefits? ANS - monthly or bi-monthly 153. Typically, what will a disability income rider pay? ANS a monthly income for aslong as the insured remains totally and completely disabled 154. longer elimination periods result in..? ANS lower premiums 155. Mary and Paul have individual disability income policies that both pay a $5,000/month benefit. Mary's policy has a 30 - day elimination period, and Paul's
