1: With respect to the Consideration Clause, which of the following would be considered consideration on the part of the applicant for insurance?
A Notice of policy cancellation
B Payment of premium
C Promise to renew the policy at the end of the policy period
D Providing warranties on the application
The two types of consideration on the part of an insurance applicant are payment of premiums and representations on the application.
2: Which health insurance provision describes the insured’s right to cancel coverage?
A Insuring clause
B Cancellation provision
C Renewal provision
D Policy duration provision
Renewability provisions are included in each health insurance contract and outlines both the insurer’s and insured’s right to cancel or renew coverage. This is considered to be a very important provision required by HIPAA, the federal Health Insurance Portability and Accountability Act of 1996.
5: Which of the following is NOT a feature of a noncancellable policy?
A The insurer may terminate the contract only at renewal for certain conditions.
B The premiums cannot be increased beyond the amount stated in the policy.
C The guarantee to renew coverage usually applies until the insured reaches certain age.
D The insured has the right to renew the policy for the life of the contract.
The insurance company cannot cancel a noncancellable policy, nor can the premium be increased beyond what is stated in the policy. The insured has the right to renew the policy for the life of the contract; however, the guarantee to renew coverage usually only applies until the insured reaches age 65.
6: Which of the following entities has the authority to make changes to an insurance policy?
A Producer
B Insurer's executive officer
C Department of Insurance
D Broker
Only an executive officer of the company, not an agent, has authority to make any changes to the policy. The insurer must have the insured's written agreement to the change.
8: All of the following are correct about the required provisions of a health insurance policy EXCEPT
A Proof-of-loss forms must be sent to the insured within 15 days of notice of claim.
B A grace period of 31 days is found in an annual pay policy.
C The entire contract clause means the signed application, policy, endorsements, and attachments constitute the entire contract.
D A reinstated policy provides immediate coverage for an illness.
Accidental injury is covered immediately, but to protect the insurer against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date.
9: An insured owes his insurer a premium payment. Since then, he incurs medical expenses. The insurer deducts the unpaid premium amount from the claim amount and pays the insured the difference. What provision allows for this?
A Payment of claims
B Unpaid premium
C Legal action
D Proof of loss
If a premium is past due and the insurer owes claim payment, the amount of the premium will be deducted from the amount of the claim. For example, if a claim is worth $500 and the premium costs $200, the insured would receive the net total of $300 from his insurer.
15: Twenty-five days after a health insurance policy is delivered, the policyowner decides that she would like to return the policy and receive a refund of premium. Which of the following is true?
A The policyowner will not receive a refund because once a policy is purchased, the premiums cannot be refunded.
B The insurer will provide a full refund.
C The insurer will provide a prorated refund.
D The policyowner will not receive a refund because the free-look period is over.
The free-look provision allows a policyowner to review a new health policy after it has been delivered. If the policyowner decides to return it within a certain time period, the full premium will be refunded. In New York, a free-look period cannot be longer than 20 days.
12: An insured purchased a noncancellable health insurance policy 1 year ago. Which of the following circumstances would NOT be a reason for the insurance company to cancel the policy?
A The insured reaches the maximum age limit specified in the policy.
B Within two years of the application, the insurer discovers a misrepresentation.
C The insured is in an accident and incurs a large claim.
D The insured does not pay the premium.
The company may not cancel coverage due to covered claims. All the rest are allowable reasons for an insurer to terminate the contract.