Simulation test

This list shows all of the questions that you missed in the session you just completed. The answer you selected is in bold. The correct answer is highlighted in green.
#1.	Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?
a)	Premiums are tax deductible by the key employee.
b)	Premiums are tax deductible as a business expense.
c)	Premiums are taxable to the employee.
d)	Premiums are not tax deductible as a business expense.
	The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.
#2.	What is the benefit of choosing extended term as a nonforfeiture option?
a)	It can be converted to a fixed annuity.
b)	It has the highest amount of insurance protection.
c)	It matures at age 100.
d)	It allows for coverage to continue beyond maturity date.
	Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.
#4.	A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
a)	Juvenile protection provision
b)	Survivor protection
c)	Life planning
d)	Survivorship insurance
	Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.
#8.	Under the Affordable Care Act, a special enrollment period allows an individual to enroll in a qualified health plan within how many days of a qualifying event?
a)	10 days
b)	30 days
c)	60 days
d)	90 days
	Unless specifically stated otherwise, individuals or enrollees have 60 days from the date of a triggering event to select a qualified health plan.
#11.	The annual contribution limit of a Dependent Care Flexible Spending Account is set by
a)	The insurer.
b)	The insured.
c)	The IRS.
d)	The employer.
	The IRS sets limits for the annual contribution for Dependent Care Accounts.
#14.	For which of the following reasons can a temporary license be issued?
a)	To provide temporary help to a licensed producer
b)	To service the existing business
c)	To solicit new business
d)	To negotiate new insurance contracts
	A temporary license may only be used to service existing business, not to solicit, negotiate or procure new business.
#21.	The coverage provided by a disability income policy that does not pay benefits for losses occurring as the result of the insured's employment is called
a)	Occupational coverage.
b)	Workers compensation.
c)	Nonoccupational coverage.
d)	Unemployment coverage.
	Most group disability income is nonoccupational coverage, covering insureds only off the job. The employer carries workers compensation for on the job injuries or sickness.
#31.	Which of the following is true regarding health insurance?
a)	It could provide payments for loss of income.
b)	Disability coverage is excluded.
c)	It provides death benefit coverage.
d)	It only covers expenses related to health care.
	Health insurance is a generic term, encompassing several types of insurance contracts, which, though related, are designed to protect against different risks. It provides coverage for expenses related to health care, loss of income, and disability income.
#34.	When must agents submit license renewal applications to the Superintendent?
a)	At least 60 days before the license expires
b)	By the last day of February of every year
c)	At least 30 days before the anniversary of the day they received their licenses
d)	Within 10 business days of their birthdays
	Agents must file applications for renewal of their licenses with the Superintendent at least 60 days before the expiration of the license.
#43.	What method is used to determine the taxable portion of each annuity payment?
a)	The exclusion ratio
b)	The excise ratio
c)	The annuity to age ratio
d)	The marginal tax formula
	The ratio of the total investment in that contract to the expected return is developed to determine the portion of the annuity payment that will be taxable and nontaxable.
#46.	Which nonforfeiture option provides coverage for the longest period of time?
a)	Extended term
b)	Paid-up option
c)	Accumulated at interest
d)	Reduced paid-up
	The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.
#47.	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.
	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.
#48.	In which of the following scenarios will repayment of funds take place per the Medicaid Estate Recovery Act?
a)	A Medicaid recipient is survived by his wife
b)	The 22-year-old son of a Medicaid recipient is blind
c)	The mother of a 10-year-old died after receiving 8 months of Medicaid payments
d)	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.
#49.	ABC insurance company receives an incomplete application and issues the policy anyway. Six months later ABC realizes the missing information. What term is used that prevents ABC from forcing the policyowner to answer further questions?
a)	Unilateral
b)	Consideration
c)	Estoppel
d)	Adhesion
	ABC had waived its right to receive answers to the missing information once the policy was issued; therefore, they are estopped from enforcing those waived rights.
#62.	Which Universal Life option has a gradually increasing cash value and a level death benefit?
a)	Juvenile life
b)	Term insurance
c)	Option B
d)	Option A
	Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.
#72.	How long will the beneficiary receive payments under the single life settlement option?
a)	Until the insured's death
b)	For a specified period of time
c)	Until the insured's age 100
d)	Until the beneficiary's death
	The Single Life Option can provide a single beneficiary income for the rest of his/her life. Upon the death of the beneficiary, the payments stop.
#78.	Which of the following Life Insurance policies would be considered interest sensitive?
a)	Whole life
b)	Increasing term
c)	Universal life
d)	Adjustable life
	As well as being a flexible premium policy, universal life is also an interest-sensitive policy. 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.
#80.	Which of the following is NOT an example of a business use of Life Insurance?
a)	Key Person
b)	Workers Compensation
c)	Buy-sell Funding
d)	Executive Bonuses
	Workers Compensation is a benefit payable when a worker is injured by a work-related injury, regardless of fault or negligence. It is not considered a business use of insurance.
#84.	When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called
a)	Revocable designation.
b)	Irrevocable designation.
c)	Stirpes designation.
d)	Class designation.
	A designation such as the child of the insured, or all children of the insured, or all current members of a group, is called a "class designation." The individuals need not be specifically named, since each who meet the qualifications of being included in the class will share in the benefit.
#94.	In insurance policies, contract ambiguities are automatically ruled in the favor of the insured. What privilege does the insurer have in order to balance this?
a)	The right to determine the wording of a policy
b)	The right to refute the rulings
c)	The right to revoke the policy
d)	The right to raise premiums as a result of court rulings
	In contracts in which only the insurer has the right to determine the wording of a policy, the policyholder will receive benefits denied due to a contract ambiguity.
#95.	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.
	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.
#101.	An insurer is preparing to pay disability income benefits to an insured. In order to prevent overinsurance, the insurer monitors the income of the insured before submitting payment. Which rule corresponds to this behavior?
a)	Relation of earnings to insurance
b)	Overinsurance prevention
c)	Income tracking
d)	Income monitoring phase
	The relation of earnings to insurance rule is designed to protect an insurer from overinsuring disability cases. Before submitting payment, the insurer monitors the income of the insured for a period of time. The goal of this monitoring is to make sure that the income the insured receives while on disability is not greater than the income that the insured receives while working.
#108.	Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?
a)	The Entire Contract Provision
b)	The Consideration Clause
c)	Assignment Rights
d)	Owner's Rights
	Policyowners can learn about their ownership rights by referring to the policy.
#109.	The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called
a)	Credit health.
b)	Decreasing whole life.
c)	Multiple Protection insurance.
d)	Credit life.
	Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period. Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.
#121.	In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?
a)	The customer has no knowledge of this action.
b)	The customer's associates, friends, and neighbors provide the report's data.
c)	They provide additional information from an outside source about a particular risk.
d)	They provide information about a customer's character and reputation.
	Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.
#126.	Can the Superintendent investigate fraudulent claims if they occurred outside of the resident's state according to the Insurance Fraud Prevention Act?
a)	No. If fraudulent acts are believed to have been committed, the Superintendent must notify the state's Superintendent or Commissioner. It will then become a federal matter.
b)	Yes. The Superintendent has the power to make an investigation within this state or outside of the state.
c)	Yes, but only if it is a violation of another state's insurance law.
d)	No. Because insurance is regulated by the state, all claims must occur within state boundaries.
	If the insurance frauds bureau has reason to believe that a person is engaged or is about to engage in a fraudulent act, the Superintendent has the power to make an investigation within this state or outside of the state.
#127.	What is the term used for an applicant’s written request to an insurer for the company to issue a contract, based on the information provided?
a)	Application
b)	Policy Request
c)	Insurance Request Form
d)	Request for Insurance
	An individual can submit an application to an insurer, which requests that the insurer review the information and issue an insurance contract.
#134.	Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?
a)	Assumed
b)	Apparent
c)	Express
d)	Implied
	Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
#143.	In a shared-care policy, the benefits of 2 LTC policies
a)	Are multiplied according to the number of people in the contract.
b)	Can be divided by as many as 5 people.
c)	Go to the couple if they get sick at the same time and share resources.
d)	Are split between the couple who signed the contract.
	In a shared care policy, a couple pools the benefits of two LTC policies, and splits them. If 2 people buy two 5-year policies, they have a total of 10 years of LTC.
#144.	OBRA requires which disease to be covered by an employer for 30 months before Medicare becomes the primary mode of coverage?
a)	End-stage heart failure
b)	End-stage renal failure
c)	Black lung
d)	Leukemia
	OBRA requires end-stage kidney (renal) failure to be covered by an employer for 30 months before Medicare becomes the primary mode of coverage.
#148.	The Superintendent will not renew an agent or broker’s license upon finding that the license has been used to write controlled business. Which of the following would be a violation of controlled business practices?
a)	40% of the agent's commission in the last month comes from business sold to friends and family members.
b)	15% of the agent's annual commission is from business sold to the agent's family.
c)	25% of the agent's commissions come from policies sold to one client.
d)	5% of the agent's annual commission is from policies sold to the agent's business associates.
	Controlled business is when an agent receives more than 10% of the aggregate commissions during a 12-month period from insurance business sold to family, or business associates and their family members.