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A life insurance policy sold to each spouse, rather than a


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1)      A life insurance policy sold to each spouse, rather than a joint life policy, would have all EXCEPT:

A: Coverage only for the first spouse to die

B: Coverage for both spouses separately

C: A combined higher premium

D: Two separate premiums

2) A provision contained in most group medical expense policies that applies when a claim is covered by more than one policy is known as:          A: Utilization Management           B: Coordination of Benefits (COB)           C: Case Management                         D: Retrospective Review

3) What is the main purpose of the State Guaranty Fund or Association:           A: To provide coverage for residents of this state who are uninsurable in the normal market place            B: To protect the customers of insurers who become financially impaired or bankrupt                                 C: To resolve consumer complaints against insurers                                                        D: To examine the business practices of foreign and alien insurers doing business in this state

4) If your insurance agent's license is revoked or suspended by the Commissioner, what happens to the accounts you have previously written:           A: They expire along with your license           B: They are assigned to another insurance company by the Commissioner          C: They must be rewritten by another agent          D: They remain in force

5) An insurance company that is incorporated and formed in this state is known as a:           A: Alien company           B: Mutual company           C: Foreign company           D: Domestic Company

6) What are the tax implications when an annuitant elects to take cash surrender of a deferred annuity during the accumulation period at age 56:           A: Only the interest is taxable as ordinary income, plus a 10% early withdrawal penalty          B: All the funds distributed are taxable as ordinary income           C: All of the funds distributed are taxable as a capital gain          D: Only the interest is taxable as ordinary income



7) Which life insurance rider allows policy proceeds to be paid out prior to the insured's death:                A: Accelerated benefits           B: Cash surrender           C: Paid up additions          D: Automatic premium loan

8) An insured paid $4,000 in premiums on his whole life policy over a period of time. When his cash value equaled $6,500, he elected to take cash surrender. How much is taxable:          A: $2,500          B: $4,000                         C: None, life insurance benefits are never taxable           D: $6,500

9) An annuitant has paid monthly premiums into a deferred annuity over a period of time totaling $20,000. Due to tax deferred earnings in the account, his account balance at age 60 is $30,000. If he now takes a partial withdrawal of $5,000, how much is taxable:          A: $5,000          B: $10,000          C: None, since he withdrew less than his cost basis           D: None, since benefits of life insurance products are never taxable

10) Which of the following is true regarding KEOGH (HR 10) plans:

A: They are non-qualified plans

B: They are for the self-employed or partners only

C: They are for employees of public educational institutions

D: There are no maximum contribution limits      

11)  Premiums paid by self employed sole proprietors or partners for medical expense insurance are:

A: Partially tax deductible

B: Totally tax deductible

C: Not tax deductible

D: Taxable          




12)    All of the following are true about immediate annuities EXCEPT:

A: They are often used in structured settlements

B: There is no beneficiary

C: They pay for the lifetime of the annuitant

D: There is no accumulation period      


13)   The penalty for taking a policy loan as a premature distribution on a life insurance policy that has been classified as a Modified Endowment Contract (MEC) is:

A: 10%

B: 7 and 1/2%

C: 5%

D: None, life insurance policies are not subject to early withdrawal penalties      

14)      A health insurance claim occurs on May 30th, but the policy lapses on June 1st. If the claim is not turned in until June 8th, what will the insurer do:

A: Pay the claim

B: Deny the claim

C: Pay the claim, but subtract the overdue premium

D: Pay the claim, but send a bill for the overdue premium    

15) When an insurer requires pre-authorization prior to hospitalization, all are true EXCEPT:

A: Overall insurer expenses will probably increase

B: Unnecessary hospitalization may be avoided

C: Specifically, pre-authorization is a form of prospective review

D: Pre-authorization is a form of Utilization Management        




16)   All of the following are true regarding the tax implications of health insurance EXCEPT:

A: Premiums paid by the employer for a group health policy are not tax deductible

B: Benefits received from an individual Disability Income policy are not taxable

C: Benefits received by an employer from a Key Person disability policy are not taxable

D: Medical expense premiums paid by a sole proprietor are partially tax deductible    

18)   Most insurance contracts written by banks are backed by:

A: The Federal government


C: The State government                                                       D: The State Guarantee Association

19) Disability Income (DI) benefits are not subject to income taxation EXCEPT for:

A: Individual DI

B: Partnership Buy Out DI

C: Group DI

D: Key Person DI

20) Mr. Baugh elects to make a direct rollover of his traditional IRA from one trustee to another trustee at age 35. How is this taxed:

A: Income taxes are incurred, but the 10% IRS penalty is waived

B: All is taxed as capital gain in the year of the rollover

C: All is taxed as ordinary income in the year of the rollover

D: There is no current tax implication






21) Writing policies primarily on yourself or on your family members or on employees of a business you own is a violation of state insurance law known as:

A: Compensating an unlicensed agent

B: Controlled business

C: Rebating

D: Misrepresentation

22) A rider added to a life policy to create coverage for the entire family is called a:

A: Family income rider

B: Family term rider

C: Family maintenance rider

D: Other insured rider

23) Giving the customer part of the commission from an insurance sale is:

*A: A prohibited practice known as rebating

B: Acceptable with prior approval of the Insurance Commissioner or Director

C: An acceptable marketing practice          D: Acceptable with your manager's prior approval

24) If a subscriber goes out of network for PPO (Preferred Provider Organization) services:

A: Only emergencies are covered

B: There is no coverage

C: Coverage is not affected

D: The amount of coverage may be reduced

25) All of the following are true regarding Key Employee Disability Income insurance, EXCEPT:

A: The employer owns the policy

B: Premiums are not tax deductible for the employer

C: Benefits are taxable to the employer

D: Benefits are payable to the employer to retrain a new person

26) Why would a person consider buying Disability Income coverage that covers on the job injury:

A: Workers Compensation only covers non-occupational injury

B: Most employees are not covered by Workers Compensation

C: Disability Income is primary over Workers Compensation coverage

D: Workers Compensation benefits may be inadequate

27) All are true about agent's appointments in this state EXCEPT:

A: When an appointment is terminated, the insurer must notify the Insurance Department

B: An agent represents the insured

C: An agent must have at least 1 appointment from an authorized insurer

D: An agent may have more than 1 appointment

28) Under the __________ provision of an individual health insurance policy, the insured cannot sue for non-payment of a valid claim until after 60 days in order to give the insurer time to properly investigate.

A: Proof of Loss

B: Time Payment of Claims

C: Time Limit on Certain Defenses

D: Legal Actions

29) Under the __________ provision of an individual health insurance policy, the insured cannot sue for non-payment of a valid claim until after 60 days in order to give the insurer time to properly investigate.

A: Proof of Loss

B: Time Payment of Claims

C: Time Limit on Certain Defenses

D: Legal Actions





30) An HMO utilization management technique known as "concurrent review" requires:

A: A second opinion

B: Assignment of a case worker to an ongoing claim

C: Pre-authorization

D: An initial consultation with a primary care physician

31) The doctrine that states that an insurer should pay a claim based upon what most people would normally expect to receive is known as:

A: Indemnity

B: Adhesion

C: Utmost good faith

D: Reasonable expectations

32) A tax deferred exchange of life insurance policies is permitted when exchanging all EXCEPT:

A: An annuity for a life insurance policy

B: A life insurance policy for an annuity

C: A life insurance policy for another life insurance policy

D: An annuity for another annuity

33) When a dentist uses mechanical devices to straighten teeth, it is known as:

A: Prosthodontics

B: Orthodontics

C: Periodontics           D: Endodontics

34) Under ERISA rules regarding qualified plans, the term "minimum coverage" refers to:

A: A minimum retirement benefit that must be provided for employees

B: A minimum amount of life insurance that must be provided for employees

C: The exemption of employees who make only minimum wage

D: Retirement plan coverage for a broad cross section of employees

35) How can a beneficiary/spouse of an annuitant who dies during the accumulation period avoid current taxation on the benefits:

A: They can take lump sum now but defer taxes to a later time

B: They may select the tax free death benefit

C: They can continue the contract by selecting a life income or installment pay out option

D: Since annuities are life insurance products, there is no tax due

36) The person responsible for managing the Insurance Department or Division of this state and for administering state insurance laws and regulations is known as the:

A: Governor

B: Commissioner or Director

C: Administrator

D: Attorney General

37) All are true about insurance agencies formed as corporations or partnerships EXCEPT:

A: All individuals transacting insurance must have individual licenses

B: All owners must have individual agent's licenses

C: Individuals transacting insurance must be licensed for the same lines as the agency they represent

D: Appropriate forms and fees must be submitted

38) Annuities are underwritten by:

A: Securities firms

B: Insurance companies

C: Banks         D:Insurance Agents

39) All of the following are true about Medicaid EXCEPT:

A: It is based upon financial need, regardless of age

B: It is subsidized by both state and federal monies

C: It is sold by private insurers

D: It is not part of Medicare

40) Purchasing insurance is:

A: Reducing risk

B: Avoiding risk

C: Retaining risk

D: Transferring risk

41) All of the following are true regarding PPOs EXCEPT:

A: The amount of coverage is reduced for out of network services

B: Employers may offer a PPO as well as a traditional indemnity plan to employees

C: They may only be operated by hospitals

D: They may be operated by insurance companies

42) Generally, coverage under a group health insurance policy is convertible to individual coverage:

A: Up to 18 months after termination of employment, subject to insurability

B: For 31 days after termination of employment, subject to insurability

C: For the primary insured employee only, not dependents

D: For 31 days after termination of employment, without a physical exam

43) f an insurer allows an insured to violate one of the conditions of the policy, they cannot at a later time void the policy because the condition was violated, under the doctrine of:

A: Alienation

B: Adhesion

C: Estoppel

D: Evidence





44) Retirees would prefer to spend as much money as they want without worrying about running out of funds. Which of the following variables makes this difficult to accomplish:

A: How long they will live

B: The future performance of the stock market

C: The rate of inflation in the economy

D: Possible changes in interest rates

45) In failing to settle a claim when liability is clear, an insurer is guilty of:

A: Unfair Trade Practices

B: Breach of Contract

C: Misrepresentation

D: Unfair Claims Practices

46) All of the following are factors in determining the amount of Key Person life insurance an employer should buy on an employee EXCEPT:

A: The amount it would cost to conduct a job search for a replacement

B: The amount it would cost to train a replacement

C: The amount of income lost until the key person can be replaced

D: The amount of group life coverage the employee already has

47) Medical expense benefits received by a partner or sole proprietor are:

A: Partially taxable

B: Proportionately taxable

C: 100% taxable

D: Not taxable

48) The responsibility of knowing, understanding and complying with the insurance laws of this state rests with the:

A: Licensee           B: Insurer                                                                                                   C: Insured                         D: Client

49) An employee pays that portion of the group disability premium attributable to Residual Disability benefits and the employer pays the balance. If the employee has a claim for Residual Disability, how will the benefits paid out be taxed to the employee:

A: 100% taxable to the employee, since this is a contributory plan

B: 100% taxable to the employee, since this is a group disability income plan

C: Taxable as ordinary income, based upon a proportionate IRS formula

D: Not taxable, since the employee paid for that portion of the coverage

50) A "cancelable" policy of health insurance may be cancelled by:

A: The insurer only

B: The insured only

C: Either the insurer or the insured

D: The agent, insurer or the insured

51) In order to obtain an Agent's license, an applicant must do all of the following EXCEPT:

A: Take and pass an examination

B: Submit a licensing application and the proper non-refundable fees

C: Agree to represent only one insurer

D: Have at least 1 appointment

52) A client wishing to take cash surrender on a deferred annuity during the accumulation period would be exercising a required contractual provision known as:

A: Right of exchange

B: Non-forfeiture

C: Settlement option

D: Loan privilege





53) A corporation may use tax deferred annuities for all of the following purposes EXCEPT:

A: To fund deferred compensation plans for key employees

B: To fund structured settlements

C: To fund the corporate pension plan

D: To accumulate tax deferred earnings on corporate assets

54) An agent promises his client Super Bowl tickets in exchange for buying a policy from him. The agent is guilty of an unfair trade practice known as:

A: Rebating

B: No violation has occurred

C: Compensating an unlicensed agent

D: Coercion

55) Which life insurance rider allows the insured to purchase additional amounts of insurance at specified intervals in the future without a physical exam:

A: Paid up option

B: Accidental death benefit

C: Guaranteed insurability

D: Extended term option

56) If a person exiting a streetcar elects to leap down the steps and breaks his ankle:

A: The broken ankle would be considered intentional and foreseen

B: The leap was intentional, but the injury was unforeseen

C: The resulting injury would be covered only by an A/D and D policy

D: The would be no coverage, since the leap was intentional





57) On life insurance, the Misstatement of Age clause permits:

A: The premium to be adjusted to reflect the correct age

B: The insurer to void a claim during the first 2 years due to misrepresentation

C: The face amount to be paid at death, less any overdue incorrect premiums

D: The face amount to be adjusted to what the correct premium would have purchased

58) All are true about the Commissioner's powers to issue a Cease and Desist order EXCEPT:

A: They require the Commissioner to appoint a committee to review their validity

B: Recipients are entitled to a hearing, if requested

C: They are subject to appeal

D: They relate to a specific activity or specific violation

59) All of the following could disqualify you from group insurance eligibility EXCEPT:

A: Attaining age 65

B: Labor Union membership

C: Independent contractor status

D: Part time employment

60) To obtain a non-resident insurance license in this state, you must comply with all of the following requirements EXCEPT:

A: Submit the proper licensing forms and pay the appropriate non-refundable fees

B: Pass the appropriate licensing exam in this state

C: Submit a Certificate of Good Standing from your home state

D: Be 18 years of age





61) Parents are considering opening traditional IRAs for their two children, ages six and eight. Why should they consider something other than IRAs:

A: Future rollovers would not be permitted

B: Any earned income in the IRA accounts would be taxable to the parents

C: It is unlikely that the children have any earned income

D: Minors are not permitted to have IRAs

62) An insurer distributes dividends to policyholders out of accumulated divisible surplus on its "participating policies". The insurer is guilty of:

A: Coercion

B: Nothing. This is not considered to be an Unfair Trade Practice

C: Compensating an unlicensed agent

D: Rebating

63) To sell variable contracts, such as variable life or variable annuities in this state you must hold a current life insurance license and submit proof that you have also passed an exam given by the:

A: New York Stock Exchange (NYSE)

B: Securities & Exchange Commission (SEC)

C: National Association of Insurance Commissioners (NAIC)

D: Financial Industry Regulatory Authority (FINRA)

64) The amount of annuity benefits included in the value of the estate of a deceased "life income only" annuitant is:

A: Zero

B: The amount of future benefits to be paid

C: The interest earned in the annuity account

D: The amount of the premium paid




65) All of the following are true regarding independent insurance agents EXCEPT they:

A: Are self employed independent contractors

B: The represent the insured, not the insurer

C: Do not receive financial support, other than commissions, from any insurer

D: May be appointed to represent more than one insurance company

66) The Insurance Commissioner's or Director's duties include all of the following EXCEPT:

A: Making sure that the insurance laws of this state are uniform with other states

B: Qualifying individuals who wish to be licensed as insurance agents

C: Formulating and adopting insurance rules

D: Administering state insurance laws and regulations

67) An agent's authority to "bind" coverage, if any, would be found in:

A: A contract between the insurer and the agent

B: The state Insurance Code and/or Regulations

C: A contract between the agent and the Commissioner

D: A contract between the agent and the insured

68) Which Medicare benefit has no deductible or co-insurance requirements:

A: Blood transfusions

B: Physician's services

C: Clinical lab services

D: Durable medical equipment

69) On a Major Medical plan, all are true about co-insurance EXCEPT:

A: It helps hold down the cost of insurance premiums

B: It prevents over utilization of insurance coverages

C: It requires the insured to pay a portion of the claim, after the deductible

D: It requires the insured to pay a portion of the claim, before the deductible

70) After overhearing a rumor, an insurer sends a letter to all its policy holders warning them of a competing insurer's pending bankruptcy. This insurer is guilty of an Unfair Trade Practice known as:

A: Nothing. This is not considered to be an Unfair Trade Practice.

B: Coercion

C: Defamation

D: Slander

71) All of the following are required Medi-Gap basic core benefits EXCEPT:

A: The $100 Part B Medicare deductible

B; The Part A Medicare Hospital co-insurance

C: The 20% Part B Medicare Physician's services co-insurance

D: The first 3 pints of a blood transfusion

72) All of the following are true about a Multiple Employer Trust (MET) EXCEPT:

A: The trustee is the policyholder

B: Enrollees are given a "Joinder Agreement"

C: Employees must purchase all coverages offered by the trust

D: They are for small employers in the same type of business

73) Annuities are commonly used for all of the following EXCEPT:

A: To provide income in the event of total disability

B: To fund structured settlements

C: To supplement retirement income

D: To fund deferred compensation plans

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