Life, Accident & Health Agent License Practice Exam #4

Front 1

Harold, a variable annuity applicant, does not request the premium be invested in a stock or bond portfolio during the cancellation period. The policy is returned to the company within the cancellation period. What is Harold entitled to receive?

a. The entire premium

b. The value of the policy on the day it was cancelled

c. The premium less the surrender charge

d. The value of the policy on the day the policy was delivered

Back 1

(A) "Cancellation period" is also known as "Free Look" or "Right to Return".

Front 2

Any transaction that involves purchasing a life insurance policy and terminating an existing policy is known as:

a. Replacement

b. Reinsurance

c. Reinstatement

d. Assignment

Back 2

(A) This is an example of "replacement".

Front 3

According to the CA Insurance Code, in which of the following classes of insurance can a binder NOT be issued?

a. Marine

b. Auto

c. Fire

d. Life

Back 3

(D) Life agents issue conditional receipts, not binders.

Front 4

An organization will cease to exist as an entity eligible to hold a license for all of the following reasons, except:

b. Termination of a key employee

Back 4

(B) Although the termination of a key employee may harm an organization, it will not usually cause the organization to cease to exist.

Front 5

What does it mean if an agent's license is inactive?

d. The agent cannot transact any insurance business for which a license is required.

Back 5

(D) In essence, the agent is out of the insurance business.

Front 6

If the Commissioner issues a Notice of Seizure for documents and the individual fails to send those documents what is the penalty?

c. 1 year in jail and/or $1,000 fine

Back 6

(C) Although answer choice (d) is true, it does not directly answer the question

Front 7

A disability income policy covers injuries suffered by a insured on or off the job is called?

a. An occupational policy

Back 7

(A) Question specifies "Disability Income" hence "occupational" not 24-Hour coverage which is classed with Worker's Compensation.

Front 8

Which of the following must any person engaged in the business of acting as an insurance agent or broker who receives compensation for arranging or directing sales in connection with a premium financing agreement do?

c. Maintain a list of accounts in connection with compensation exempted in premium financing payments for three years.

Back 8

(C) This is the regulation.

Front 9

All of the following would be considered one of the three major types of loss exposures, except:

c. Human and personnel loss exposure

Back 9

(C) The loss exposure can result from the possibility of injuring others (liability), the damage or loss of property, or from an important financial relationship such as with a spouse, child, or key employee.

Front 10

Which of the following statements concerning the usual coordination-of-benefits provision are correct?

a. When the plans both have the provision, coverage as an employee is primary to coverage paid to dependents.

Back 10

(A) The "coordination of benefits" provision is an arrangement in health insurance to discourage multiple payment for the same claim under two or more policies. If one spouse becomes ill, his/her policy at work would become the primary plan.

Front 11

Which of the following is NOT provided by Hospice Care?

d. Rehabilitation

Back 11

(D) Hospice is for terminal patients hence no rehabilitation.

Front 12

Tony Brown has a CLU certification. Which of the following names would be automatically approved for his agency's use?

d. None of these would be automatically approved

Back 12

(D) Agency names are never "automatically" approved.

Front 13

A person has paid $50,000 into a fixed annuity over 20 years. When he decides to begin income payments the insurer calculates that he will receive $4,000 per year for life, which means that he will receive a total of $100,000. In the first 10 years of payments how much is taxable each year?

c. $2,000

Back 13

(C) Question refers to the exclusion ratio formula.

Front 14

According to the code, all insurers must maintain a department to investigate:

c. Possible fraudulent claims from insureds

Back 14

(C) Insurance companies and the Department of Insurance have targeted this as a major problem that needs to be addressed.

Front 15

Which two are Activities of Daily Living?

a. Eating and dressing

Back 15

(A) Under a long term care contract, there are six "activities of daily living" that will trigger care and benefits payments. Both of these qualify. The other four are: mobility, toiletry, bathing, and transferring (moving from one place to another).

Front 16

What does the Insurance Commissioner have the right to do if an agent lacks authority from an insurer named on a binder for coverage?

c. Suspend or revoke the license of the agent

Back 16

(C) The Commissioner has the right to "discipline" agents. This means suspension or revocation of their license. This is but one example of a circumstance that would case disciplinary action.

Front 17

An insured bought an annuity ten years ago. He will retire in five years. To determine the value of the annuity, the number of accumulation units is multiplied by the value of the separate account. What type of annuity was purchased?

a. Variable annuity

Back 17

(A) Key phrase is "separate account".

Front 18

The likelihood of incurring disease or disability at any given time is:

b. Morbidity

Back 18

(B) A morbidity assumption is a statistical projection of future illness, sickness, and disease.

Front 19

The class beneficiary designation which means that the beneficiaries will receive equal shares of the death benefit divided among the surviving members of the class is:

b. Per capita

Back 19

(B) This is one definition of per capita. Per stirpes refers to sharing the beneficiary's share of an estate among that beneficiary's children.

Front 20

Twelve months ago, a man slipped and fell down a flight of stairs at his workplace. As a result he has a paralysis for which he is not expected to recover. This 46 year old person will probably be able to collect disability income benefits from:

b. Workers Compensation

Back 20

(B) Workers compensation insurance is designed to provide income, medical, rehabilitation, death and survivor payments to workers injured on the job.

Front 21

In order to be qualified to sell LTC insurance in a state of CA, agents must comply with all of the following, except:

a. All licensees are required to pass a LTC knowledge exam every 10 years

Back 21

(A) This is not one of the requirements to sell LTC insurance in California.

Front 22

The mathematical rule that says that as the number of individual but similar exposure units increases the easier it is to predict losses is which of the following?

c. The law of large numbers

Back 22

(C) Out of a large group of policy holders, the insurance company can fairly accurately predict the number of policy holders who will suffer a loss, not by name, but by number. They base their premium rates upon this mathematical rule.

Front 23

Which of the following is a description of a Life and Disability Analyst?

c. A person licensed to advise clients about life and disability insurance for a fee

Back 23

(C) This is the definition of a Life and Disability Analyst. Choices (a) and (c) refer to property and casualty insurance, not life insurance.

Front 24

What happens to a license after the death of a natural person who holds a valid insurance license?

a. It always terminates

Back 24

(A) Once a natural person dies, their license is automatically terminated.

Front 25

If the financial loss on a certain group of people occurring over a certain period of time defines the pricing of a disability policy, it is the pricing principle known as:

c. Risk

Back 25

(C) You would expect that an administrative assistant would have lower disability premium than a racecar driver.

Front 26

Which of the following are common insurance policy provisions?

b. Entire contract, grace period, reinstatement

Back 26

(B) Policies commonly have these provisions. The "entire contract" provision states that the policy, together with the copy of the attached application, is the entire contract. Pre-existing conditions are not a provision, and the right to return is an optional provision.

Front 27

With the cost of living rider, the life insurance policy holder:

b. Gets the automatic increase in the face value if there is an increase in the cost of living index. There is an additional premium for the additional coverage

Back 27

(B) Based upon the Consumer Price Index the face value may increase OR decrease.

Front 28

Which of the following is not a standard level of care for a LTC policy?

d. Convalescent care

Back 28

(D) Convalescence is not a level of care for which benefits are paid on a LTC policy.

Front 29

All of the following is required on a life insurance application, except:

d. The amount of disability income insurance in force

Back 29

(D) The amount of life insurance in force is required. The amount of disability insurance is not.

Front 30

All of the following statements regarding survivorship life insurance are true, except:

d.

Back 30

(D) "Survivorship Life" is also called "Joint and Last to Die"

Front 31

Which of the following is not an option for the use of the policy dividends?

a. Fund the distribution of monthly income payment

Back 31

(A) The distribution of monthly income payments do not come from dividends, which are paid to policy owners under a participating policy.

Front 32

What information can a party to a contract of insurance be allowed NOT to communicate according to California law?

a. Information which the other party already knows

Back 32

(A) A party to a contract does not need to communicate known information, information that should be known, information which the other party waives, nor information that is not material to the risk.

Front 33

Which of the following (recall) provisions of a disability contract is likely to change the contract least and cost the most?

b. Non-cancelable contract

Back 33

(B) "Renewability Provisions" are sometimes called "Recall Provisions".

Front 34

According to the CA Insurance Cod, a judgment against an applicant who entered a pleas of "nolo contendere" is considered to be:

d. Convicted

Back 34

(D) "Nolo contendere" is Latin for "no contest"

Front 35

The policy provision which prevents an insurer from voiding a policy for misstatements after 2 years is:

a. Incontestability

Back 35

(A) This is the definition. However, if the misstatement concerns the age of the individual, the insurance company can adjust the benefit according to the correct age.

Front 36

The clause that protects the proceeds of a life insurance policy from attachment by creditors after the death of the insured is:

b. Spendthrift trust clase

Back 36

(B) This clause will guard the proceeds from creditors until after the time the beneficiary receives them.

Front 37

An association of industry specific employers who are joined together in order to qualify for, or gain premium advantages, in group insurance is:

c. MET

Back 37

(C) MET=Multiple Employer Trust. This is also known as a Multiemployer Trust.

Front 38

Which of the following gives individuals the right to purchase additional life insurance regardless of their insurability?

c. Guaranteed insurability

Back 38

(C) These additions can be bought at stated times up to a maximum age (usually 40 or 45), or upon the birth of a child.

Front 39

Under a disability insurance policy, an insured is eligible for a waiver of premium benefit:

b. After the first sic months of disability

Back 39

(B) Although the insurance company waives the premium, the policy remains in force.

Front 40

Which is NOT part of transacting insurance?

b. Establishing a list of clients

Back 40

(B) Establishing a list of clients does not come under the CA Insurance Code definition of "transact". All the other choices constitute transacting insurance.

Front 41

An insurer organized under the laws of the State of California is a:

a. Domestic insurer

Back 41

(A) A domestic insurer is one organized under the laws of the state of CA.

Front 42

An insured and beneficiary die in a car accident and it is impossible to determine who died first. Who will receive the life insurance proceeds?

a. The insured's estate

Back 42

(A) Statement of fact since no contingent beneficiary is named.

Front 43

A beneficiary wants to receive $2,000 per month until the principal and interest are exhausted. Which settlement option should be chosen?

a. Fixed amount option

Back 43

(A) The key word is "exhausted". This option emphasizes the dollar amount per installment as opposed to length of time installments are to be paid.

Front 44

Which of the following applies to the social insurance program known as social security?

a. Contributions are compulsory for most workers

Back 44

(A) Federal taxes are withheld from payroll checks of all covered workers through the "Federal Insurance Contributions Act" (FICA). Exceptions are certain categories of Federal and State public employees and others.

Front 45

Any person who diverts or misappropriates fiduciary funds is guilty of:

d. Theft

Back 45

(D) Fiduciary responsibilities include the proper handling of the funds of clients, which must be held in trust.

Front 46

A probationary period in a group health policy is intended for people:

c. With a pre-existing condition when they joined the group

Back 46

(C) The purpose of the probationary period is to avoid providing benefits for illnesses that existed prior to the date that an insured became a member of the group.

Front 47

An insurer owned by policyholders is:

c. Mutual insurer

Back 47

(C) This is the definition. Mutual insurers issue participating policies.

Front 48

Physicians and surgeons services, whether provided in a hospital, or elsewhere:

a. Are covered by Medicare Part B. There is a charge for the coverage

Back 48

(A) Medicare Part A covers hospital services and fees which are provided with no monthly premium payments. Medicare Part B is a supplementary program to cover the costs of care received from physicians, surgeons, and other health services not covered by Part A. There is a premium for Part B.

Front 49

COBRA applies to employers with a least:

b. 20 employees

Back 49

(B) COBRA -- Consolidation Omnibus Budget Reconciliation Act is a federal law that requires employers with 20 or more employees to provide for the continuation of their employer's group health insurance benefits at group rates to former employees and their families for a period of time.

Front 50

All of the following are valid reasons for the Insurance Commissioner to deny the applicant for an insurance license, except:

c. Applicant does not have a CA business address

Back 50

(C) The lack of a CA business address is not a valid reason to deny an insurance license to an applicant.

Front 51

An agent who replaces an existing life insurance contract, must do all of the following, except:

b. Submit a copy of the replacement notice to the EXISTING insurer

Back 51

(B) The replacing insurer notifies the existing insurer.

Front 52

Why should a contingent beneficiary be named in a life insurance policy?

a. To determine who received the policy BENEFITS if the primary beneficiary is deceased

Back 52

(A) It is important to know who will receive the policy benefits if the primary beneficiary is not able to receive them.

Front 53

Which statement best describes a life insurance policy dividend?

c. It is a DISTRIBUTION of EXCESS FUNDS accumulated by the insurer on participating policies.

Back 53

(C) This is the definition of a policy dividend.

Front 54

In order for an entity to be eligible to hold a license, a co-partnership whose membership has changed must do all of the following, except:

c. Return the old-license with signatures of the original partners to the Commissioner with an explanation

Back 54

(C) There is no requirement to return the old license to the Commissioner.

Front 55

The Federal Act that is designed to protect group plan participants, establish pension equality, and mandates strict reporting and disclosure requirements is:

d. ERISA

Back 55

(D) ERISA is the Employee Retirement Income Security Act.

Front 56

The person whose life is the object of a life insurance policy is:

c. Insured

Back 56

(C) Memorize this definition of the insured.

Front 57

FYI Company's employee is injured while driving in the employ of the company. Coverage for the employee comes from:

b. FYI's Workers Compensation

Back 57

(B) Workers compensation coverage provides benefits for employee job-related injuries or diseases as a matter of right (without regard to fault).

Front 58

An individual might purchase LTC protection out of concern for all of the following, except:

a. Ineligibility for Medigap coverage

Back 58

(A) Medigap plans do not include LTC coverage

Front 59

How is the Insurance Commissioner selected?

d. An election by the people

Back 59

(D) Unlike the Real Estate Commissioner, who is appointed by the governor, the Insurance Commissioner is elected by the people.

Front 60

A policy is returned to the insurer within 10 days of the date the policy is delivered. How much of the premium is returned to the applicant?

d. 100%

Back 60

(D) The policy has been returned during the "free look" period.

Front 61

The SEC is involved in the regulation of:

c. Variable life policies

Back 61

(C) Since variable life policies provides a return linked to an underlying portfolio of securities, the SEC (securities Exchange Commission) is involved in the regulation.

Front 62

A disability income policy social insurance supplement (SIS) benefit rider:

c. Provides a benefit if the insured does not quality for social insurance benefits

Back 62

(C) SIS provides additional coverage designed to provide protection against economic losses incurred by wage earners when their income is interrupted or terminated because of illness, sickness, or accident, and these losses are not covered under workers compensation insurance, disability income benefits or the disability income benefits of Social Security.

Front 63

HMOs are involved in all of the following, except:

b. Emphasizing the use of specialty physicians

Back 63

(B) HMOs use the "gatekeeper" system that refers patients to specialists when needed. It is not emphasized.

Front 64

The guarantee insurability rider provides that the policy holder can purchase more insurance:

d. On his own life at certain specified ages without proof of insurability

Back 64

(D) This is a definition that needs to be memorized.

Front 65

The purpose of laws regarding the replacement of life and annuity contracts includes all of the following, except:

c. To protect the interests of life insurers and their agent

Back 65

(C) Replacement laws are designed to protect the public.

Front 66

Who has the right to change life insurance policy beneficiaries?

c. The policyholder

Back 66

(C) It is the policyholder who actually owns the insurance policy. Thus, they have the right to make changes such as whom the beneficiaries will be.