Life & Health - Practice Exam 4

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Questions: 150 | Attempts: 6,686 | Updated: May 23, 2023

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Life & Health - Practice Exam 4

Questions and Answers

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 thepolicy on the day the policy was delivered
Correct Answer
A. The entire premium

Explanation
During the cancellation period, if Harold returns the policy to the company, he is entitled to receive the entire premium back. This means that he will receive the full amount of money that he initially paid for the policy.

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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
Correct Answer
A. Replacement

Explanation
When a person purchases a new life insurance policy and cancels or terminates their existing policy, it is referred to as "replacement." This term is used to describe the process of replacing one policy with another. Reinsurance refers to the process where an insurance company transfers some of its risks to another insurance company. Reinstatement refers to the process of resuming a lapsed policy. Assignment refers to the transfer of rights or benefits of a policy to another party.

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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
Correct Answer
D. Life

Explanation
A binder is a temporary insurance contract that provides immediate coverage until a formal policy is issued. According to the CA Insurance Code, binders can be issued in the classes of insurance such as marine, auto, and fire. However, binders cannot be issued in the class of insurance called life. This means that temporary coverage cannot be provided for life insurance policies until a formal policy is issued.

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4.

An organization will cease to exist as an entity eligible to hold a license for all of the following reasons, except:
- A.
  
  Termination of an association
- B.
  
  Termination of a key employee
- C.
  
  Dissolution of a corporation
- D.
  
  Dissolution of a co-partnership
Correct Answer
B. Termination of a key employee

Explanation
An organization will cease to exist as an entity eligible to hold a license if there is a termination of an association, dissolution of a corporation, or dissolution of a co-partnership. However, the termination of a key employee does not directly affect the organization's eligibility to hold a license. While the departure of a key employee may have significant implications for the organization's operations and success, it does not automatically result in the organization's cessation as an eligible entity for holding a license.

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5.

What does it mean if an agent's license is inactive ?
- A.
  
  The agent can still transact insurance business in CA, but not in any other states until the license is reactivated
- B.
  
  The agent can transact any insurance business with another agent's approval
- C.
  
  The agent can transact any insurance business for which the agent is licensed
- D.
  
  The agent cannot transact any insurance business for which a license is required.
Correct Answer
D. The agent cannot transact any insurance business for which a license is required.

Explanation
If an agent's license is inactive, it means that the agent is not authorized to transact any insurance business for which a license is required. This restriction applies to all states, not just CA. The agent would need to reactivate their license in order to resume transacting insurance business.

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6.

If the Commissioner issues a Notice of Seizure for documents and the individual fails to send those documents what is the penalty?
- A.
  
  1 year in jail
- B.
  
  $1,000 fine
- C.
  
  1 year in jail and/or $1,000 fine
- D.
  
  Each state handles discipline in its own way
Correct Answer
C. 1 year in jail and/or $1,000 fine

Explanation
If an individual fails to send the documents requested by the Commissioner after receiving a Notice of Seizure, the penalty is 1 year in jail and/or a $1,000 fine. This means that the individual may face either or both of these consequences as a result of their non-compliance.

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7.

A disability income policy covers injuries suffered by an insured on or off the job is called?
- A.
  
  An occupational policy
- B.
  
  A non-occupational policy
- C.
  
  A wraparound policy
- D.
  
  Twenty-four-hour policy
Correct Answer
A. An occupational policy

Explanation
An occupational policy is a type of disability income policy that provides coverage for injuries suffered by an insured individual both on and off the job. This means that the policyholder will receive benefits if they become disabled due to an injury, regardless of whether the injury occurred at their workplace or outside of it. This type of policy is specifically designed to protect individuals who rely on their income and need financial support in the event of a disability.

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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 ?
- A.
  
  Provide a list of the potential complaints lodged against the broker or agent through past customers
- B.
  
  Provide records of interest payments to the broker agent with respect to interest paid by the insurer
- C.
  
  Maintain a list of accounts in connection with compensation exempted in premium financing payments for three years
- D.
  
  Provide a list of current accounts for any client who wishes to see the records
Correct Answer
C. Maintain a list of accounts in connection with compensation exempted in premium financing payments for three years

Explanation
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 must maintain a list of accounts in connection with compensation exempted in premium financing payments for three years. This means that they are required to keep a record of the accounts where compensation is exempted in premium financing payments for a period of three years. This is important for transparency and accountability purposes, ensuring that there is a documented record of the exempted compensation.

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9.

All of the following would be considered one of the three major types of loss exposures, except:
- A.
  
  Liability loss exposure
- B.
  
  Financial loss exposure
- C.
  
  Human and personnel loss exposure
- D.
  
  Property loss exposure
Correct Answer
B. Financial loss exposure

Explanation
Financial loss exposure is not considered one of the three major types of loss exposures. The three major types of loss exposures are liability loss exposure, human and personnel loss exposure, and property loss exposure. Financial loss exposure refers to the risk of experiencing financial losses due to various factors such as market fluctuations, economic downturns, or poor financial management. While financial loss exposure is a significant risk, it is not classified as one of the three major types of loss exposures in this context.

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10.

Which of hte following statement 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
- B.
  
  Coverage under COBRA is primary to other coverage paid to the employee
- C.
  
  Medicare coverage is always primary to "medical coverage"
- D.
  
  Coverage under any plan with the provision is primary to coverage under any plan without the provision
Correct Answer
A. When the plans both have the provision, coverage as an employee is primary to coverage paid to dependents

Explanation
When both plans have the usual coordination-of-benefits provision, the coverage for an employee takes priority over the coverage provided to dependents. This means that if an employee is covered under two different plans, their own plan will be considered primary and the plan of their dependents will be considered secondary.

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11.

Which of the following is NOT provided by Hospice Care?
- A.
  
  Pain relief
- B.
  
  Symptom management
- C.
  
  Counseling
- D.
  
  Rehabilitation
Correct Answer
D. Rehabilitation

Explanation
Hospice care focuses on providing comfort and support to individuals who are terminally ill and nearing the end of their lives. The goal is to improve the quality of life for patients and their families. Pain relief, symptom management, and counseling are all essential components of hospice care, as they address the physical, emotional, and psychological needs of the patients. However, rehabilitation, which typically involves therapies to restore function and improve mobility, is not typically provided in hospice care. The focus is on providing comfort rather than curative treatments or rehabilitation services.

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12.

Tony Brown has a CLU certification. Which of the following names would be automatically approved for his agency's use ?
- A.
  
  Tony Brown CLU and Company
- B.
  
  Brownies Insurance Services
- C.
  
  Brown Insurance
- D.
  
  None of these would be automatically approved
Correct Answer
D. None of these would be automatically approved

Explanation
The correct answer is "None of these would be automatically approved" because the question states that Tony Brown has a CLU certification, but it does not mention anything about his agency's name or the criteria for approval. Therefore, without any further information, it cannot be determined which names would be automatically approved for his agency's use.

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13.

A person has apaid $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 te first 10 years of payments how much is taxable each year ?
- A.
  
  $0
- B.
  
  $800
- C.
  
  $2,000
- D.
  
  $4,000
Correct Answer
C. $2,000

Explanation
The taxable amount each year is calculated by subtracting the original investment amount from the total income received. In this case, the person invested $50,000 into the annuity and will receive a total of $100,000 over their lifetime. Therefore, the taxable amount each year is $100,000 - $50,000 = $50,000 divided by 10 years, which equals $5,000. However, the question asks for the taxable amount in the first 10 years, so we divide $5,000 by 2 to get $2,000. So, the correct answer is $2,000.

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14.

According to the code, all insurers must maintain a department to investigate:
- A.
  
  Possible abuses of rating laws
- B.
  
  Possible arson
- C.
  
  Possible fraudulent claims from insureds
- D.
  
  Possible fraud by insurers
Correct Answer
C. Possible fraudulent claims from insureds

Explanation
The code states that all insurers must maintain a department to investigate possible fraudulent claims from insureds. This means that insurers are required to have a department dedicated to looking into any potentially fraudulent claims made by their policyholders. This is important in order to ensure that insurance companies are not being taken advantage of by individuals making false claims, and to protect the integrity of the insurance industry.

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15.

Which two are Activities of Daily Living?
- A.
  
  Eating and dressing
- B.
  
  Speaking and Incontinence
- C.
  
  Sleeping and walking
- D.
  
  Bathing and hearing
Correct Answer
A. Eating and dressing

Explanation
The two activities of daily living are eating and dressing. These activities are essential for an individual's self-care and independence. Eating refers to the ability to consume food and maintain proper nutrition, while dressing involves the ability to choose and put on appropriate clothing. Both activities are necessary for maintaining personal hygiene and overall well-being.

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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 ?
- A.
  
  Request his certificate of authority
- B.
  
  Authorize agent with a certificate of convenience
- C.
  
  Suspend or revoke the license of the agent
- D.
  
  Fine the insurance company
Correct Answer
C. Suspend or revoke the license of the agent

Explanation
The Insurance Commissioner has the right to suspend or revoke the license of the agent if they lack authority from an insurer named on a binder for coverage. This action is taken to ensure that agents are properly authorized and to maintain the integrity of the insurance industry.

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17.

An insured bought an annuity ten years ago. He will retire in five year. 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
- B.
  
  Fixed premium annuity
- C.
  
  Tax sheltered annuity
- D.
  
  Single payment annuity
Correct Answer
A. Variable annuity

Explanation
The insured purchased a variable annuity. This is because the value of the annuity is determined by multiplying the number of accumulation units by the value of the separate account. In a variable annuity, the separate account is invested in various assets such as stocks and bonds, and the value fluctuates based on the performance of these investments. Therefore, the value of the annuity will vary over time, making it a variable annuity.

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18.

The likelihood of incurring disease or disability at any given time is:
- A.
  
  Risk
- B.
  
  Morbidity
- C.
  
  Mortality
- D.
  
  Hazard
Correct Answer
B. Morbidity

Explanation
Morbidity refers to the state of being diseased or the incidence of disease within a population. It represents the likelihood of incurring disease or disability at any given time. This term is commonly used in public health to assess the burden of diseases and to develop strategies for prevention and treatment. Mortality, on the other hand, refers to the number of deaths in a population. Risk and hazard are more general terms that can encompass a wide range of potential dangers or threats, but they do not specifically address the likelihood of disease or disability.

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19.

The class beneficiary designation which means that the beneficiaries will receive equal shares fo the death benefit divided among the surviving members of the class is:
- A.
  
  Class beneficiaries, equal shares
- B.
  
  Per capita
- C.
  
  Per stirpes
- D.
  
  Per diem
Correct Answer
B. Per capita

Explanation
Per capita is a class beneficiary designation where the beneficiaries receive equal shares of the death benefit divided among the surviving members of the class. This means that each beneficiary in the class will receive an equal portion of the benefit, regardless of their relationship to the deceased. It is a fair and equal distribution method that ensures each member of the class receives an equal share.

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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:
- A.
  
  Medicare
- B.
  
  Workers Compensation
- C.
  
  Medicaid
- D.
  
  Social security
Correct Answer
B. Workers Compensation

Explanation
The man will likely be able to collect disability income benefits from Workers Compensation because this program provides benefits for employees who are injured or become disabled as a result of their work. Medicare is a federal health insurance program for people aged 65 and older or with certain disabilities, but it does not provide disability income benefits. Medicaid is a joint federal and state program that provides medical coverage for low-income individuals and families, but it does not specifically provide disability income benefits. Social Security provides disability benefits, but it is not mentioned in the question as a possible source of income for the man.

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21.

In order to be qualified to sell LTC insurance in the 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
- B.
  
  For licenses issued after January 1, 1992, 8 hours of training for the first four 12-month periods from date of license issuance, then 8 hours prior to each renewal
- C.
  
  Non-resident licensees file with the Insurance Commissioner and have Commissioner approve education requirement
- D.
  
  8 hours prior to renewal for licenses issued prior to January 1, 1992
Correct Answer
A. All licensees are required to pass a LTC knowledge exam every 10 years

Explanation
The correct answer is "All licensees are required to pass a LTC knowledge exam every 10 years." This statement contradicts the information given in the question, which states that passing a LTC knowledge exam every 10 years is a requirement for selling LTC insurance in the state of CA. The question asks for an exception, so the correct answer is the statement that does not align with the given requirements.

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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 ?
- A.
  
  Insurable interest standard
- B.
  
  Contract law
- C.
  
  The law of large numbers
- D.
  
  Materiality
Correct Answer
C. The law of large numbers

Explanation
The law of large numbers is a mathematical rule that states as the number of individual but similar exposure units increases, it becomes easier to predict losses. This means that the larger the sample size, the more accurate and reliable the predictions will be. This principle is widely used in insurance and statistics to assess and manage risk. The other options, such as insurable interest standard, contract law, and materiality, are not directly related to this concept.

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23.

Which of the following is a description of a Life and Disability Analyst ?
- A.
  
  A broker paid fees for service
- B.
  
  A person licensed to assist an agent in soliciting life insurance
- C.
  
  A person licensed to advise clients about life and disability insurance for a fee
- D.
  
  Any agent
Correct Answer
C. A person licensed to advise clients about life and disability insurance for a fee

Explanation
A Life and Disability Analyst is a person who is licensed to provide advice to clients regarding life and disability insurance in exchange for a fee. They specialize in helping clients understand and choose the right insurance policies that meet their specific needs and goals. This role requires expertise in analyzing the client's financial situation, assessing risks, and recommending suitable insurance coverage. Unlike other options listed, such as a broker or an agent, a Life and Disability Analyst focuses specifically on advising clients about life and disability insurance rather than selling or soliciting insurance products.

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24.

What happens to a license after the death of a natural person who holds a valid insurance license?
- A.
  
  It always terminates
- B.
  
  It may be transferred to another person
- C.
  
  The license becomes inactive until the expiration date
- D.
  
  The license must be returned to the Commisioner to cancel the license
Correct Answer
A. It always terminates

Explanation
After the death of a natural person who holds a valid insurance license, the license always terminates. This means that the license is no longer valid and cannot be transferred to another person. Additionally, the license does not become inactive until the expiration date, nor does it need to be returned to the Commissioner to cancel it. The termination of the license is a standard procedure that occurs upon the death of the license holder.

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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:
- A.
  
  Rapidity
- B.
  
  Security
- C.
  
  Risk
- D.
  
  Frequency
Correct Answer
D. Frequency

Explanation
The pricing principle known as frequency refers to the financial loss that occurs on a certain group of people over a specific period of time. This principle takes into account how often the loss occurs, rather than the severity or magnitude of the loss. By analyzing the frequency of the loss, insurance companies can determine the appropriate pricing for a disability policy.

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26.

Which of the following are common insurance policy provisions?
- A.
  
  Reinstatement, suicide, pre-existing conditions
- B.
  
  Entire contract, grace period, reinstatement
- C.
  
  Entire contract, incontestability, pre-existing conditions
- D.
  
  Grace period, suicide right to return
Correct Answer
B. Entire contract, grace period, reinstatement

Explanation
The correct answer is "Entire contract, grace period, reinstatement". These provisions are commonly found in insurance policies. The entire contract provision states that the policy and any attached endorsements constitute the entire contract between the insured and the insurer. The grace period provision allows the insured a specified period of time after the premium due date to make a payment without the policy lapsing. The reinstatement provision allows the insured to reinstate a lapsed policy by paying any outstanding premiums and meeting certain conditions.

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27.

With the cost of living rider, the life insurance policy holder:
- A.
  
  Must increase or decrease the face value of the policy as the index increases or decreases
- 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
- C.
  
  Gets the automatic increase in the face value if the index goes up. There is no charge except for the flat charge for the rider
- D.
  
  All of the above are flase
Correct Answer
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

Explanation
The correct answer is that the life insurance policy holder gets an automatic increase in the face value if there is an increase in the cost of living index, and there is an additional premium for the additional coverage. This means that if the cost of living increases, the face value of the policy will also increase, providing the policy holder with more coverage. However, the policy holder will need to pay an additional premium for this increased coverage.

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28.

Which of the following is not a standard level of care for a LTC policy ?
- A.
  
  Intermediate care
- B.
  
  Custodial care
- C.
  
  Skilled nursing care
- D.
  
  Convalescent care
Correct Answer
D. Convalescent care

Explanation
Convalescent care is not a standard level of care for a Long-Term Care (LTC) policy. Convalescent care refers to the care provided to individuals who are recovering from an illness or surgery and need assistance with daily activities during the recovery period. In contrast, standard levels of care for an LTC policy typically include intermediate care, custodial care, and skilled nursing care, which are focused on providing long-term assistance with activities of daily living, medical care, and supervision for individuals who have chronic illnesses or disabilities.

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29.

All of the following is required on a life insurance application, except:
- A.
  
  Health history
- B.
  
  Amount of other life insurance in force
- C.
  
  Age of the inured
- D.
  
  The amount of disability income insurance in force
Correct Answer
D. The amount of disability income insurance in force

Explanation
On a life insurance application, the applicant is typically required to provide their health history, the amount of other life insurance they have in force, and their age. However, the amount of disability income insurance in force is not typically required on a life insurance application. Disability income insurance is a separate type of insurance that provides income replacement in the event the insured becomes disabled and is unable to work. Therefore, it is not directly relevant to the assessment of risk for a life insurance policy.

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30.

All of the following statements regarding survivorship life insurance are true, except:
- A.
  
  It is particularly well situated to provide cash to cover estate taxes
- B.
  
  The policy face amounts are usually for more than $1,000,000
- C.
  
  It offers premiums that are quite low compared to what you would be charged for separate policies
- D.
  
  The policy face amount is made out based only on the death of the first to die
Correct Answer
D. The policy face amount is made out based only on the death of the first to die

Explanation
Survivorship life insurance is a type of insurance that covers the lives of two individuals, typically spouses, and pays out the death benefit only after both individuals have passed away. This type of insurance is commonly used to provide cash to cover estate taxes, as mentioned in one of the statements. The policy face amounts are usually for more than $1,000,000, and the premiums are relatively low compared to separate policies, which are also mentioned in the statements. However, the given answer states that the policy face amount is made out based only on the death of the first to die, which is incorrect. The policy pays out the death benefit after the death of both insured individuals.

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31.

Which of the following is not an option for the use of the policy dividends ?
- A.
  
  Fund the distribution of monthly income payment
- B.
  
  Purchase paid-up additions
- C.
  
  Reduce the current premium
- D.
  
  Purchase one year term insurance
Correct Answer
A. Fund the distribution of monthly income payment

Explanation
The use of policy dividends includes purchasing paid-up additions, reducing the current premium, and purchasing one year term insurance. However, funding the distribution of monthly income payment is not an option for the use of policy dividends.

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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
- B.
  
  Information not specifically asked by an agent and company, even if it's considered relevant
- C.
  
  Information which is material to the contract
- D.
  
  Information which cannot be proven but is material
Correct Answer
A. Information which the other party already knows

Explanation
According to California law, a party to a contract of insurance can be allowed not to communicate information which the other party already knows. This means that if the other party is already aware of certain information, it is not necessary for the party to communicate it again. This exception is based on the assumption that if the other party already has knowledge of the information, it does not need to be disclosed again as it would not affect the terms of the contract.

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33.

Which of the following (recall) provisions of a disability contract is likely to change the contract least and cost the most ?
- A.
  
  Continuous indemnity contract
- B.
  
  Non-cancelable contract
- C.
  
  Guaranteed renewable contract
- D.
  
  Expense arrangement contract
Correct Answer
B. Non-cancelable contract

Explanation
A non-cancelable contract is likely to change the contract least and cost the most. This type of contract guarantees that the insurer cannot cancel or change the terms of the policy as long as the premiums are paid on time. This provides stability and security for the policyholder, as they know that their coverage will remain unchanged. However, because the insurer is taking on more risk by offering this type of contract, the premiums for a non-cancelable contract are typically higher compared to other types of disability contracts.

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34.

According to the CA insurance Code, a judgment against an applicant who entered a plea of "nolo contendere" is considered to be:
- A.
  
  Innocent by code, but guilty by law
- B.
  
  Innocent
- C.
  
  Referred to the Insurance Commissioner for opinion
- D.
  
  Convicted
Correct Answer
D. Convicted

Explanation
According to the CA insurance Code, a judgment against an applicant who entered a plea of "nolo contendere" is considered to be convicted. This means that even though the applicant did not admit guilt, the judgment still implies a conviction. The plea of "nolo contendere" is essentially a plea of no contest, where the defendant does not admit guilt but accepts the punishment. Therefore, the judgment is treated as a conviction under the insurance Code.

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35.

The policy provision which prevents an insurer from voiding a policy for misstatements after 2 years is:
- A.
  
  Incontestability
- B.
  
  Indemnity
- C.
  
  Misrepresentation
- D.
  
  There is no such provision
Correct Answer
A. Incontestability

Explanation
The correct answer is "Incontestability." This policy provision prevents an insurer from voiding a policy for misstatements made by the insured after a period of 2 years. It provides a certain level of protection to the policyholder by limiting the insurer's ability to retroactively cancel or modify the policy based on misrepresentations. This provision helps ensure that the policy remains valid and enforceable after a specified time, giving the insured peace of mind and stability in their coverage.

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36.

The clause that protects the proceeds of a life insurance policy from attachment by creditors after the death of the insured is:
- A.
  
  Common disaster clause
- B.
  
  Spendthrift trust clause
- C.
  
  Incontestability clause
- D.
  
  Beneficiary clause
Correct Answer
B. Spendthrift trust clause

Explanation
The spendthrift trust clause is the correct answer because it protects the proceeds of a life insurance policy from being seized or claimed by creditors after the insured person's death. This clause ensures that the beneficiaries named in the policy receive the full benefits without the risk of losing them to creditors. It provides a level of financial security and helps to safeguard the intended use of the life insurance proceeds.

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37.

An association of industry specific employers who are joined together in order to qualify for, or gain premium advantages, in group insurance is:
- A.
  
  MEWA
- B.
  
  MEC
- C.
  
  MET
- D.
  
  MIB
Correct Answer
C. MET

Explanation
MET stands for Multiple Employer Trust, which is an association of industry-specific employers who join together to qualify for or gain premium advantages in group insurance. This allows small employers to pool their resources and negotiate better insurance rates and coverage options. By forming a trust, these employers can offer their employees competitive benefits similar to those provided by larger companies.

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38.

Which of the following gives individuals the right to purchase additional life insurance regardless of their insurability ?
- A.
  
  Incontestability
- B.
  
  Accelerated death benefit
- C.
  
  Guaranteed insurability
- D.
  
  Waiver of premium
Correct Answer
C. Guaranteed insurability

Explanation
Guaranteed insurability gives individuals the right to purchase additional life insurance regardless of their insurability. This means that even if their health or other factors change, they can still buy more coverage without having to go through the underwriting process again. This option provides flexibility and ensures that individuals can increase their coverage as their needs evolve over time.

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39.

Under a disability insurance policy, an insured is eligible for a waiver of premium benefit:
- A.
  
  Under the age 65
- B.
  
  After the first six months of disability
- C.
  
  During maternity leave
- D.
  
  During delayed retirement
Correct Answer
B. After the first six months of disability

Explanation
The waiver of premium benefit under a disability insurance policy becomes eligible for the insured individual after the first six months of disability. This means that if the insured becomes disabled and is unable to work for a period of six months or more, they will no longer be required to pay premiums for their insurance coverage. This benefit helps to alleviate the financial burden on the insured during a period of disability when they may already be facing additional expenses and loss of income.

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40.

Which is NOT part of transacting insurance ?
- A.
  
  Solicitation
- B.
  
  Establishing a list of clients
- C.
  
  Negotiation
- D.
  
  Execution of a contract
Correct Answer
B. Establishing a list of clients

Explanation
Establishing a list of clients is not part of transacting insurance. Transacting insurance involves activities such as solicitation, negotiation, and execution of a contract. Establishing a list of clients, on the other hand, is more related to marketing and prospecting for potential clients, rather than the actual process of transacting insurance.

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41.

An insurer organized under the laws of the State of California is a:
- A.
  
  Domestic insurer
- B.
  
  Foreign insurer
- C.
  
  Non-alien insurer
- D.
  
  Non-admitted insurer
Correct Answer
A. Domestic insurer

Explanation
A domestic insurer refers to an insurance company that is organized and operates within a specific state or country. In this case, since the insurer is organized under the laws of the State of California, it can be classified as a domestic insurer.

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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
- B.
  
  The insurance company retains the proceeds
- C.
  
  The beneficiary's estate
- D.
  
  Both the insured's and beneficiary estate will share
Correct Answer
A. The insured's estate

Explanation
In cases where it is impossible to determine who died first in a car accident involving both the insured and the beneficiary, the general rule is that the insured's estate will receive the life insurance proceeds. This is because the beneficiary is typically required to outlive the insured in order to receive the proceeds. Since it cannot be determined in this scenario, the proceeds will go to the insured's estate.

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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
- B.
  
  Cash option
- C.
  
  Fixed period option
- D.
  
  Interest option
Correct Answer
A. Fixed amount option

Explanation
The beneficiary should choose the fixed amount option. This option allows the beneficiary to receive a fixed amount of $2,000 per month until both the principal and interest are exhausted. This ensures a consistent monthly income for the beneficiary until the funds are depleted.

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44.

Which of the following applies to the social insurance program known as social security ?
- A.
  
  Contributions are compulsory for most workers
- B.
  
  Benefits are based upon a contract with the insured
- C.
  
  Benefits are paid to each individual matching their contributions
- D.
  
  All insured workers begin to receive benefits at age 65
Correct Answer
A. Contributions are compulsory for most workers

Explanation
The correct answer is "Contributions are compulsory for most workers." This means that most workers are required to make contributions to the social security program.

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45.

Any person who diverts or misappropriates fiduciary funds is guilty of:
- A.
  
  Misrepresentation
- B.
  
  Forgery
- C.
  
  Fraud
- D.
  
  Theft
Correct Answer
D. Theft

Explanation
If a person diverts or misappropriates fiduciary funds, they are guilty of theft. Theft refers to the act of taking someone else's property without their permission, with the intention of permanently depriving them of it. In this case, the person is unlawfully taking fiduciary funds, which are funds held in trust for someone else, and using them for their own purposes. This action constitutes theft as it involves the illegal taking of someone else's funds for personal gain.

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46.

A probationary period in a group health poliy is intended for people:
- A.
  
  Who decline to join the group during the eligibility period
- B.
  
  With other coverage after a qualifying event
- C.
  
  With a pre-existing condition when they joined the group
- D.
  
  Who joined the group after the effective date
Correct Answer
D. Who joined the group after the effective date

Explanation
The probationary period in a group health policy is intended for people who joined the group after the effective date. During this period, these individuals may have limited coverage or certain restrictions on their benefits. This is done to prevent adverse selection, where individuals wait until they have a medical need before joining the group. By implementing a probationary period, the insurance company can ensure that new members are committed to the group and are not solely joining for immediate medical benefits.

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47.

An insurer owned by policyholders is:
- A.
  
  Fraternal insurer
- B.
  
  Capital stock insurer
- C.
  
  Mutual insurer
- D.
  
  Reciprocal exchange
Correct Answer
C. Mutual insurer

Explanation
A mutual insurer is an insurance company that is owned by its policyholders. This means that the policyholders are also the owners of the company and have a say in the company's operations. The profits of a mutual insurer are typically returned to the policyholders in the form of dividends or lower premiums. This ownership structure allows the company to prioritize the needs and interests of its policyholders rather than external shareholders.

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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
- B.
  
  Are covered by Medicare Part A. There is no charge for the coverage
- C.
  
  Are covered by Medicare Part A. There is a charge for the coverage
- D.
  
  Are covered by Medicare Part B. There is no charge for the coverage
Correct Answer
A. Are covered by Medicare Part B. There is a charge for the coverage

Explanation
Physicians and surgeons services are covered by Medicare Part B, which is a part of the Medicare program that covers outpatient services. However, there is a charge for the coverage, meaning that beneficiaries are required to pay a premium for this coverage. Medicare Part A, on the other hand, covers inpatient hospital services and does not typically require a premium. Therefore, the correct answer is that physicians and surgeons services are covered by Medicare Part B, with a charge for the coverage.

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49.

COBRA applies to employers with at least:
- A.
  
  80 employees
- B.
  
  20 employees
- C.
  
  40 employees
- D.
  
  60 employees
Correct Answer
A. 80 employees

Explanation
The correct answer is 80 employees. COBRA, which stands for Consolidated Omnibus Budget Reconciliation Act, is a federal law that allows employees to continue their health insurance coverage after leaving their job. It applies to employers with at least 20 employees, but only if they offer a group health plan. Therefore, an employer must have at least 80 employees in order for COBRA to apply to them.

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50.

All of the following are valid reasons for the Insurance Commissioner to deny the applicant for an insurance license, except:
- A.
  
  Applicant does not have a good business reputation
- B.
  
  Applicant is not properly qualified to perform duties
- C.
  
  Applicant does not have a California business address
- D.
  
  Applicant lacks integrity
Correct Answer
C. Applicant does not have a California business address

Explanation
The Insurance Commissioner may deny an applicant for an insurance license if they do not have a good business reputation, if they are not properly qualified to perform duties, or if they lack integrity. However, the lack of a California business address is not a valid reason for denial.

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Jan 28, 2010

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Life & Health - Practice Exam 4

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 ?

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

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

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

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

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

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

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 ?

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

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

Which of the following is NOT provided by Hospice Care?

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

A person has apaid $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 te first 10 years of payments how much is taxable each year ?

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

Which two are Activities of Daily Living?

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

An insured bought an annuity ten years ago. He will retire in five year. 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 ?

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

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

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:

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

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 ?

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

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

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:

Which of the following are common insurance policy provisions?

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

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

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

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

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

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

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

According to the CA insurance Code, a judgment against an applicant who entered a plea of "nolo contendere" is considered to be:

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

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

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

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

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

Which is NOT part of transacting insurance ?

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

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

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

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

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

An insurer owned by policyholders is:

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

COBRA applies to employers with at least:

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