Life & Health - Practice Exam 6

During the disability elimination period, no benefits are payable. This period refers to the waiting period before an individual can start receiving disability benefits. It is a specified period of time that an individual must wait after becoming disabled before they can start receiving benefits. During this elimination period, the individual is not eligible to receive any benefits, regardless of the type of claim or the size of the claim. Once the elimination period is over, the individual may become eligible for different types of benefits depending on their specific policy.

An agent acting as an insurance agent, broker, solicitor, life agent, or bail agent acts in the capacity of a fiduciary when handling premiums or return premiums for an insured. A fiduciary is someone who is entrusted with the responsibility to act in the best interest of another party. In this case, the agent is entrusted with handling the insured's premiums, which involves managing and safeguarding the insured's funds. The agent is expected to exercise loyalty, good faith, and honesty in their dealings with the insured, ensuring that the premiums are properly accounted for and used for the intended purposes.

Unfair discrimination refers to the practice of an insurer using higher rates solely based on an individual's religion, race, or ethnic group. This practice is considered unfair and discriminatory as it treats individuals differently based on factors that are unrelated to their risk profile or ability to pay. It goes against principles of equality and fairness, and can contribute to social injustices and inequalities within society.

A supplemental insurance policy that pays a set amount for each day that an individual is hospitalized is known as a hospital confinement indemnity policy. This type of insurance provides coverage specifically for hospital stays, offering financial support to cover expenses incurred during the hospitalization period. It is designed to complement primary health insurance plans and can help individuals manage the costs associated with hospital stays, such as room charges, medical procedures, and other related expenses.

Mortgage protection insurance is a type of insurance policy that provides a death benefit that matches the projected outstanding debt on an individual's home. This means that if the policyholder passes away, the insurance company will pay off the remaining mortgage balance, ensuring that the family or beneficiaries are not burdened with the debt. It is specifically designed to protect the family's financial security by ensuring that the mortgage is paid off in the event of the policyholder's death.

In underwriting for health insurance, various factors are considered to assess the risk of insuring an individual. Income, sex, and age are commonly used factors as they can provide insight into a person's health and potential risk factors. However, intelligence is not typically used in underwriting as it is not directly related to an individual's health or risk of needing medical care. Therefore, intelligence is not considered in the underwriting process for health insurance.

The automatic mode of settlement for life insurance proceeds, if no other method of payment is selected, is a lump-sum settlement in cash. This means that the beneficiary will receive the entire amount of the life insurance proceeds in one payment, rather than receiving it in installments or other forms of settlement.

Traditional comprehensive major medical plans typically include deductibles, co-insurance, and out-of-pocket maximums. These features require the insured individual to pay a certain amount before the insurance coverage kicks in, share a percentage of the cost with the insurance company, and have a limit on the total amount they have to pay out of pocket, respectively. However, first-dollar coverage is not included in traditional comprehensive major medical plans. First-dollar coverage means that the insurance company pays for all eligible expenses from the first dollar without the insured individual having to pay any deductibles or co-insurance.

Medicare Part B pays 80% of the balance of approved charges after the deductible is paid. This means that once the deductible is met, Medicare will cover 80% of the remaining approved charges, while the remaining 20% will be the responsibility of the individual.

The incontestability clause prevents a life insurance policy from being rescinded by the insurer after it has been in effect for two years. This clause states that the insurer cannot challenge the validity of the policy or deny a claim based on misrepresentation or concealment by the policyholder after the two-year period has passed. This provides security and assurance to the policyholder that their policy will not be canceled or revoked without valid reasons after the specified time frame.

Activities of daily living (ADLs) refer to the basic tasks that individuals perform on a daily basis, such as eating, bathing, dressing, toileting, transferring, and continence. The ability to perform these activities is often used as a measure to determine an individual's need for long-term care benefits. ADLs are used by healthcare professionals and insurance providers to assess an individual's functional abilities and determine the level of assistance or care required. The higher the level of dependence on others for ADLs, the greater the need for long-term care benefits.

Preferred risk classification carries the lowest premium because it represents individuals who have the lowest risk of experiencing a claim or loss. These individuals are considered to be in good health, have a low likelihood of engaging in risky behavior, and have a good credit history. Insurance companies offer lower premiums to preferred risk individuals as they are less likely to file claims, resulting in lower costs for the insurance company.

Demutualization refers to the process in which a mutual insurer, owned by its policyholders, converts into a stock company owned by shareholders. This transition allows the company to issue stock and raise capital from the public. Through demutualization, the insurer can access additional funding sources, increase its competitiveness, and potentially expand its operations. This process typically involves a reorganization of the company's structure and governance to align with the requirements of a stock company.

A commonly used cost containment measure for emergency hospital care under a major medical expense plan is a deductible. A deductible is the amount of money that the insured individual must pay out of pocket before their insurance coverage begins. By having a deductible, it encourages individuals to be more cautious with their healthcare expenses and helps to control costs for the insurance provider. It also ensures that individuals are responsible for a portion of their healthcare expenses, reducing the likelihood of unnecessary and excessive medical visits.

The correct answer is that the license number must be printed in the same size print as the licensee's phone number, fax number, or address. This means that the license number should be given equal importance and visibility as the contact information of the licensee.

Coordination of benefits is the correct answer because it refers to the provision in a group medical plan that determines how benefits are coordinated when a claimant has coverage under multiple plans. This provision helps avoid overpayment or duplication of benefits by ensuring that the total benefits received do not exceed the actual expenses incurred.

To authorize the release of an attending physician's report, the applicant must sign a consent form. This is because a consent form is a legal document that gives permission for the release of medical information. By signing the consent form, the applicant is acknowledging their understanding of the release and granting permission for the physician to share their medical report with the necessary parties. This ensures that the release of the report is done in a legal and ethical manner, protecting the privacy and confidentiality of the applicant's medical information.

To meet the chronically ill trigger of a long term care policy, an individual must be unable to perform a minimum of two activities of daily living. This means that the person must have limitations in at least two basic self-care tasks such as bathing, dressing, eating, toileting, transferring, or continence. This requirement ensures that the individual requires assistance and care on a regular basis due to their chronic illness or condition.

The initial requirements for a licensed agent to sell long term care insurance include training in all of the following areas except financial planning. This means that agents are required to have knowledge and training in areas such as available long term care services and facilities, California regulations, and alternatives to the purchase of long term care insurance. However, they do not need specific training in financial planning.

The correct answer is "the beneficiary must sign the application before the insurer will issue the policy." This is because the beneficiary's signature is not a requirement for the insurer to issue the policy. The application is important for other reasons, such as ensuring that the statements made are true, providing essential information about the applicant, and becoming a part of the policy when a copy is attached.

The correct answer is Institutional (nursing facilities) and home care. According to the CA Insurance Code, comprehensive long term care insurance policies or certificates must provide benefits for both institutional care in nursing facilities and home care. This means that the policy should cover expenses related to receiving care in a nursing facility as well as receiving care at home.

Mortality tables provide yearly probabilities of death for different age groups. These tables are used by insurance companies to calculate premiums and assess the risk of insuring individuals. They help determine the likelihood of an individual's death based on their age and other factors, allowing insurers to accurately price their policies. Mortality tables are a crucial tool in the insurance industry for assessing mortality risk and making informed decisions about policy pricing and coverage.

Under Medicare Part B, after the deductible is met, a patient is responsible for paying 20% of the covered expenses. This means that Medicare will cover 80% of the costs, while the patient will be responsible for the remaining 20%.

Co-insurance is a provision in health insurance that requires both the insured individual and the insurance company to share the cost of covered losses in an agreed proportion. This means that the insured person will have to pay a certain percentage of the covered expenses out of pocket, while the insurance company will cover the remaining percentage. Co-insurance helps to distribute the financial risk between the insured individual and the insurer, ensuring that both parties contribute to the cost of healthcare services.

In a contributory group insurance plan, the employee is required to pay a portion of the premium. This means that the cost of the insurance coverage is shared between the employer and the employee. The employee's contribution helps to offset the cost of the insurance, making it more affordable for both parties. By having employees contribute to the premium, it also encourages them to value and utilize the insurance benefits provided.

Members of the Medical Information Bureau are required to report medical impairments found during the underwriting process. This means that if any medical conditions or impairments are discovered while assessing an individual's eligibility for insurance coverage, the member physicians are obligated to report this information to the Medical Information Bureau. This helps the insurance industry to have a comprehensive understanding of an individual's medical history and assess the risk associated with providing insurance coverage to them.

Insurance records for insurance agents and insurance brokers must be made available to the insurance commissioner at all times. This means that the records should be accessible and ready for inspection whenever the commissioner requires them. This ensures transparency and accountability in the insurance industry and allows the commissioner to effectively regulate and oversee the activities of insurance agents and brokers.

The correct answer suggests that if a person violates Section 770 of the CA Insurance Code regarding loans on the security of real or personal property, the insurance Commissioner would most likely issue a cease and desist order. This implies that the Commissioner would order the violator to stop engaging in such transactions. The other options either do not directly address the violation or impose different consequences that are not specifically related to the violation described.

Social Security disability benefits are paid to individuals who are expected to be disabled for at least 12 months. This means that the disability must be long-term and have a significant impact on the person's ability to work and earn a living. The 12-month requirement ensures that the benefits are provided to those who have a sustained and severe disability that prevents them from engaging in substantial gainful activity for an extended period of time.

Medicare Part A is available at no cost to persons at age 65. This coverage provides hospital insurance and covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care services. It is funded through payroll taxes paid by employees and employers during their working years. Medicare Part B, on the other hand, requires a monthly premium and covers outpatient medical services, doctor visits, and preventive care. Social Security retirement benefits are separate from Medicare and are based on a person's earnings history. Long term care insurance is a separate insurance policy that covers the costs of long-term care services.

During a blackout period, certain Social Security benefits may be temporarily suspended. In this scenario, the surviving spouse is the one whose benefits are affected. This means that they will not receive their regular Social Security benefits during this period. It is important to note that the blackout period typically occurs when the surviving spouse is also entitled to receive benefits from another source, such as a pension.

Under a disability income insurance policy with an "own occupation" clause, an employee who can no longer perform the tasks of the job held at the time of injury is considered "totally disabled." This means that the individual is unable to engage in any type of work that is consistent with their education, training, or experience. The "own occupation" clause ensures that the policyholder is protected if they are unable to perform the specific duties of their own occupation, even if they may still be able to work in a different capacity or field.

A life insurance policy dividend is the distribution of excess funds accumulated by the insurer on participating policies. This means that when an insurance company has accumulated more funds than necessary to cover claims and expenses, they distribute the excess to policyholders who have participating policies. This is a benefit for policyholders and is not related to the cash value or interest paid on a permanent insurance policy. It is also not a return on investment for stockholders in the company.

Marketing is the best defined function as an insurance company's identifying and selling to potential customers. Marketing involves activities such as market research, advertising, promotion, and sales, which are all aimed at attracting and retaining customers. It involves understanding customer needs, creating awareness about insurance products, and persuading potential customers to purchase insurance policies. By effectively marketing their products and services, insurance companies can reach their target audience and increase their customer base.

A policy owner has the right to change the beneficiary, the payment mode, and the dividend option of their policy. However, they do not have the right to change the dividend schedule. The dividend schedule is predetermined by the insurance company and outlines when and how dividends will be paid to the policy owner. This schedule is typically based on the insurance company's financial performance and cannot be altered by the policy owner.

If an insurer pays an insured $25,000 in lost wages, $45,000 for physicians visits and hospital costs, and $15,000 for physical therapy treatments, and later discovers that the claim was fraudulent, the insured may be fined as much as $170,000. This is because the insured received a total of $85,000 in fraudulent payments ($25,000 + $45,000 + $15,000), and the fine for fraudulent claims is typically double the amount received. Therefore, the insured may be fined $170,000 ($85,000 x 2).

When an applicant reveals conditions that require more information, a physical examination is required. This is because a physical examination allows a healthcare professional to assess the applicant's overall health and determine if there are any underlying medical conditions or risks that may affect their ability to perform certain tasks or activities. By conducting a physical examination, the insurer can gather more information about the applicant's health status and make an informed decision regarding their insurance application.

Substandard life insurance classification carries the highest premium because it is offered to individuals who have a higher risk of mortality due to health issues, risky occupations, or unhealthy habits. Insurers charge higher premiums to compensate for the increased likelihood of paying out a claim. This classification is typically assigned to individuals with pre-existing medical conditions, a history of smoking or drug use, or those engaged in dangerous professions.

Long term care policies can be replaced for various reasons, such as when the insured's condition has improved or when a new policy offers greater benefits. Additionally, if a new policy has a lower premium, it might be more financially advantageous to switch. However, the given answer states that a long term care policy cannot be replaced if the new policy has fewer benefits and a higher premium. This means that even if the new policy is less beneficial and more expensive, it cannot be replaced according to the question.

According to the Employee Retirement Income Security Act of 1974 (ERISA) fiduciary standards, benefit plans are operated for the benefit of plan participants and beneficiaries. This means that the primary focus of the plan is to ensure that the participants and beneficiaries receive the intended benefits and are protected from any potential conflicts of interest. The plan sponsors and employees may also benefit from the plan, but their interests are secondary to those of the plan participants and beneficiaries.

Long-term care (24-hour care) insurance often requires life insurance agents to complete additional training specific to this type of coverage. The requirements vary by state but generally include completing an approved training course before being authorized to sell. Simply holding a life insurance license or paying fees is not sufficient.

Social security disability benefits are not designed to replace the entire amount of the worker's earnings. Instead, the benefits are based on the level of the worker's earnings up to the time of disability.

The agent must submit all of the listed items to the insurer except for a copy of all printed communications used for the presentation. This means that the agent is required to provide the insurer with a copy of the signed replacement notice, if replacement is involved; a statement signed by the applicant as to whether replacement of existing life insurance is involved in the transaction; and a signed statement as to whether or not the agent knows a replacement is involved in the transaction. However, they do not need to submit copies of all printed communications used for the presentation.

HMOs are required to provide prescription drugs as part of their services. This means that individuals who are part of an HMO can receive medications prescribed by their doctors. HMOs are also required to provide emergency services, preventive services, and physicians services. These services ensure that individuals have access to immediate medical attention in emergencies, receive preventive care to maintain their health, and can consult with physicians for diagnosis and treatment. Therefore, the correct answer is prescription drugs, as HMOs are obligated to cover this service.

Partial disability refers to a situation where an employee is still able to work part-time despite having a disability, and they receive lost income through their long-term disability benefit. This means that the employee is not completely unable to work, but their disability affects their ability to work full-time and earn their regular income.

Medicare Part B is the correct answer because it is an optional program that is specifically designed for individuals who are 65 years of age or older. Medicare Part B provides medical insurance coverage for services such as doctor visits, outpatient care, and preventive services. It is important to note that while Medicare Part A is also available to individuals age 65 or older, it is not optional as it provides coverage for hospital care. Therefore, Medicare Part B is the only optional program in the given options that is exclusively for individuals age 65 or older.

Since Jean's healthcare provider is a "service provider," it means that her payment for services goes directly to the provider. This implies that the payment does not go through any intermediaries or third parties, and instead, it is directly received by the healthcare provider. Therefore, the correct answer is that her payment for services goes directly to the provider.

A representation must be made either at the time of or before policy issuance in an insurance contract. This means that the insured individual must provide accurate and truthful information about themselves or the insured property either when applying for the policy or during the underwriting process. It is important for the insurance company to have accurate information in order to assess the risk and determine the appropriate premium for the policy.

Insurers providing Medicare supplement insurance may offer the core benefit plan without any additional benefits. This means that the insurance coverage will only include the basic benefits provided by Medicare and will not include any additional coverage or benefits.

There are two types of accidental injury policies: Accidental Means and Accidental Results. Under an Accidental Results policy, the cause of injury may or may not be accidental, but the resulting injury must be accidental to qualify. This means only the result needs to be accidental, which matches option A. Option D is a restatement of option A’s meaning but is less precise legally.