General Life Insurance Basics, Insurable Interest, Parties and Regulations

1. All of the following are parties to a life insurance contract

EXCEPT:
I.

Insurer

II.

Underwriter

III.

Beneficiary

IV.

Owner

V.

Insured
a. II only
b. III only
c. II, III, and V
d. All are parties to a life insurance contract

A beneficiary and the underwriter are not parties to a life insurance contract. An insured may be,
but is not necessarily a party. A wife (owner) can take a policy out on her husband (insured), yet
the husband is not a party to the insurance contract.
2. Which of the following will have to meet an insurable interest requirement in order for a
policy to issue?
a. Beneficiary
b. Insured
c. Insured's dependents
d. All of the above
e. Both a and b only
In addition to the information about the applicant for insurance, underwriters will also look at
the named beneficiary in the policy in order to determine whether or not there is an insurable
interest. If there is not, the application for life insurance could be rejected.

Types of Life Insurance Policies and Individual versus Group Life Insurance
3. Jack and his wife Lyn just purchased a home with a 15-year mortgage. Wanting to make
sure that Lyn would be able to pay off the mortgage balance in the event of Jack's death,
Jack had a "temporary" need for life insurance. What type of policy should Jack purchase?
a. Whole Life Insurance
b. Term Life Insurance

c. Variable Life Insurance

d. A Viatical Settlement
Given Jack's temporary need for 15 years of coverage to pay off the mortgage balance, the best
choice for Jack would be a 15-year term life insurance policy as the premiums would likely be
far less than a permanent policy, and once the mortgage is paid off in 15 years, this particular
need for Jack will no longer exist.
4. Which type of life insurance is considered to be more risky based on its investment
component?
a. Level Term Life Insurance
b. Whole Life Insurance
c. Decreasing Term Life Insurance
d. Variable Life Insurance
Because the underlying investments are equities such as mutual funds, variable life insurance
policies are considered to be securities. As these investments move up and down with the
movements of the equities market, variable life insurance is considered to be more risky than
other types of policies as there is the probability that the value of the policy's investment
component could decrease.

Life Insurance Application and Underwriting

5. Life insurance underwriters look at a variety of factors when determining the acceptance
of an applicant. These factors can include:
a. Health history
b. Occupation
c. Hobbies
d. All of the above
e. Both a and b only
Underwriters look at many factors that can deem an applicant for life insurance as being more
or less risky. These criteria can include hobbies, occupation, lifestyle, gender, age, income, and
many more.
6. Which of the following needs to have an insurable interest for an underwriter to issue an
insurance policy?
a. Owner
b. Insurer
c. Beneficiary
d. Insured
The person or entity that is the policy beneficiary will have an effect on the acceptance of the
policy. This is because the beneficiary must be at risk of suffering some type of loss should the
insured pass away.

Selling Life Insurance, Determining Coverage Needs and Issuance and Delivery
7. Which of the following deals with a set of relationships where one person is authorized to
act on behalf of another in order to create a legal relationship with a third party.
a. Law of principals
b. Law of agency
c. Law of third parties
d. None of the above
The law of agency regulates the relationship between agents and principals as well as agents and
third parties with whom they deal on the principal's behalf.
8. All of the following can be considered life-changing events that could result in a change in
the amount of life insurance coverage needed EXCEPT:
I. Birth of a child
II. Divorce
III. Marriage
IV. Change in job title
a. I, II, and III
b. II and III only
c. I only
d. IV only
While a new job with a drastic change in income and / or hazardous duties could result in a
change of life insurance coverage needs, simply changing job titles will not.

Life Insurance for Business Owners and in Estate Planning

9.

Term life insurance should always be used in buy / sell agreements.

True
False

Permanent life insurance should be used with buy / sell agreements in order to ensure that the
insured will not need to re-qualify for life insurance after a certain amount of time elapses.
10. Corporate owned life insurance proceeds may be used for the following purposes:
I. To find, replace, and train a new employee or executive
II. To fund other corporate debt obligations
III. To redeem the deceased employee's stock

a. III only

b. I and III only

c. All of the above
d. None of the above
There are many purposes in which the proceeds of corporate owned life insurance may be used.

Policy Components, Riders and Non-forfeiture Options

11.

What is the most common component in all life insurance policies?

a. Living benefits
b. Waiver of premium
c. Death benefit
d. Cost of living rider

While there are many different options and riders on life insurance, all policies possess a death
benefit.
12. Permanent life insurance policies always have two components. What are they?
I. Death benefit
II. Cash value
III. Living Benefits
IV. Conversion Benefit

a. I, II, III and IV

b. I, II and III
c. II and IV
d. I and II
Permanent life insurance policies consist of both a death benefit component and a cash value
component.

Claims, Settlement Options and Tax Concepts

13. A beneficiary on a life insurance policy will receive what value upon the death of the
insured?
a. Cash value
b. Surrender value
c. Investment value
d. Death benefit
The death benefit is the amount that is paid to the policy beneficiary upon the death of the
insured. Should a permanent life insurance policy holder decide to cancel the policy prior to the
insured's death, they will receive the amount of the cash surrender value.
14. John, who had a life insurance policy with a death benefit, died on August 31st, after a long

a. No, the agent filed the paperwork within 30

days of the claim.
b. Yes, the claim was not settled within 30
days of the claim.
c. No, there are suspicions around the death of
John.
d. Yes, the claim was not settled within 15
days of the claim.
Although it typically takes approximately two weeks to settle death benefit claims, insurance
companies are required to settle such claims within 30 days. Some claims may require additional
time if they require additional investigation. Here, there is nothing suspicious about John's
death.

Living Benefits and Viatical and Life Settlements

15. Which of the following is a rider that allows a terminally ill person to access at least a
portion of the death benefit proceeds prior to death?
a. Waiver
b. Living benefit
c. Supplement
d. Addendum
A living benefit on a life insurance policy is typically a policy rider that allows an insured who
has a qualifying terminal illness to access some or all of the death benefit proceeds in order to
pay medical bills or other financial obligations. The death benefit proceeds on the policy will be
reduced by the amount that is accessed by the insured.
16. Living benefits on a life insurance policy can be typically be accessed via:
a. Lump sum
b. Regular installments
c. Loan
d. All of the above
e. Both a and b
The living benefits that are accessed from a life insurance policy can typically be taken out
either in one lump sum amount or they could be received via regular installments. With the
installment method, the insured may wish to use these funds to pay his or her ongoing monthly
bills.

General Health Insurance Basics, Regulation and Social Health Insurance

17. The insured party has no part in determining the wording of an insurance contract. In this
respect, insurance contracts are considered to be __________.

a. Contracts of Adhesion
b. Contracts of Forbearance
c. Contracts by Regulation
d. Contracts by Law
If a contract contains unclear wording, then a court will interpret the language used against the
writer of the contract - unless the wording that is used is required by law to be stated in a
specific way.
18. A(n) __________ in an insurance contract is a statement by the issuing insurance company
that sets out the essential element of insurance - to pay for losses covered in the policy.
a. Beneficiary designation
b. Premium amount
c. Insuring clause
d. Rider
This promise of covering losses is in exchange for the premium that is paid by the insured and
the compliance with the policy terms.

Types of Health Insurance Policies and HMO and PPO

19.

Which of the following is not a form of health insurance?

I. Dental insurance
II. Vision insurance
III. Disability insurance
IV. Long-term care insurance

a. I only
b. II only
c. All of the above
d. None of the above
All of the above are types of health insurance policies.
20. A business client is looking for ways to decrease its monthly premiums. To get down to the
premium level sought after by the company, the agent realizes they have to go to a high
deductible health plan. As part of your advice to the business, what should you include in
your discussion?
a.
HMO
b.
PPO
c.
POS

d.
HSA
Health savings accounts (HAS) are used with high deductible health insurance policies. With an
HSA, money that is saved on the premium may be put into the account and then funds are used
for certain medical fees. Because the funds in the HSA account can be used for medical services,
participants often use them for un-covered procedures such as chiropractic visits or other healthrelated services that are not covered by their insurance policy.

Health Insurance Policy Components and Exclusions

21. The components of a long-term care insurance policy include all of the following EXCEPT:
a. Elimination period
b. Benefit amount
c. Own occupation
d. Benefit duration
Own occupation is a type of benefit trigger that is found in a disability insurance policy, not in
long-term care insurance policies. An elimination period in a long-term care insurance policy is
the number of days that an insured must pay for their care after a qualifying claim, but before
benefits begin to pay (such as with a deductible). The benefit duration in a long-term care policy
states how long benefits will be paid to an insured, and the benefit amount may be stated either
as a daily or monthly amount. (Some recent long-term care insurance plans also offer a lumpsum benefit payout option).
22. When constructing a major medical insurance policy, several criteria must be established,
including:
a. Policy deductible
b. Maximum out-of-pocket amount
c. Elimination period
d. All of the above
e. Both a and b only
While major medical insurance policies typically have high deductibles, these must be
established in the policy as well as the maximum amount of out-of-pocket costs that will be paid
by the policy holder. The elimination period is not part of a major medical insurance policy.

Selling Health Insurance, Issuance and Delivery and Tax Considerations

23. As a marketing tool, Ted, a health insurance agent, offered to send an applicant and his wife
on a weekend vacation to a local resort to induce the applicant to purchase a policy. Is this
practice permitted and, if not, what is it called?
a. No; Misrepresentation
b. No; Twisting
c. Yes; it is perfectly acceptable

d. No; Rebating
Rebating is the act of offering an applicant an inducement to purchase insurance. It is prohibited
as an unfair trade practice. Another example would be returning a portion of the applicant's
policy premium from the agent's commission.
24. An agent is in need of generating business. He gets an idea of asking his client to let his
policy lapse so that the agent can sell him a new similar policy. Is this permissible and, if
not, what is this action called?
a. No; Rebating
b. No; Bait and switch
c. No; Twisting
d. Yes; it is perfectly acceptable
Twisting involves an agent suggesting that an individual let their current insurance coverage
lapse in order to purchase a new policy, typically with similar benefits. It is a prohibited activity.
In this case, the new policy does not necessarily benefit the client, however, the agent will likely
receive a commission on the sale of the new policy.

Deductibles and Copayments

25. A __________ is the amount that an insured person is expected to pay for a medical
expense at the time of the visit.
a. Deductible
b. Reimbursement
c. Corridor
d. Copayment
A copayment is the amount or portion of the total cost that is the patient's responsibility upon
receiving a medical service such as an annual check-up.
26. The "deductible" in a long-term care insurance policy is referred to as the __________.
a. Deductible
b. Coinsurance
c. Elimination period
d. Copayment
A long-term care insurance policy's elimination period is the number of days that the insured
must pay for services out-of-pocket until the insurance coverage begins to pay.

Health Insurance Claims and Indemnity vs. Reimbursement

27. On a health insurance claim form, the exact procedures that were performed for the insured
are represented by standard codes that are referred to as __________.
a. RVU codes
b. AMA codes

c. HCPCS codes
d. CPT codes
Each CPT also corresponds to one or more International Classification of Diseases (ICD-9)
codes. For example, 99214 may be used for a physical and 90658 indicates a flu shot.
28. What type of notice is used to show all of the services or supplies that were billed to
Medicare during a 3-month period, what Medicare paid, and what the patient may owe the
provider?
a. MSN
b. CPT
c. OPPS
d.
HCPCS
A MSN, or Medicare Summary Notice, can also be checked for any changes to a patient's
claims.

Disability and Related Insurance and Seniors and Special Needs Individuals
29. As a professional surgeon, which type of disability coverage would offer the most liberal
definition of benefits triggers for the policy holder in terms of benefit receipt if the insured
were to break their hand?
a. Own occupation
b. Employer provided
c. Social Security
d. Business overhead
Own occupation offers the most liberal definition of disability as the insured is considered to be
totally disabled if he or she is unable to engage in the principal duties of his or her own
occupation.
30. Social Security should be considered one's primary source of disability income coverage.
True
False
Although Social Security may provide disability benefits, in the majority of cases, these benefits
are inadequate. Therefore, Social Security disability benefits should only be used to supplement
an individual disability income policy.