Texas State Exam - Life and Health Insurance

Questions and Answers

An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called?

A Joint Life annuity

A Straight Life annuity

An Installment Refund annuity (correct)

A Cash Refund annuity

One becomes eligible for Social Security disability benefits after having been disabled for how long?

3 months

6 months

12 months

5 months (correct)

Which statement made by the producer would be correct for a potential client, age 40, looking to purchase a Whole Life policy that accumulates cash value faster?

Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating

20-Pay Life accumulates cash value faster than Straight Life (correct)

Straight Life accumulates faster than Limited-pay Life

20-Pay Life and Straight Life accumulate cash value at the same rate

Who makes the legally enforceable promises in a unilateral insurance policy?

Insurance company Signup and view all the answers

The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of what?

The initial premium Signup and view all the answers

Which parts of a life insurance policy are guaranteed to be true?

Warranty Signup and view all the answers

A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies types of health care services covered. Which of the following is typically excluded?

Experimental and investigative services Signup and view all the answers

If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital expenses?

Medicare Supplement Signup and view all the answers

What happens to the claim a beneficiary submits if the insured dies while converting group life insurance to an individual policy?

Full benefits are payable under the Master contract Signup and view all the answers

All of the following are limited benefit plans EXCEPT?

Life insurance policies Signup and view all the answers

A physician qualifies for a $7,000/month Disability Income policy. What rider would allow him to increase his policy benefit as his practice and income grow?

Guaranteed Insurability Option rider Signup and view all the answers

An agent whose license has been revoked is required to?

Wait at least five years before applying for a new license Signup and view all the answers

The benefits under a Disability Buy-Out policy are?

Payable to the company or another shareholder Signup and view all the answers

The Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for?

Health information Signup and view all the answers

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted when the policy is discontinued Signup and view all the answers

What MUST an insurance company use in its advertising?

Its true corporate name Signup and view all the answers

An accident policy will most likely pay a benefit for a(n)?

Off-the-job accident Signup and view all the answers

M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT?

Free-look period has expired Signup and view all the answers

What violation may be indicated if a policyowner cash surrenders a Universal Life insurance policy in its early years?

Anti-Money Laundering Violation Signup and view all the answers

Which of these do NOT constitute policy delivery?

Policy issued with a rating Signup and view all the answers

What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits?

2 Signup and view all the answers

An agent who tells a client that dividends are guaranteed may be guilty of?

Misrepresentation Signup and view all the answers

Which statement regarding a Key Employee Life policy is NOT true?

The beneficiary is named by the key employee Signup and view all the answers

A policyowner's rights are limited under which beneficiary designation?

Irrevocable Signup and view all the answers

Agent J takes an application and initial premium from an applicant. The insurance company returns the check back because it was made out to J instead of the company. What action should J take?

Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company Signup and view all the answers

Variable Whole Life Insurance can be described as?

Both an insurance and securities product Signup and view all the answers

A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary?

Her group health plan Signup and view all the answers

Medicare is?

A hospital and medical expense insurance program Signup and view all the answers

T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take?

Increase her policy's coverage amount Signup and view all the answers

All of the following statements about health coverage for newborns are correct EXCEPT?

Coverage during the first year is limited to congenital defects Signup and view all the answers

Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?

Entire Contract Provision Signup and view all the answers

An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to?

$25,000 individual whole life policy Signup and view all the answers

M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. What type of policy has M purchased?

Modified Premium Life Signup and view all the answers

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT?

Beneficiary's age Signup and view all the answers

Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?

Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company Signup and view all the answers

Which of the following statements is CORRECT about the period in which a Term Policy can be converted?

It varies according to the contracts Signup and view all the answers

If, at the time of an insured's death, the insurance company discovers that the insured's age was misstated on the application for life insurance, the company will most likely?

Pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age Signup and view all the answers

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured Signup and view all the answers

An assignment of benefits of a Health Policy?

Transfers payments to someone other than the policyowner Signup and view all the answers

What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)?

Dread disease insurance Signup and view all the answers

K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income?

Disability Income Signup and view all the answers

M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. What type of beneficiary is his son?

Revocable Signup and view all the answers

The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured?

Is blinded in an accident Signup and view all the answers

Which of the following policy features allows an insured to defer current health charges to the following year's deductible instead of the current year's deductible?

Carryover provision Signup and view all the answers

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

Life Annuity with Period Certain Signup and view all the answers

On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. What action should the producer take when the policy is delivered on August 20?

Collect initial premium along with a signed health statement Signup and view all the answers

Which of the following costs would a Basic Hospital/Surgical policy likely cover?

Surgically removing a facial birthmark Signup and view all the answers

Which of these statements concerning an Individual Straight Life annuity is accurate?

Payments are made to an annuitant for life Signup and view all the answers

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?

Reinstatement Provision Signup and view all the answers

What is the Reinstatement provision?

A provision that allows a lapsed policy to be reinstated within a certain time period without requiring evidence of insurability. Signup and view all the answers

After the expiration of COBRA laws, which of the following statements is TRUE?

She does NOT need to provide evidence of insurability Signup and view all the answers

Which option enables the policyowner to sell the policy for more than its cash value?

Life settlement contract Signup and view all the answers

Who can purchase a plan through the Marketplace?

Any legal resident except those incarcerated Signup and view all the answers

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

Social Security Signup and view all the answers

Which of these require an offer, acceptance, and consideration?

Contract Signup and view all the answers

How does a typical Variable Life Policy investment account grow?

Through mutual funds, stocks, bonds Signup and view all the answers

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the?

Applicant's physician Signup and view all the answers

After the initial enrollment period, an HMO must hold an open enrollment period of how many days at LEAST once in every 12-month period?

31 Signup and view all the answers

Which of the following is NOT included in the policy face?

Exclusions Signup and view all the answers

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Aviation exclusion Signup and view all the answers

In a life insurance policy, which provision states who may select policy options and designate beneficiaries?

Owner's Rights Signup and view all the answers

A Renewable Term Policy is renewable at the option of the?

Insured Signup and view all the answers

Which of these is considered a true statement regarding Medicaid?

Funded by both state and federal governments Signup and view all the answers

Which is true concerning a Variable Universal Life policy?

Policyowner controls where the investment will go and selects the amount of the premium payment Signup and view all the answers

In life insurance, the needs approach is used mostly to establish?

How much life insurance a client should apply for Signup and view all the answers

A life insurance illustration is NOT required to include the?

Company's mortality table Signup and view all the answers

Which of these characteristics is consistent with a Straight Life policy?

Premiums are payable for as long as there is insurance coverage in force Signup and view all the answers

Under the Texas insurance code, which of the following statements about the Suicide clause is CORRECT?

Suicide may not be a defense against payment after the second year Signup and view all the answers

Which of the following best describes a contingent beneficiary?

Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured Signup and view all the answers

A Business Disability Buyout plan policy is designed?

To pay benefits to the Corporation or other shareholders Signup and view all the answers

Term insurance has which of the following characteristics?

Expires at the end of the policy period Signup and view all the answers

An agent MUST do which of the following during a sales presentation for a participating life insurance policy?

Include a statement that dividends are NOT guaranteed Signup and view all the answers

In regards to representations or warranties, which of these statements is TRUE?

If material to the risk, false representations will void a policy Signup and view all the answers

The Commissioner of Insurance may issue a temporary agent's license for a maximum of how many days?

90 Signup and view all the answers

A stock insurance company is owned by its?

Stockholders Signup and view all the answers

J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?

The gross premium is higher on a monthly payment mode as compared to being paid annually Signup and view all the answers

What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?

Family Maintenance Policy Signup and view all the answers

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

Collateral assignment Signup and view all the answers

Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured?

PPO Signup and view all the answers

Basic Hospital and Surgical policy benefits are?

Lower than the actual expenses incurred Signup and view all the answers

An employer that offers a qualified retirement plan to its employees is eligible to?

Make tax-deductible contributions to the plan Signup and view all the answers

What action can a policyowner take if an application for a bank loan requires collateral?

Assign policy ownership to the bank Signup and view all the answers

Which of the following provisions specifies how long a policyowner's health coverage will remain in effect if the policyowner does not pay the premium when it is due?

Grace Period Signup and view all the answers

The Consideration clause in a life insurance contract contains what pertinent information?

Amount of premium payments and when they are due Signup and view all the answers

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000 Signup and view all the answers

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?

$0 Signup and view all the answers

The clause identifying which losses resulting from an accident or sickness are insured by the policy is called the?

Insuring clause Signup and view all the answers

What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?

Whole Life Signup and view all the answers

What is the purpose of the Time of Payment of Claims provision?

Prevents delayed claim payments made by the insurer Signup and view all the answers

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

Inability of the insured to perform more than 2 Activities of Daily Living (ADLs) Signup and view all the answers

Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

Conversion privilege Signup and view all the answers

The Insurance Commissioner may examine the records of an insurance company in order to?

Determine the solvency of the company Signup and view all the answers

What does Medicare Parts A and B cover?

Part A covers hospitalization; Part B covers doctor's services Signup and view all the answers

What is issued to each employee of an employer health plan?

Certificate Signup and view all the answers

A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?

Universal Life Signup and view all the answers

When a life insurance policy exceeds certain IRS table values, the result would create which of the following?

Modified Endowment Contract (MEC) Signup and view all the answers

Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?

The maximum amount considered eligible for reimbursement by an insurance company under a health plan Signup and view all the answers

K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

$20,000 death benefit Signup and view all the answers

Which of the following are NOT managed care organizations?

Medical Information Bureau (MIB) Signup and view all the answers

K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered?

Guaranteed renewable Signup and view all the answers

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Universal Life Signup and view all the answers

Study Notes

Annuities and Insurance Policies

An installment Refund annuity continues payments to a beneficiary if the annuitant dies before receiving the contract value.
A whole life policy, such as the 20-Pay Life, accumulates cash value faster than a Straight Life policy.
In a unilateral insurance policy, legally enforceable promises are made by the insurance company.

Social Security disability benefits become available after a waiting period of 5 months.

Policy Provisions and Rights

The Consideration clause specifies that a policyowner's consideration consists of a completed application and the initial premium.
Warranties in insurance policies are guaranteed to be true.
An irrevocable beneficiary designation limits the policyowner's rights.

Healthcare and Medicare

Comprehensive major medical health insurance typically does not cover experimental and investigative services.
For retirees on Medicare needing hospital care, a Medicare Supplement policy is the best option to cover excess expenses.

Insurance Coverage Considerations

Full benefits under a group life insurance master contract are payable if the insured dies while converting to an individual policy.
Group term life insurance can be converted into a $25,000 individual whole life policy after termination of employment.
Surrender charges in a life policy with a rear-end loaded provision are deducted when the policy is discontinued.

Agent and Policyholder Responsibilities

An agent must submit a properly completed application and initial premium to the insurance company for coverage to take effect.
If an agent accepts a check made out to himself instead of the insurance company, he must return it and collect a new check.

Coverage Specifics

Variable Whole Life Insurance combines both insurance and securities investment features.
Dread disease insurance provides coverage for specific illnesses such as cancer or stroke.

Health Policies and Rights

Assignment of benefits in a health policy allows payments to be transferred to someone other than the policyowner.
A disability income policy covers loss of income due to inability to work from illness or injury.

Key Features and Provisions

The Carryover provision allows insured individuals to defer current health charges to the next year’s deductible.
A Life Annuity with Period Certain guarantees income payments for the annuitant’s lifetime, with payments to a beneficiary if the annuitant dies early.

Final Observations

The Reinstatement provision allows coverage to be reestablished after policy lapse due to nonpayment.
Legal residents, except those incarcerated, can purchase a health plan through the Marketplace.### Insurance Fundamentals
Insurance policies can be tied to various financial instruments such as mutual funds, stocks, and bonds, and may also relate to the price of gold or Treasury Bills.
The Medical Information Bureau (MIB) allows sharing of applicants' medical information primarily with the applicant's physician.

Health Maintenance Organization (HMO)

After the initial enrollment period, an HMO is required to hold at least one open enrollment period of a minimum of 31 days annually.

Policy Components

The exclusions section is not included in the policy face, while the name of the insured and insurer, as well as the Free Look provision, are included.
A "renewable term policy" gives the insured the option to renew, not the owner or company.

Life Insurance Policies

Guaranteed Insurability riders are needed for students pilots, emphasizing the importance of understanding exclusions related to aviation.
Owner's rights in a life insurance policy allow the policy owner to choose options and beneficiaries.

Medicaid and Variable Policies

Medicaid is funded by both state and federal governments, catering to low-income individuals, including those receiving Social Security disability benefits.
In Variable Universal Life policies, the policy owner has control over investments and premium payments.

Determining Insurance Needs

The needs approach in life insurance helps determine the necessary coverage amount for a client.
Life insurance illustrations do not require the company’s mortality table to be disclosed.

Policy Characteristics

Straight Life policies require premiums to be paid throughout the life of the coverage.
The Suicide Clause in Texas must ensure that insurance benefits cannot be denied for suicides occurring after the second year.

Beneficiaries and Policy Assignments

A contingent beneficiary receives policy proceeds if the primary beneficiary passes away before the insured.
Collateral assignments allow a policy owner to use their life insurance policy as security for a bank loan.

Hospital and Surgical Insurance

Basic Hospital and Surgical policies often provide benefits lower than the actual incurred expenses.

Retirement Plans

Employers can make tax-deductible contributions to qualified retirement plans.

Claims and Provisions

The grace period dictates how long coverage remains effective if a premium is unpaid.
The consideration clause details the amount of premium payments and their due dates within a life insurance contract.

Claims Payments

If a person with a life insurance policy dies by suicide, the insurer pays the face value of the policy minus any loans, provided it’s not within the exclusion period.
A Family Maintenance Policy provides income to beneficiaries for a specified period following the insured's death.

Medicare Coverage

Medicare Parts A and B cover hospitalization and doctor’s services respectively, while part D covers prescription drugs.

Educational Aspects

Certificates are issued to employees as evidence of insurance under employer-sponsored health plans.
Universal Life policies allow for adjustable premiums and death benefits, catering to changing coverage needs.

Long-term Care and Managed Care

Long-term care riders in life policies pay benefits if the insured cannot perform two or more Activities of Daily Living (ADLs).
Medical Information Bureau (MIB) is not classified as a managed care organization unlike HMOs and PPOs.

Insurance Classes

Guaranteed renewable policies ensure premiums can only be increased for an entire class of insured individuals, making them a stable option for consumers.

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Description

Prepare for the Texas State Exam with this comprehensive practice exam featuring 200 questions focused on Life and Health Insurance concepts. This quiz will help reinforce your understanding of annuities, their types, and key terminologies crucial for passing the exam. Test your knowledge and get ready for success!