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California Life, Accident, and Health Licensing Exam Questions
and Answers 2024
Co-insurance - ☑☑The policy provision which requires the insurer and the insured to share in the cost of services rendered Exclusion ratio - ☑☑The formula which is used by the IRS to determine how much is taxable to an annuitant during the pay out period. Occupational policy - ☑☑When a disability income policy provides coverage for injuries which occur on and off the job Most disability income policies are non occupational, meaning - ☑☑They only cover the insured if they become disabled while away from work. Self employed individuals doesn't have - ☑☑workers compensation coverage. They need coverage both on and off the job (occupational). A life agent who offers for sale or sells any financial product on the basis of its treatment under the MediCal Program must provide - ☑☑The Notice Regarding Standards for Medi-Cal Eligibility. Must be signed by applicant. A widow or widower without any children is eligible for social security survivors benefits at age - ☑☑ 60 A surviving spouse is eligible for social security survivor's benefits at age - ☑☑ 60
An authorized, or admitted carrier (insurer) - ☑☑one which is under compliance with the California Insurance Code (CIC) and can operate legally in California Which type of life insurance utilizes the "level premium concept" - ☑☑Traditional whole life Disability income policy proceeds must be paid out at least - ☑☑monthly What life insurance rider will pay a monthly benefit to the insured when they become disabled - ☑☑The disability income rider. It is a type of health (disability) insurance Dread (Specified) Disease policies, such as cancer insurance, covers - ☑☑Treatment for one specific disease The benefit paid out for a residual disability in a disability income policy is based upon - ☑☑a loss of a minimum of 20% of income Agent may be either - ☑☑Captive (Exclusive) or independent Captive agents - ☑☑agents who agree by contract to represent only one insurer in the sale of insurance Independent agents - ☑☑usually self-employed and often represent several insurance companies Under state law, agents must have at least - ☑☑one appointment in order to keep their license active Agents are prohibited from engaging in any of the following activities - ☑☑1. using a business name that implies that they are an insurer
- advertising on behalf of a non-admitted insurer
- offering free insurance as an inducement to purchase or sale Under a group insurance plan a certificate of insurance is issued to - ☑☑the participants, usually employees. The policy owner, usually employer, gets the master policy
Life insurance death benefit policy proceeds paid from an insurer are - ☑☑Federal tax free when paid to a beneficiary When an insured with a cash value elects to take the reduced paid-up non-forfeiture option, the cash value will be - ☑☑used to buy him a new hole life policy with a reduced face amount that is paid-up for life The traditional net cost method of evaluating the true cost of insurance does not take into consideration - ☑☑the time value of money The primary difference between using the interest adjusted net cost method and the net cost method when evaluating the true cost of a life insurance policy - ☑☑time value of money Dividends may never be - ☑☑guaranteed All are true about "stock" insurance companies - ☑☑1) Dividends are taxable
- The stockholders own the company
- They may pay dividends to share holders out of divisible surplus
- they issue non-participating policies Under the Family and Medical Leave Act, how many weeks of leave must be provided per year for a qualifying person - ☑☑12 weeks ESOP invest in - ☑☑Stock of the employer Riders may be added to a policy at issue for an additional premium charge. Examples of riders - ☑☑1) accidental Death benefit
- Cost of living
- Waiver of Premium as used in the CIC the word "shall" is mandatory and the word "may" is - ☑☑permissive Agents own a policyholder or a prospective policyholder a duty of - ☑☑honesty, good faith, and fair dealing
Insurance underwriters are responsible for - ☑☑risk selection and classification. The goal of the underwriter is to make sure that - ☑☑the insurer makes a reasonable underwriting profit at the premium rate charged for the risk accepted Long Term Care insurance include - ☑☑Skilled nursing, custodial care, home health care but not convalescent care Medicare claim, the first step in the process is - ☑☑the individual's provider files the claim with a local Medicare carrier In the original Medicare program, it is the provider which is responsible for - ☑☑submitting the claim 403(b) are available to - ☑☑employees of public educational institutions and certain non- profit charitable or religious organizations. Contributions are made in before tax dollars on a payroll deduction basis Renewable term has a level death benefit and - ☑☑increasing premium. Each time the policy renews, the premium will go up The automatic premium loan rider will go into effect at the end of - ☑☑the grace period. It can only be added to a cash value policy and was created to keep the policy in force if the insured forgets to pay their premium HMOs are required to cover all of the following - ☑☑preventive services, physician services, emergency services. Except prescription drugs Insurance contracts must identify 6 required specifications - ☑☑1) the parties between whom the contract is made
- the property or life insured
- the interest of the insured in the property insured
- the risks (perils) insured against
80% after 6 years and 100% after 7 years Three types of ordinary life insurance - ☑☑WET Whole life Endowment Term A disability recurs within 90 days, the insurer will waive waiting (elimination) period. Nonetheless, since the disability recurs 6 months later, a new - ☑☑elimination (waiting) period and benefit period will apply. A new policy need not be written If an employee is receiving benefits under a policy and still able to work, they have a - ☑☑partial disability A guaranteed renewable disability policy is one where the insurer - ☑☑has the right to change the premiums, but may not change any of the policy terms Accidental death benefit rider - ☑☑Double indemnity If the owner of the policy has named on irrevocable beneficiary, they cannot - ☑☑assign the policy without their consent underwriting risk classification - ☑☑preferred, standard, non-standard Frequency pricing principle - ☑☑Determining how frequently or how often a loss will occur within a group of individuals, how these loses will effect rates Non medical life insurance applications - ☑☑usually buy low amount of coverage, need not take a physical exam, usually young. but they have to answer medical questions on the application If a person returns a variable annuity invested in mutual funds during the free look, they will receive a return of - ☑☑the value of the account on the date of cancellation
In an insurance contract, a representation qualifies as - ☑☑an implied warranty If a whole life policy is being kept in-force by the Waiver of Premium rider - ☑☑the cash value will continue to increase as if the insured paid the premium Roth IRA - ☑☑Contributions are not tax deductible, qualified distributions are not taxable A qualified distribution for Roth IRA is - ☑☑one made to a participant who has been participating in the Roth for at least 5 years and is at least age 59 and a half When a disability income policy provides occupational coverage and the insured has 2 jobs, the insurer will base the premium on - ☑☑the most hazardous job AD&D (Accidental Death and Dismemberment) insurance - ☑☑is not a life insurance AD&D (Accidental Death and Dismemberment) insurance - ☑☑has both a Capital and Principal sum. Principal sum pays a lump sum for accidental death. Capital Sum pays a lump sum for accidental dismemberment Principle of indemnity - ☑☑the insured should not profit from a loss or damage but should be returned (as near as possible) to the same financial position that existed before the loss or damaged occurred Managing General Agents (MGA) - ☑☑Fire and Casualty broker/ agent or a life agent who represents one or more admitted insurers and manages the transaction of insurance by those insurers in a specific territory Surplus Lines Broker - ☑☑a person licensed by the Commissioner to solicit and place insurance with non-admitted insurers when the insurance cannot be procured from admitted insurers Proof of loss - ☑☑must be provided in order to collect on a valid claim
Medicare Supplement insurance policies - ☑☑Insurers may offer plans that contain only the "core" benefits. (Plan A) There are 12 standardized Medicare Supplement policies, identified as - ☑☑Plans A through L Medicare Supplements are sold by private insurers to supplement Medicare, which is generally only available to those who are at least age - ☑☑ 65 In disability income insurance in order for bodily injury to be classife3d as accidental - ☑☑the cause may be intentional but the result must be accidental Which of the following best illustrates the Principle of Indemnity - ☑☑Insurable Interest Factors used to underwrite group medical expense insurance policies - ☑☑the location of the group, term of the probationary period, the age and gender of those making up the group morbidity - ☑☑the likelihood of illness or injury The minimum number of employees which must be covered in a group life insurance plan in California is - ☑☑ 2 Persistency - ☑☑the continued existence of a policy being in force. At what point in time may a representation be altered or withdrawn - ☑☑Prior to the insurance going into effect only During the waiting (elimination period) - ☑☑the insured is not eligible for benefits. They have to wait after becoming totally disabled before receiving any benefits Concealment - ☑☑The failure to disclose a material fact that a party knows and ought to communicate Concealment, whether intentional or not, entitles - ☑☑the injured party to rescind (void) the contract
A material fact is on that is important to the - ☑☑underwriter Fraud - ☑☑1) claims forms must contain a warning that false representations are subject to a penalty of perjury
- requires the intent to deceive
- every admitted insurer must maintain a fraud unit to investigate possible fraudulent claims An agent can only provide this statement during a tax qualified Long Tern Care insurance policy presentation - ☑☑The plan may receive federal and state tax advantages The Doctrine of Utmost Good Faith - ☑☑All parties, including the insurer, the agent and the insured, are honest and acting in good faith. The Doctrine of Adhesion - ☑☑since the insurer wrote the contract, any vague language will be construed in favor of the insured, since they had no choice when they bought it. The Doctrine of Reasonable Expectations reinforces - ☑☑the Doctrine of Adhesion. Waiver and Estoppel are legal doctrines that state - ☑☑once an insurer gives up the right to deny a claim (a waiver), they can no longer deny it (estoppel) An insurer who provides for all of its liabilities and purchases reinsurance on all of its outstanding risks is considered to be - ☑☑Insolvent On a fully contributory group disability income policy, the benefits payable to disabled employees are - ☑☑not taxable On what type of Life insurance is the beneficiary also the policyholder - ☑☑Credit Life Survivorship life - ☑☑Policies pays a death benefit when the second insured person dies Equity Indexed Annuity - ☑☑an annuity with a fixed minimum rate of return with the potential for excess stock market like returns
An avocation is a another name for - ☑☑a hobby The Facility of Payment clause in a group life policy allows the policy proceeds to be paid to - ☑☑The guardian of a child who is the beneficiary The Facility of Payment clause - ☑☑allows the insurer to elect to choose who to pay the policy proceeds to if the beneficiary named in the policy is a minor, or is deceased Features of major medical insurance - ☑☑Deductibles, co-insurance, high lifetime limits Capitation fee - ☑☑also known as a per head fee. A fee that some HMO's pay their providers to service their subscribers Under the CIC, if an agent receives a notice of claim, they are supposed to - ☑☑send the insured proper forms A stock insurer - ☑☑owned by stockholders who have the right to any dividends declared and also have the right vote for the board of directors CLHIGA (California Life and Health Insurance Guarantee Association) covers - ☑☑disability income policies, group term insurance, individual annuities. Not self funded employer plans Best ethical behavior - ☑☑always putting the best interests of clients and policyholders first If a corporation uses life insurance to buy shares under a buy-sell agreement, this is true regarding taxation - ☑☑The IRS will treat the sale of the shares as a loss or gain depending on the purchase and sale price, if the stock is common. COBRA - ☑☑federal law that enable employees covered by group health insurance to continue their group coverage by paying their own premiums, generally for up to 18 months. Job termination for gross misconduct cause no eligibility - ☑☑for COBRA
Mortality tables - ☑☑the annual probability of death Group stop-loss plans does not covered by - ☑☑the Life and Health Insurance Guaranty Fund The commissioner may deny an application for an agent's license, without hearing if - ☑☑the applicant has had a previously issued license revoked with the past 5 years The underwriting department - ☑☑responsible for the evaluation, distribution and selection of risks Annual mode of premium payment has the lowest - ☑☑overall cost for the customer The guaranteed insurability rider - ☑☑allows the insured to purchase additional amounts of life insurance at specific points in the future without having to prove insurability Under the CIC an insured may cover an unmarried child as a dependent on their group life insurance policy up to - ☑☑age 21 Variable annuity premiums may be invested in - ☑☑mutual funds, money markets, fixed income investments Worker Compensation - ☑☑1) it covers occupational injury or sickness
- it requires that employers be responsible for their employees
- there are no time or dollar limits on covered expenses Under the California Insurance Code, anyone who diverts or appropriates customer funds while acting in a fiduciary capacity to their own use is guilty of - ☑☑theft Fiduciary - ☑☑the trust that is placed in an agent with regard to the handling of funds in a capable responsible and honest manner Foreign company - ☑☑An insurance company domiciled in another state but transacting business in California
Optometrist - ☑☑is not a physician Social Security "black-out" period affect - ☑☑Surviving spouse On a Major Medical Expense policy, the purpose of co-insurance is to - ☑☑require that the insured and the insurer share the claim after the deductible has been paid Currently insured under Social Security means - ☑☑a worker must have at least 6 quarters of coverage paid in out of the last 13-quarter period ending with the quarter resulting in their death, disability or retirement. They only currently insured status, they are eligible for only certain reduced benefits. Fully insured status means - ☑☑a person has paid in 40 quarters of coverage. They are eligible for all Social Security benefits. An application for life insurance become part of the Entire Contract - ☑☑when attached to the policy at issue Coordination of Benefits (COB) provision - ☑☑Protect against over insurance. COB - ☑☑If you are covered by more than one Group Medical Expense policies, the one that covers you as an employee is primary and the one that covers you as a dependent is excess A license renewal application - ☑☑filed on or before the last day of the current license period entitles the applicant to continue operating for 60 days after expiration Case value Life insurance policies allow the policy owner to select their choice of 3 non- forfeiture options any time the policy lapses - ☑☑cash surrender, reduced paid up, or extended term. The Federal law COBRA applies to employers with a minimum of - ☑☑20 employees The purpose of a 75% participation requirement on a contributory Group Health insurance plan is - ☑☑to prevent adverse selection
If non-contributory, meaning the employer pays it all, then - ☑☑100% of those eligible must enroll in the group insurance plan Buy-Sell Agreement - ☑☑When a corporation enters into an agreement with their shareholders to buy their shares back in the event of their death A life Agent represents - ☑☑Insurance Company Hospital Confinement Indemnity - ☑☑A policy that will pay the insured a flat daily rate for each day they are hospitalized Speculative risk - ☑☑it has a chance for gain or loss Defined benefits plans (money purchase plans) - ☑☑qualified corporate pension plans usually set up by large employers. Conditional Receipts - ☑☑No coverage is in effect until the applicant has satisfied all the conditions and the underwriter has approved the application Binding Receipts - ☑☑used by some insurers to provide the applicant with a small amount of coverage while the results of the physical exam and underwriting process are pending. Neither type of receipt may be given out unless the applicant has paid the premium. Medicare is part of Social Security and beneficiaries - ☑☑Part A hospital Insurance at age 65 at no premium charge. Part B is designed to cover Physicians and related services for an additional premium charge Long Term Care insurance covers custodial nursing which is not covered by - ☑☑Medicare or Medicare Supplement insurance policy Low income Californians may obtain custodial care through - ☑☑Medi-Cal if they fail an income/asset test. Medi-cal - ☑☑Taxpayer funded public assistance program
Implied authority - ☑☑the authority an agent needs to carry out his duties, even though they are not expressed in the contract Express authority - ☑☑the authority written down in an agent's contract Apparent authority - ☑☑the authority that a customer believes that an agent has, whether they actually have it or not Waiver of premium - ☑☑Life insurance rider that will pay the premium if the insured becomes disabled for a specific period of time Self-fund or self insure for Group Medical Expense works only - ☑☑Losses are predictable A life insurance policy which will allow the insured to self direct the case value into different sub-account - ☑☑Variable life California Insurance Guarantee Association (CIGA) does not include - ☑☑Life and annuity. California Life and Health Insurance Guarantee Association covers it. an optional Health coverage that is generally available only to persons age 65 or more - ☑☑Medicare part B Life settlements are accomplished through - ☑☑absolute assignment Multiple Employer Trust (MET) - ☑☑an entity that allows small employers to obtain the advantages of group coverage when they would otherwise not be eligible One unit of life insurance is - ☑☑1000 dollars of coverage Retirement benefits under Social Security are based primarily upon - ☑☑average monthly wages The primary Insurance Amount
Term insurance - ☑☑less expensive than whole life at issue because it is pure protection and has no cash value. Employee Retirement Income Security Act (ERISA) of 1974 was passed to protect - ☑☑plan participants and beneficiaries A deferred compensation plan - ☑☑a non-qualified plan Aleatory means - ☑☑have an unequal exhange % they are vested right the way in 401 k is - ☑☑100% Which of the Life insurance conversions are permitted - ☑☑Term Life to Whole Life On group coverage, Tax implications of Disability Income insurance - ☑☑premiums are deductible and benefits are taxed On individual disability income insurance, Tax implication is - ☑☑insured cannot deduct the premiums paid, but benefits are deductible. Non-contributory employee group insurance premiums paid by employers on behalf of their employees - ☑☑tax deductible for the employer and tax free to employee Morbidity table - ☑☑The actuarial table used by insurers to determine product benefits and pricing A dividend option - ☑☑paid-up additions Employers may obtain the coverage of Worker Compensation from - ☑☑the competitive State Compensation Fund, elect to self insure, any insurer admitted to sell it Part A Medicare covers - ☑☑Hospital
