Download California Insurance Exam: Life, Accident, Sickness or Health Questions and Answers and more Exams Insurance Economics in PDF only on Docsity!
CA INSURANCE EXAM LIFE, ACCIDENT, SICKNESS OR HEALTH
QUESTIONS AND ANSWERS
"An insurance agent with a LIFE license can transact: A. Auto Insurance B. Life Insurance C. Homeowners Insurance
D. All the Above - CORRECT ANSWER D. All the Above
(only those with a P&C license can be called "an insurance agent" this is a trick question... this is a person who already has their p&c license AND their life license."
"Which of these best describes an "agent"? - CORRECT ANSWER one who is appointed by any
number of insurers, receives commissions from them and transacts on their behalf"
"Which of the following best describes an express authority? - CORRECT ANSWER Authority of
an agent that is specifically granted by the insurer"
"Implied Authority is: - CORRECT ANSWER Authority given to an agent other than in the
agent's contract" "Which of the following describes an insurer who has enough financial resources only to provide
for all its liabilities and reinsurance of its outstanding risks? - CORRECT ANSWER Insolvent
(Remember to be solvent you need all three, this one is missing Assets)" "An insurer must have money in reserves to cover its liabilities and reinsure its outstanding risks.
In addition to this, the code requires a company to have: - CORRECT ANSWER Assets
equivalent to paid in Capital" "According to the California Insurance Code, the penalty failutre to comply with a Notice of
Seizure order is: - CORRECT ANSWER $1,000 fine AND/OR imprisonment for up to one year"
"The California Insurance code defines a domestic insurer as an insurer organized under the laws
of: - CORRECT ANSWER The state of California, whether or not it is an admitted insurer"
"An insurer organized under the laws of any state outside the state of California is a: - CORRECT
ANSWER Foreign Insurer"
"An insurer organized in great Britain is an - CORRECT ANSWER Alien Insurer"
"Which could be an admitted insurer? - CORRECT ANSWER Either a domestic, foreign, or alien
insurer"
"The retention limit is: - CORRECT ANSWER the maximum risk an insurance company will
accept on a policy" "When an insurance company works with another insurer because it has exceeded its retention
limit on a risk, this would be an example of: - CORRECT ANSWER Reinsurance"
"A type of insurance where one insurer transfers loss exposures from policies written for its
insured's to another insurer is known as? - CORRECT ANSWER Reinsurance"
"The purpose of the 16-point bold type disclosure on a surplus lines policy is to inform the: -
CORRECT ANSWER Insured that the policy is being issued through a non-admitted insurer"
"A person who acts in a capacity that requires an active license without having a valid license is
guilty of a: - CORRECT ANSWER Misdemeanor"
"If an agent moves, he should advise the commissioner of his change in address: - CORRECT
ANSWER Immediately"
"Every licensee must include his license number on his business card in: - CORRECT ANSWER
The same size type, and font, as any telephone number, address, or fax number"
"When advertising on the internet, all of the following are required except: - CORRECT
ANSWER His/her telephone number"
"When an agent accepts premium from the insured and uses the money for personal gain, it is
considered: - CORRECT ANSWER Theft"
"Which of the following would not be an unfair trade practice? - CORRECT ANSWER charging
males and females different rates for life or annuity contracts according to the mortality table that is segregated by sex"
"Which of these best describes a "whole life" contract? - CORRECT ANSWER It pays the face
amount whenever death occurs during the entire span of life." "John purchased a life policy at age 30. Which of the following would require the highest premium payment? A. 20 Pay life B. 30 Pay Life C. Paid up in 25 years
D. Paid up at age 65 - CORRECT ANSWER A. 20 Pay Life"
"When the cash values of a life policy equal the face amount of the policy, what is the effect? -
CORRECT ANSWER The policy has endowed and the insured can surrender it for the full face
amount"
"A whole life policy has: - CORRECT ANSWER Fixed Interest, Fixed Premiums"
"Which of the following policies will keep up with Inflation? - CORRECT ANSWER Indexed
whole life" "A flexible benefit cash value policy which earns a current rate of interest with flexible premiums
is: - CORRECT ANSWER Universal Life"
"The current rate of interest paid to the cash value account of a universal life policy consists of: -
CORRECT ANSWER Guaranteed interest plus excess interest"
"In order from lowest to highest, what is the correct order of initial premiums for life insurance
policies? - CORRECT ANSWER Modified life, ordinary life, single premium"
"The Cash value of a variable life policy: - CORRECT ANSWER Is determined by the investment
experience of the separate account"
"The SEC regulates: - CORRECT ANSWER Variable life policies"
"Which of the following would require a securities license to sell? - CORRECT ANSWER
Variable Life"
"Term insurance is typically characterized by: - CORRECT ANSWER Low premiums and no cash
value"
"Which type of joint life policy pays no benefit after the death of the first insured individual? -
CORRECT ANSWER Second to Die"
"A handicap child's first parent dies, and the child is still financially stable. The second parent dies, and as a result the child is now financially unstable. Which policy would be most suitable for the
child's needs? - CORRECT ANSWER Second to die (last survivor)"
"Bob and Mary have a handicap child. bob and Mary both die in an accident. Which policy is most
suitable for the handicap child's needs? - CORRECT ANSWER Last survivor policy"
"An insurer pays a refund from the surplus of profits to the holder of a participating policy. What
is this payment? - CORRECT ANSWER A policy dividend"
"Ray has a $40,000 20-pay life policy which lapses at the end of the seventh year. The non-
forfeiture option that would provide coverage for the longest period of time would be: -
CORRECT ANSWER Reduced Paid-up"
"A $50,000 whole life policy with a cash value of $10,000 has been in force for 11 years. The policy owner is unable to continue the premium payments. Which of the following describes the reduce
paid-up non-forfeiture option? - CORRECT ANSWER The cash value is used to purchase a
$20,000 paid-up policy"
"Who would be considered a claimant on a life insurance policy? - CORRECT ANSWER
Beneficiary"
"Who has the right to change life insurance policy beneficiaries? - CORRECT ANSWER The
policyholder" "All the following statements about the election of a life insurance policy's settlement options are
true except: - CORRECT ANSWER When no settlement option is chosen, the proceeds are
automatically paid to the policy owner's estate."
"According to the Employee Retirement Income Security Act (ERISA), a plan sponsor must provide
the participants with: - CORRECT ANSWER Annual financial statements"
"According to the Employee Retirement Income Security Act (ERISA) fiduciary standards, benefit
plans are operated for: - CORRECT ANSWER Plan participants and beneficiaries"
"Which of the following is true about an IRA? - CORRECT ANSWER It grows tax deferred"
"A contribution to which of the following retirement plans does not allow for a tax deduction in
the year the contribution is made? - CORRECT ANSWER Roth IRA"
"What type of a retirement plan is used by employees of public school systems? - CORRECT
ANSWER TSA"
"What is the earliest age at which an owner can start to withdraw funds from a IRA without
penalty? - CORRECT ANSWER 59 1/2"
"In a 6-year vesting schedule, what percentage of employer contributions must be vested after 6
years of service? - CORRECT ANSWER 100%"
"In a 6-year vesting schedule, what percentage of employer contributions must be vested after 2
years of service? - CORRECT ANSWER 20% (first year nothing, every year after is 20%)"
"In a 6-year vesting schedule, what percentage of employer contributions must be vested after 3
years of service? - CORRECT ANSWER 40%"
"The entire contract is: - CORRECT ANSWER The policy, and when attached, the application"
"All the following are required on a life insurance application except: - CORRECT ANSWER The
amount of disability income in force"
"Who can make a change in an insurance contract? - CORRECT ANSWER Authorized officer of
the insurance company"
"What is involved in a viatical contract transaction? - CORRECT ANSWER Absolute
Assignment"
"The complete transfer by the existing owner of all rights in an insurance policy to another person
is: - CORRECT ANSWER Absolute Assignment"
"Which of the following are common insurance policy provisions? - CORRECT ANSWER entire
contract, grace period, reinstatement" "The policy provision which prevents an insurer from voiding a policy for misstatements after two
years is: - CORRECT ANSWER Incontestability"
"Which life insurance provision states the policy proceeds cannot be assigned, transferred, or
encumbered in any way? - CORRECT ANSWER Spendthrift provision"
"Under the 10 day right to return, the policy will pay proceeds: - CORRECT ANSWER If the
policy is not returned but premium is paid"
"Senior citizens are given a 30 day right to return: - CORRECT ANSWER At age 60 or older"
"When does the automatic premium loan provision start? - CORRECT ANSWER At the end of
the grace period"
"Common Insurance Policy Riders include all of the following except: - CORRECT ANSWER
Extended Term" "The insured is totally and permanently disabled. The insured's policy continues in full force
without further premium payment as the policy contains a: - CORRECT ANSWER Waiver of
Premium Rider"
"To waive an insured's premium, most companies require an individual's disability to be: -
CORRECT ANSWER Total and Permanent"
"While an insurer is paying the premium for a life insurance policy under the waiver of premium
rider: - CORRECT ANSWER The policy remains in full force in every respect"
"If waiver of premium rider is added to a policy, the additional premium: - CORRECT ANSWER
Has no effect on the cash values of a life policy"
"Under the FMLA (Family and Medical Leave Act) How many weeks of leave must be provided in a
12 month period due to pregnancy? - CORRECT ANSWER 12 Weeks"
"What is not a state government program? - CORRECT ANSWER Social Security"
"Which program is provided for people who are low income and cannot afford health insurance?
CORRECT ANSWER Medi-Cal"
"Which health entitlement program is jointly financed by the Federal and State government? -
CORRECT ANSWER Medi-Cal"
"All of the following are benefits under OASDHI except: - CORRECT ANSWER Long Term Care"
"Retirement benefits under social security are available only for workers who are: - CORRECT
ANSWER Fully insured"
"All of the following statements about Social Security disability benefits are true except" -
CORRECT ANSWER Benefits are designed to replace the entire amount of a worker's
earnings."
"Which individual collecting Social security benefits would be affected by a black out period? -
CORRECT ANSWER The insured's spouse"
"The Social Security blackout period ends when the surviving spouse reaches the age of: -
CORRECT ANSWER 60"
"During the blackout period, a child in school is eligible to receive Social Security survivor benefits
until what age? - CORRECT ANSWER 19"
"Medicare Part A begins automatically at age: - CORRECT ANSWER 65"
"An individual may qualify for a special enrollment period outside the open enrollment period
how many days after the certain qualifying life event? - CORRECT ANSWER 60 Days"
"When a person enrolls in Medicare, they will automatically be enrolled in which medicare part?
CORRECT ANSWER Part A and B"
"Medicare Part A provides for all of the following except: - CORRECT ANSWER Physicians
Services"
"Medicare Part A does not cover: - CORRECT ANSWER Prescription Drugs"
"Medicare Part A does not cover which of the following? - CORRECT ANSWER Long Term
Care"
"All the the following are not covered under Part A of Medicare except: - CORRECT ANSWER
Hospital stays and inpatient mental health care"
"Which of the following is not provided by hospice care? - CORRECT ANSWER Rehabilitation"
"After an insured pays the deductible on Medicare Part B, the insured pay what percent of the
services received? - CORRECT ANSWER 20%"
"Physicians services in the hospital, doctor's office, or clinic are covered under: - CORRECT
ANSWER Medicare Part B; additional premium due"
"What is Medicare Part C? - CORRECT ANSWER Medicare Advantage"
"What is covered under Medicare's vision care? - CORRECT ANSWER One pair of eyeglasses
with an intraocular lens after cataract surgery"
"What is NOT true about Medicare's vision care? - CORRECT ANSWER Medicare covers
routine eye care and eyeglasses or contact lenses"
"What is the first step in submitting a claim to medicare? - CORRECT ANSWER The medical
provider submits expenses to Medicare"
"Who submits claims to Medicare Part A? - CORRECT ANSWER Medical Provider"
"Medicare is administered by which of the following? - CORRECT ANSWER Health Care
Financing Administration" "After receiving care by a doctor, how is the insured notified of Medicare's decision to cover the
claim? - CORRECT ANSWER Notice from the Health Care Financing Administration"
"Coinsurance - CORRECT ANSWER Feature of a major medical policy where insurer and
insured share in the cost of medical expense (usually on a 80/20 basis)"
"Copayment: - CORRECT ANSWER Fixed payment for a covered service or visit paid when an
individual receives medical services"
"Cost Sharing: - CORRECT ANSWER Deductibles, copayments, and coinsurance are all part of
cost sharing"
"Usual, Customary, and Reasonable charges: - CORRECT ANSWER Surgical benefits are not
listed by dollar amount, instead insurer will pay based on the amount physicians in the same geographical area normally charge for the similar procedures."
"What type of policy would have a corridor deductible? - CORRECT ANSWER Supplemental
major medical policy"
"What is not a feature of major medical policies? - CORRECT ANSWER First dollar coverage"
"What term describes the concept that the insurer and the insured share in the cost of medical
expenses, with the insurer bearing the greater share? - CORRECT ANSWER Coinsurance"
"A provision stating that persons with health insurance and their insurers will share covered
losses in an agreed proportion is called: - CORRECT ANSWER Coinsurance"
"Many major medical policies include a provision whereby when expenses reach a certain dollar amount the insured no longer shares in the cost of expenses; the insurer pay 100% of remaining
covered charges. This is referred to as: - CORRECT ANSWER Stop loss limit"
"Which of the following is NOT an example of cost sharing in a health insurance policy? -
CORRECT ANSWER Coordination"
"On a major medical policy when two or three family members have satisfied the deductible for
the entire family, this is referred to as: - CORRECT ANSWER Family deductible"
"When medical expense policies do not state specific dollar benefit amounts, but instead base payments upon the charges for like services in the same geographical area, benefits are
designated as which of the following? - CORRECT ANSWER Usual, customary, and reasonable
charges."
"A health maintenance organization (HMO) plan contains costs by promoting: - CORRECT
ANSWER Preventative Care"
"In HMO's, the use of a primary care physician is common as part of the: - CORRECT ANSWER
Gatekeepers System" "Under an HMO, when physicians receive a flat monthly payment from the HMO for every
member without regard to actual services provided by the physician, this is known as: -
CORRECT ANSWER Capitation Fee"
"HMO's are required to provide for all of the following except: - CORRECT ANSWER
Prescription Drugs"
"Waiver of Premium Rider: - CORRECT ANSWER allows insured to waiver premium during a
period of total disability"
"Who would be considered a claimant on a disability income policy? - CORRECT ANSWER
Insured" "An insured's disability income policy defines total disability as the "insured's inability to perform the duties of any occupation for which he or she is reasonably qualified by education, training, or
experience." This definition is known as the: - CORRECT ANSWER "Any Occupation" definition
and is more restrictive than other definitions"
"Own Occupation: - CORRECT ANSWER Defines total disability as the insured's inability to
perform any/all of the duties of their OWN occupation as a result of sickness or accident"
"Occupational Policy: - CORRECT ANSWER Covers losses due to work related or non work
related injuries"
"Non Occupational Policy: - CORRECT ANSWER will not cover the insured only while not
working"
"A disability income policy would do which of the following? - CORRECT ANSWER Replace a
partial portion of income if you were disabled."
"To remain a certified agent with Covered California, an agent must get recertified how often? -
CORRECT ANSWER Every 5 Years"
"According to the Affordable Care Act, insurers must offer vision care to which of the following?
CORRECT ANSWER Children"
"A woman had breast cancer then has a mastectomy. Under the WHCRA, which of the following
would be covered? - CORRECT ANSWER Breast Reconstruction"
"Contributory - CORRECT ANSWER Employer and employee contribute to premium payment"
"Non-contributory - CORRECT ANSWER Employer pays entire premium"
"Probationary - CORRECT ANSWER Period of time an employee must work for an employer
before being covered under the group insurance"
"Eligibility Period: - CORRECT ANSWER Period of time employees have to enroll in the group
coverage"
"MET - CORRECT ANSWER Provides benefits to employees of two or more financially
unrelated companies"
"COBRA: - CORRECT ANSWER Applies to employers offering group insurance with 20 plus
employees, allows employees to stay under the group policy for a period of time if employee is terminated/loses coverage for any reason besides gross misconduct"
"Coordination of Benefits: - CORRECT ANSWER Provision that specifies which policy is primary
and which is secondary."
"The main master policy owner of a group health insurance contract is the: - CORRECT
ANSWER Employer"
"In group insurance who is the contract between? - CORRECT ANSWER Employer and Insurer
(the relationship between a carrier and broker/agent is employer to employee)"
"In group insurance the employee receives: - CORRECT ANSWER A certificate of Insurance"
"California will recognize a group for group insurance with a minimum of how many people? -
CORRECT ANSWER 2 (true group is recognized at 10)"
"A mentally handicapped child who is a life dependent under the parents group life policy will
remain in the policy until what age? - CORRECT ANSWER Any age"
"When a group plan is contributory, what percentage of eligible employees must participate? -
CORRECT ANSWER 75%"
"Which of the following is true regarding participation in a group health plan? - CORRECT
ANSWER A non-contributory group health plan must involve all members."
"Under a group life policy, the employee does not have to report the employer paid premium for
the life insurance policy as long as the coverage is which of the following? - CORRECT ANSWER
$50,000 or less" "Usually, in order to join a group insurance plan without proving insurability, an employee must:
CORRECT ANSWER Join the plan during the enrollment (eligibility period) period."
"The probationary period in a group health policy intended for people: - CORRECT ANSWER
Who joined the group after the policy effective date" "Which of the following statements concerning the usual coordination of benefits provision is
correct? - CORRECT ANSWER When the plans both have this provision, coverage as an
employee is primary to coverage as a dependent."
"When a claimant is covered by more than one health plan, the situation is resolved through: -
CORRECT ANSWER Coordination of benefits"
"A blanket policy: - CORRECT ANSWER Covers a group, not individually named"
"A university covering its students with disability insurance would use which type of policy? -
CORRECT ANSWER Blanket"
"If 2 or more employers are grouped together to purchase insurance, this would be known as: -
CORRECT ANSWER Multiple Employer Trust"
"Which of these is a correct statement about an admitted insurer? - CORRECT ANSWER Any
insurer approved to transact insurance in California is an admitted one, without regard to location."
"Which is NOT covered by CLHIGA? - CORRECT ANSWER Auto Insurance"
"What classes of insurance are excluded from the California Insurance Guarantee Association? -
CORRECT ANSWER Life and Annuity (CIGA is p&c while CLHIGA is EH&B)"
"An applicant for an insurance license had another professional license revoked. What would the
commissioner most likely do? - CORRECT ANSWER Deny the application without a hearing"
"Effective Jan 1, 2011, a new life/health or property & casualty agent will need to take continuing
education courses to renew their license. The requirement is: - CORRECT ANSWER 24 hours
per two-year license term" "When a licensed agent submits a renewal application with applicable fees on or before the
expiration date: - CORRECT ANSWER The agent will be able to transact for up to 60 days after
the specified expiration date"
"Bill, a life agent, died. When would his insurance license terminate? - CORRECT ANSWER
upon death"
"If a licensee wants to terminate and surrender his license, what must he do? - CORRECT
ANSWER deliver the license to the commissioner"
"If a licensee wants to terminate his license and the license is in the possession of the insurer or
the licensee's employer, what must he do? - CORRECT ANSWER Make the surrender by
written notice to the commissioner"
"Records of an agent or broker must be available to the commissioner: - CORRECT ANSWER At
all times"
"How long must an agent maintain records for transactions in CA? - CORRECT ANSWER 5
years"
"Records of an agent/broker must be stored in which of the following? - CORRECT ANSWER
Primary/principal office"
"Section 770 of the California Insurance Code: - CORRECT ANSWER States that no one
engaged in the business of financing real or personal property can make such financing agreement contingent upon the placing of insurance business with a specified agent or broker" "Neglecting to communicate that which a party knows, and ought to communicate, so that the
other party may make a sound decision is known as: - CORRECT ANSWER Concealment"
"In the California Insurance Code there is a definition that reads... "a person shall not make any representation or comparison of insurers or policies to an insured which is misleading, for the purpose of inducing him to lapse, forfeit, change or surrender his insurance on a temporary or
permanent plan." This is called - CORRECT ANSWER Twisting"
"All of the following are considered unfair claim practices except: - CORRECT ANSWER Directly
advising a claimant to obtain the service of an attorney"
"What is the definition of Insurance? - CORRECT ANSWER It is a written contract whereby one
seeks to indemnify another against loss, damage, or liability arising from a contingent or unknown event" "A written contract that indemnifies another party against loss, damage, or liability arising out of
a contingent or unknown event describes which of the following? - CORRECT ANSWER
Insurance" "To make one whole again by returning an insured to his previous financial condition prior to the
loss is: - CORRECT ANSWER Principle of Indemnity"
"What is the definition of risk? - CORRECT ANSWER An uncertainty or chance of loss"
"A risk management technique that eliminates a loss exposure and reduces the chance of loss to
zero is: - CORRECT ANSWER Avoidance"
"The purpose of insurance is: - CORRECT ANSWER To transfer risk"
"What is true about insurance? - CORRECT ANSWER It is a form of transferring risk"
"The purchase of an insurance contract by an applicant is the process of risk: - CORRECT
ANSWER Transfer"
"An underwriting department can classify acceptable risks as: A. Standard
