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XCEL SOLUTIONS FINAL EXAM: CALIFORNIA LIFE, ACCIDENT, AND HEALTH INSURANCE
"What prevents a life insurance policy from being rescinded by the insurer after being in force for
two years? - CORRECT ANSWER Incontestability clause"
"Which of the following is NOT a requirement of a contract?
- Parties involved must be competent
- Offer and acceptance must be involved
- Contract must have a legal purpose
- Equal consideration is required between the involved parties - CORRECT ANSWER Equal consideration is required between the involved parties" "Which of the following is NOT considered to be a definition of the term "loss"?
- The amount an insurance company must pay because of an insurable event
- An insurable event that takes place which results in a payment made by the insurance company
- Probability that an event will occur
- Unintentional decrease in the value of an asset due to a peril - CORRECT ANSWER Probability that an event will occur" "What is required after a life agent sells an insurance policy to an applicant without being
appointed by the insurer? - CORRECT ANSWER Notice of appointment must be submitted to
the commissioner" "Which of the following services are health maintenance organizations (HMO's) NOT required to provide?
- Preventative services
- Hospitalization
- Prescription drugs
- Emergency services - CORRECT ANSWER Prescription drugs"
"A person who asserts a right of recovery under an insurance policy is called - CORRECT
ANSWER claimant"
"Which statement is true regarding policy dividends?
- Dividends are always taxable
- A dividend option is selected by the insured at the time of policy purchase
- Nonparticipating policies issue dividends
- Dividends are always guaranteed - CORRECT ANSWER A dividend option is selected by the insured at the time of policy purchase" "Under a disability income insurance policy, which criteria must be met for "bodily injury" to be
classified as accidental? - CORRECT ANSWER The cause may be intentional, but the result
must be accidental"
"The free-look period for life insurance policyowners age 60 or older is - CORRECT ANSWER 30
days" "Which of the following does Medicare Part A NOT provide coverage for?
- Hospice
- Inpatient care
- Hospitalization
- Doctor's Services - CORRECT ANSWER Doctor's Services"
"Rating an individual's need for long-term care benefits can be measured by - CORRECT
ANSWER Activities of daily living"
"Which of the following describes the number of deaths in a year compared to the number of people in a select group?
- Risk ratio
- Mortality rate
- Morbidity rate
- Law of large numbers ratio - CORRECT ANSWER Mortality rate" "Which of these is the automatic mode of settlement for life insurance policy proceeds?
- Lump-sum
- Extended term
- Interest only
- Fixed period - CORRECT ANSWER Lump-sum"
- Employer pays the premium for the converted policy - CORRECT ANSWER Employer pays the premium for the converted policy"
"What kind of annuity pays income to two annuitants until their deaths? - CORRECT ANSWER
Joint and survivor annuity" "A savings vehicle designed to first accumulate funds and then systematically liquidates the funds
is called a(n) - CORRECT ANSWER Deferred annuity"
"What does ESOP stand for? - CORRECT ANSWER Employee Stock Ownership Plan"
"When handling premiums for an insured, an agent is acting in which capacity? - CORRECT
ANSWER Fiduciary"
"Health insurance policies typically contain a provision stating that insureds and their insurer will share covered losses in an agreed proportion. Which provision does this refer to?
- Deductible
- Internal limit
- Stop loss
- Coinsurance - CORRECT ANSWER Coinsurance"
"A life insurance policy's limit of liability would be - CORRECT ANSWER the policy's face
amount" "Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty
of? - CORRECT ANSWER Theft"
"What is the price of insurance for each exposure unit? - CORRECT ANSWER Rate"
"What does the insurance term "indemnity" refer to? - CORRECT ANSWER Make whole"
"Employer-provided group term life insurance is exempt from income taxation up to - CORRECT
ANSWER $50,000"
"Who acts as the gatekeeper in a Health Maintenance Organization (HMO)? - CORRECT
ANSWER Primary care physician"
"Which of the following types of life insurance combines a savings element along with a flexible premium option?
- Joint life
- endowment
- universal life
- whole life - CORRECT ANSWER universal life"
"What effect did the Pregnancy Discrimination Act have on the health industry? - CORRECT
ANSWER Pregnancy must be treated as any other medical condition"
"In order to be considered "currently insured" under Social Security, an individual must be
credited with: - CORRECT ANSWER 6 quarters of coverage during the last 13-quarter period"
"Life insurance creates an immediate estate. This phrase means - CORRECT ANSWER when
the insured dies, a death benefit is paid" "The California Insurance Code allows an individual how many days to cancel a life policy for a full-
refund? - CORRECT ANSWER Between 10 and 30 days"
"The importance of a representation is demonstrated in what rule? - CORRECT ANSWER
Materiality of concealment" "Dyan is considered partially disabled by her insurance company. Which of the following BEST describes her situation?
- Her employer pays half of her disability benefit
- She is working part-time and receiving lost income under her long-term disability benefit
- She has a lost hearing in one ear because of an accident on the job
- She is unable to work and receiving worker's compensation - CORRECT ANSWER She is working part-time and receiving lost income under her long-term disability benefit"
"What distinguishes a deferred annuity from an immediate annuity? - CORRECT ANSWER The
time at which benefit payments start"
- probability of loss - CORRECT ANSWER probability of loss" "Which of the following is NOT a feature of equity-indexed annuities?
- offers a minimum guaranteed rate
- offers a long term inflation protection
- offers protection during a decline in the stock market
- offers a maximum interest rate that increases annually - CORRECT ANSWER offers a maximum interest rate that increases annually" "Anyone employed in California to assist an insurance agent in transacting insurance is called an
insurance - CORRECT ANSWER solicitor"
"Which of the following is NOT an insurer policy expense?
- premiums
- rent
- commissions
- salaries - CORRECT ANSWER premiums" "All of these are examples of cost sharing in a health insurance policy EXCEPT
- copayments
- coordination
- coinsurance
- deductibles - CORRECT ANSWER coordination"
"An agent's attempt to stop the replacement of an existing life insurance policy is known as -
CORRECT ANSWER conservation"
"A contract requires - CORRECT ANSWER an offer and acceptance of the contract terms"
"Which of the following would be considered an activity of daily living under a long term care policy?
- working
- breathing
- bathing
- running - CORRECT ANSWER bathing"
"Paul has an existing annuity and is sold a new one, in which the new policy holds no greater
financial benefit to him than the existing contract. This is considered a(n) - CORRECT ANSWER
Unnecessary replacement"
"Life insurance surplus must be distributed to policyowners at what frequency? - CORRECT
ANSWER Annually"
"An eligible individual who would like to obtain group health insurance without providing
evidence of insurability must - CORRECT ANSWER enroll within a specified eligibility period"
"The California Insurance Code defines "policy" as a(n) - CORRECT ANSWER written contract"
"Which of these factors do NOT affect the rates of medical insurance?
- gender
- health
- occupation
- race - CORRECT ANSWER race"
"Who would be most likely to submit a Medicare Part A claim? - CORRECT ANSWER Hospital"
"Buy-sell plans are typically funded by which two types of insurance? - CORRECT ANSWER life
insurance and disability insurance"
"What is a participating life insurance policy? - CORRECT ANSWER Contract that allows the
policyowner to receive a share of surplus in the form of policy dividends" "What is the insurance term the state of California uses for an insurer that is eligible to transact
business in this state? - CORRECT ANSWER Admitted"
"Jon's health plan pays benefits of 90% for in-network providers and 70% for out-of-network
providers. What kind of plan is this? - CORRECT ANSWER PPO"
"Which of the following describes the increase in the probability of a loss due to an insured's dishonest tendencies?
- First-dollar coverage
- deductibles
- maximum coverage limits
- coinsurance - CORRECT ANSWER First-dollar coverage"
"Non-deductible contributions are typically associated with a - CORRECT ANSWER Roth IRA"
"All of the following circumstances must be met for loss retention to be an effective risk management technique, EXCEPT
- loss cannot be catastrophic
- loss must be measurable
- highly predictable losses
- probability of loss is unknown - CORRECT ANSWER probability of loss is unknown" "Cindy buys a 10-year certain annuity with an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her
beneficiary? - CORRECT ANSWER 60 payments"
"At what age is a surviving spouse without dependents eligible for Social Security survivor
benefits? - CORRECT ANSWER 60"
"How long must life agents keep their transaction records? - CORRECT ANSWER 5 years"
"What is considered the most common type of specified disease insurance policy? - CORRECT
ANSWER cancer"
"Who is NOT eligible for Social Security survivor benefits? - CORRECT ANSWER a deceased
worker's dependent parents of any age" "A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen?
- the insureds estate
- the insureds mother
- the insureds children
- the insureds spouse - CORRECT ANSWER the insureds estate"
"Which word implies permissiveness according to the California Insurance Code? - CORRECT
ANSWER May"
"Medical expense policies will typically cover which of the following?
- voluntary cosmetic procedures
- routine dental care
- injuries caused by accidents
- prescription eyeglasses - CORRECT ANSWER injuries caused by accidents"
"A unilateral contract is one in which - CORRECT ANSWER only one party (the insurer) makes
any kind of legally enforceable promise"
"The elimination period in a disability income policy serves as the same purpose as - CORRECT
ANSWER a deductible"
"According to the California Insurance Code, how is the word "may" interpreted? - CORRECT
ANSWER permissive"
"Under a health insurance policy, the provision that states the kind of benefits provided and the
circumstances under which they will be paid is called the? - CORRECT ANSWER insuring
clause" "Which of the following are two examples of activities of failing living (ADL's) used in qualifying for long-term care benefits?
- working and sleeping
- driving and working
- talking and sleeping
- eating and dressing - CORRECT ANSWER eating and dressing" "Tom is shopping for a policy that covers two people and would pay the face amount ONLY when
the first person dies. The type of life policy he is looking for is called a - CORRECT ANSWER
joint life policy" "Which type of health insurance policy cannot be canceled by the insurer nor increase the
premiums? - CORRECT ANSWER non-cancellable"
"Which of the following actions is NOT allowed by Health Insurance Counseling and Advocacy Program (HiCAP) counselors?
- Medical record keeping assistance
- Charge a fee
- Assist in understanding Medicare Supplements
Assist in policy evaluation - CORRECT ANSWER Charge a fee"
"What must an applicant do in order to authorize the release of an attending physician report? -
CORRECT ANSWER Sign a consent form"
"Failure to report background changes within 30 days as required under section 1729.2 of the
California insurance code could subject a license or applicant to - CORRECT ANSWER Denial,
suspension, and/or fine" "Which of the following is NOT typically covered under vision care insurance?
- Examinations
- Eye surgery
- Contacts
- Eyeglasses - CORRECT ANSWER Eye surgery"
"Restoring an insured to the same condition as before a loss is known as - CORRECT ANSWER
Principle of indemnity" "Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its insureds?
- Treaty insurance
- Captive insurance
- Reinsurance
- Mutual insurance - CORRECT ANSWER Reinsurance"
"What is considered to be the definition of disability, according to Social Security? - CORRECT
ANSWER Unable to engage in any substantial gainful activity"
"The misstatement of age provision in a health policy states that if an insured gives the wrong age
at the time of application, what action can the insurance company take? - CORRECT ANSWER
Benefits can be adjusted" "Which of the following types of information is NOT required for a life insurance application?
- Health history
- Occupation
- Hobbies
- Ethnicity - CORRECT ANSWER Ethnicity" "Coverage for care received from a network provider pays more than car received from a non-
network provider in what type of health plan? - CORRECT ANSWER Preferred Provider
Organization (PPO)" "Which of the following is a life insurance policy that does NOT require a physical exam?
- Non-cancelable
- Graded
- Non-medical
- Substandard - CORRECT ANSWER Non-medical"
"How is a life insurance policy dividend legally defined? - CORRECT ANSWER A return of
excess premium and not taxable" "Which of the following is NOT considered to be an insurer expenses?
- Policy premiums
- Maintenance costs
- Utilities
- Employees' salaries - CORRECT ANSWER Policy premiums" "Under the California Insurance Code, a licensee's license number must be printed at what size on
all price quotes, business cards, and printed material? - CORRECT ANSWER The same size
print as the licensee's phone number, fax number, or address" "According to section 1729.2 of the California Insurance Code, which of these does NOT qualify as "background information"?
- A filing of felony criminal charges in state or federal court
- An administrative action regarding a professional or occupational license
- A breach of fiduciary duty
- Misdemeanor charges filed, not resulting in a conviction - CORRECT ANSWER Misdemeanor charges filed, not resulting in a conviction"
"An insurer owned by its policyholders is called a - CORRECT ANSWER Mutual insurer"
- extended term
- automatic premium loan
- accidental death
- waiver of premium - CORRECT ANSWER extended term"
"What type of changes can be made to a guaranteed renewable health insurance policy? -
CORRECT ANSWER The premium rates of the policy owner"
"How are acts of war and aviation treated under a group life insurance policy? - CORRECT
ANSWER Policy exclusion"
"What does the term "indemnity" mean as it pertains to insurance? - CORRECT ANSWER To
make whole" "Which of the following factors is NOT used in underwriting health insurance policies?
- Income
- age
- intelligence
- sex - CORRECT ANSWER intelligence"
"What does the guaranteed insurability option allow an insured to do? - CORRECT ANSWER
Purchase additional coverage with no evidence of insurability required" "ABC insurance company paid an insured $30,000 in lost wages, $35,000 for hospital costs, and $20,000 for physical therapy treatments. ABC later discovers this was a fraudulent claim. How
much may the insured by fined? - CORRECT ANSWER $170,000"
"When an applicant applies for insurance, the process by which the insurer determines whether
to issue a policy is called - CORRECT ANSWER Underwriting"
"AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance
Company. In this reinsurance transaction, what is AAA Insurance Company called? - CORRECT
ANSWER Primary insurer"
"Premiums are best described as - CORRECT ANSWER the amount an insured pays per unit of
coverage"
"Mike and Ike are 30 year old identical twins. Both are in excellent health. Each brother purchases a life policy that has a $750 annual premium. Mike buys a 10-year renewable term policy. Ike purchases a whole life policy. All of the following statements are true EXCEPT
- Mike's policy will develop no cash value over the policy's term
- Ike will have a level premium
- Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance
- Ike may eventually take out a policy loan - CORRECT ANSWER Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance" "Which of the following is NOT considered to be an unfair claims settlement practice?
- Misrepresenting to insureds pertinent facts or policy provisions relating to coverage at issue
- Failing to provide a reasonable basis for the denial of a claim upon request
- Advising a claimant to hire an attorney
- Failing to adopt and implement reasonable standards for prompt investigation and processing
of insured's claims - CORRECT ANSWER Advising a claimant to hire an attorney"
"Disabled workers are covered under Worker's Compensation medical expense benefits for how
long? - CORRECT ANSWER No limit"
"A life insurance policy that pays the face amount if the insured survives to a specified period of
time is called - CORRECT ANSWER Endowment insurance"
"An individual that has 40 quarters of coverage, for Social Security purposes, is considered to be
CORRECT ANSWER Fully insured"
"Which of the following is NOT a valid reason to replace an existing long-term care policy?
- INsured's condition has materially improved
- new policy has better benefits
- new policy has higher premium with fewer benefits
- new policy has lower premium - CORRECT ANSWER ew policy has higher premium with fewer benefits" "Which of the following does NOT have to be included on a life insurance policy illustrations?
- name of the insurer
- age of the insured
- statement that all values and benefits are guaranteed
- low-cost health care coverage for pregnant women - CORRECT ANSWER Only women who have private insurance plans with a maternity-only deductible or copayment greater than $1, are eligible" "Scott has just purchased a new house. He is now shopping for a life insurance policy that provides a death benefit that matches the projected outstanding debt of his mortgage. Which life
policy would best suit his needs? - CORRECT ANSWER Mortgage redemption"
"John owns an insurance policy that gives him the right to share in the insurer's surplus. What
kind of policy is this? - CORRECT ANSWER Participating"
"According to PPACA, how long can an adult be covered as a dependent under their parents'
insurance plan? - CORRECT ANSWER Up to age 26"
"An applicant has revealed conditions that require more information. Which of the following is needed next?
- Physical examination
- Agents report
- Credit Report
- Attending physicians statement - CORRECT ANSWER Attending physicians statement"
