State: Florida | Category: Life Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. Which statement about survivor benefits is true?
A surviving spouse can receive up to 100% of the deceased worker's benefit if they wait until their own FRA; claiming earlier typically results in a reduced amount.
2. Which principle allows insurers to predict losses more accurately by pooling many similar exposures?
The law of large numbers states that as the sample size grows, the actual results approach the expected results, improving predictability of losses for pricing and reserves.
3. At the end of the grace period, if the premium remains unpaid, what usually happens to the policy?
If the premium is not paid by the end of the grace period, the policy typically lapses according to the policy terms.
4. If a named beneficiary is a minor, how are the proceeds most commonly paid?
Because minors cannot generally receive funds directly, proceeds are typically paid to a custodian under UGMA/UTMA or to a court-appointed guardian.
5. Which of the following best describes the concept of insurable interest?
Insurable interest exists when the policyowner has a valid stake in the subject matter of the risk; it prevents wagering policies.
6. How does a critical illness policy define covered illnesses?
CI policies define coverage by listing specific illnesses on the policy. If an illness is not listed, it is typically not covered unless the policy states otherwise.
7. In underwriting, credit reports are most closely associated with assessing:
Credit reports provide information about an applicant's financial responsibility and stability, relevant to financial underwriting.
8. An underwriting class is best described as:
An underwriting class determines the premium rate category (e.g., standard, preferred, substandard) assigned to the applicant.
9. How long is the typical grace period for a life insurance premium?
Most life insurance policies provide a 30-day grace period for late premiums; death benefits may be paid minus overdue premium if death occurs during the grace period.
10. In insurance, which term describes a specific cause of loss?
A peril is the actual event or circumstance that causes a loss (e.g., fire, theft).
11. Subrogation in insurance is the process by which:
Subrogation allows the insurer to step into the insured's shoes to pursue recovery from a third party responsible for the loss, preventing the insured from collecting twice and helping keep premiums stable.
12. Nonqualified annuity funds are contributed with after-tax dollars. Which portion of each distribution is NOT taxed?
The return of the investment in the contract (cost basis) is not taxed; the earnings portion is taxed as ordinary income.
13. During the contestability period, misstatements of age or sex discovered can lead to which of the following?
Most policies have a contestability period (commonly two years); misstatements found can lead to rescission or adjustment of benefits.
14. The Government Pension Offset (GPO) reduces Social Security spousal or survivor benefits by what amount related to the government pension?
GPO reduces Social Security spousal or survivor benefits by two-thirds of the government pension amount for individuals receiving a government pension from non-covered work.
15. Under HIPAA, who must authorize the release of medical information to the insurer?
Under HIPAA, a written authorization from the applicant is generally required for releasing medical information to the insurer.
16. The named insured on a policy is:
The named insured is the person whose life or property is insured under the policy.
17. If a critical illness policy lapses and is later reinstated, what is commonly required?
Lapsed policies may be reinstated, but typical terms require evidence of insurability and payment of any back premiums; a new waiting period may apply.
18. To reinstate a lapsed policy, what is typically required?
Reinstatement usually requires payment of back premiums with interest and evidence of insurability; additional conditions may apply per policy.
19. Death benefits paid to a beneficiary are generally tax-free, with exceptions such as transfers of value.
In most cases, life insurance death benefits are income-tax-free to the beneficiary; exceptions include transfers of value (e.g., sale of the policy).
20. A policy illustration is typically used to show:
Policy illustrations display non-guaranteed elements like dividends or rate projections where applicable; actual results may differ.