VA Health and Life Insurance, Questions with accurate answers, 100% verified. Rated A

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VA Health and Life Insurance, Questions with accurate answers, 100% verified. Rated A Why would a large corporation choose to self-insure rather than buy an insurance policy from an insurance com... pany? a) to avoid having to comply with individual state laws b) to cover against an occasional but high-severity loss c) to insure against frequent but low-severity losses d) for tax abatement purposes - ✔✔c) to insure against frequent but low-severity losses A large company that is willing and financially able to assume certain risks can self-insure by creating a reserve fund and using that money to pay claims. This type of system is used for frequently occurring claims such as workers' compensation or pension plans All of the following are means of regulation for the insurance business EXCEPT: a) agency regulation b) state regulation c) federal regulation d) industry self-regulation - ✔✔a) agency regulation Agencies are not permitted to regulate themselves. Regulation of insurance is now principally in the hands of the individual states, though the federal government and the industry itself have roles in this regulation. ABC Insurance Company fires Producer Renee. She continues to interview prospects, make sales presentations with company materials, and collect premiums, which she deposits in her personal account. Which of the following types of authority have her "prospects" relied on when paying what they believe to be premiums? a) apparent authority b) actual authority c) implied authority d) express authority - ✔✔a) apparent authority Apparent authority is not intended to be granted to the agent by the insurer. However, it is the authority that appears to exist from the perspective of the customer or other third parties. Under contract law, an applicant's statements on an application for insurance are considered to be which of the following? a) guaranteed as factual b) taken on good faith c) warranties d) representations - ✔✔d) representations An applicant's statements on an application for insurance are considered representations and not warranties. Margo applies for a $250,000 universal life insurance policy. During the underwriting process, the insurer determines that she fits its guidelines for policy issue without any special restrictions. What type of risk is Margo considered? a) standard b) substandard c) preferred d) rated - ✔✔a) standard A person classified as a standard risk fits the insurer's guidelines for policy issue without any special restrictions. Such applicants have a standard, or normal, medical history. Most insurance applicants fall within this category. Multiple employer welfare arrangements (MEWAs) come in two forms. These are which of the following? a) fully vested and partially vested b) fully insured and self-insured c) contributory and noncontributory d) group funded and self-funded - ✔✔b) fully insured and self-insured Fully insured MEWAs are formed by two or more employers. Self-insured MEWAs must get a state-issued certificate of authority and follow reporting guidelines similar to insurance companies, and they must have at least five employers and 200 employees. Rhonda has accumulated value in her life insurance policy. She has no children and has heard that a life settlement provider may be interested in buying her policy. How much can she expect to receive if she sells her interest in the policy? a) the policy's actual cash value b) the amount of premiums she has paid c) the policy's death benefit d) a percentage of (but less than) the policy's death benefit - ✔✔d) a percentage of (but less than) the policy's death benefit The agreement between a life insurance policyowner and a life settlement provider governs the compensation paid in return for the owner's present or future interest in any portion of the policy. Compensation to the owner is typically more than the premiums paid or the policy's cash value and is less than the policy's expected death benefit. Sam and Elena were married and had purchased a life insurance policy that covered both their lives. Sam died on June 1. One year later, Elena died, and the policy proceeds were paid to her son as beneficiary. Which type of policy did Sam and Elena own? a) survivorship life b) family life c) spousal life d) joint life - ✔✔a) survivorship life Survivorship life insurance policies insure more than one person but pay the death benefit only when the second insured dies. In these policies, premiums are lower than they would be for two comparable single-life policies. Group life insurance can be provided through a group insurance contract or through a) a trustee of the employer fund b) a close corporation formed to disburse funds to deceased employees c) a sole proprietorship formed by the business owner expressly to pay benefits to deceased employees d) an agents' association formed to collect premiums and disburse them to employees who die. - ✔✔a) a trustee of the employer fund As in estate planning, a trustee would manage the transfer of funds for the payment of claims to individual members of the group plan. The three factors included in calculating life insurance premiums are which of the following? a) mortality, interest, and expenses b) mortality, morbidity, and expenses c) age, mortality, and interest d) age, mortality, and expenses - ✔✔a) mortality, interest, and expenses Actuaries base traditional life insurance premiums on mortality, or the incidence of death among a given group; interest, or the amount of earnings the insurer can expect from its premium investments; and expenses the insurer incurs in the course of business. The 1980 CSO Table is a common mortality table that insurers use to calculate life insurance premiums. What is this table based on? a) the risk of death due to poor health in a target population b) the current rate of death per 100,000 people c) the mortality experience of U.S. insurance companies between 1970 and 1975 d) the rate of death over a five-year period among an insured population - ✔✔c) the mortality experience of U.S. insurance companies between 1970 and 1975 The 1980 CSO Table reflects the mortality experience of all U.S. insurance companies between 1970 and 1975. However, some large insurers utilize their own mortality table. Sara has a waiver of premium rider attached to her life insurance policy in the event she becomes disabled. When she suffers a stroke, she learns that she must wait four months before her waiver of premium benefit takes effect. Which of the following best explains the reason for the wait? a) She purchased an inexpensive rider. b) The four months represents the waiting period. c) She has probably not paid her premiums on time. d) This is a penalty for her particular disability. - ✔✔b) The four months represents the waiting period. Most waiver of premium riders require that the insured be totally disabled for four to six months before the waiver begins. This period is known as the waiting period. Beth pays her permanent life insurance policy for 16 years. She loses her job, is unemployed for two years, and surrenders her policy to pay bills. Which of the following will Beth learn about nonforfeiture benefits under her policy? a) Her policy will contain some nonforfeiture benefit. b) If she would have chosen the nonforfeiture benefit with an additional cost at the inception of the policy, she would receive some cash value in her policy. c) Whether or not the policy has nonforfeiture benefits depends on the amount of premium she paid. d) There is no requirement for a nonforfeiture benefits feature in life insurance policies, and her policy does not have this feature. - ✔✔a) Her policy will contain some nonforfeiture benefit. At all times, the policyowner owns cash value. If the policy lapses or is surrendered, the policyowner cannot be deprived of the cash value. That is, cash value cannot be forfeited to the insurance company. Therefore, all permanent policies include nonforfeiture options. Edgar is insured under a $1 million life insurance policy and dies during the grace period. What happens if Edgar had not yet paid the premium when he died? a) The death benefit will be paid and no deduction will be made for the premium owed. b) The amount of premium due is subtracted from the policy proceeds paid to the beneficiary. c) The death benefit will be paid after the premium owed plus a 10 percent penalty is charged against the policy. d) The death benefit will be paid and the beneficiary must pay the premium that is owed. - ✔✔b) The amount of premium due is subtracted from the policy proceeds paid to the beneficiary. During the grace period, the policy remains in force. In the event that death occurs during the grace period while the premium remains unpaid, the unpaid premium is generally deducted from the death benefit proceeds. Liam takes out a life insurance policy on his own life and names his son, Brian, as the irrevocable beneficiary. The policy has accumulated considerable cash value, and Liam wants to take out a loan against it. Which of the following statements is correct? a) Liam has the rights to the policy, so he can take a loan using the policy as collateral. b) Liam must withdraw Brian as the beneficiary before he can take the loan. c) Liam cannot take a loan without Brian's consent. d) A loan can be made against the policy, but both Liam and Brian will be co-borrowers. - ✔✔c) Liam cannot take a loan without Brian's consent. A policyowner cannot make a policy loan or surrender any part of the cash value of the policy without the consent of the irrevocable beneficiary, and the irrevocable beneficiary can be removed only with his or her signed consent. All of the following are standard permanent exclusions found in life insurance policies EXCEPT: a) war b) aviation c) hazardous occupations and hobbies d) suicide - ✔✔d) suicide A risk that is excluded from coverage means that it is not covered and that the policy's benefit will not be paid if death results from that risk. A suicide clause only restricts coverage until after a certain amount of time has passed, typically two years, and then death by suicide is covered. What is technical term for that portion of an insurance company's earnings that is available for distribution to policyowners in the form of policy dividends? a) cash value b) reserves c) bonus d) divisible surplus - ✔✔d) divisible surplus The divisible surplus is the portion of an insurance company's earnings that is available for distribution to policyowners. The surplus is distributed after accounting for liabilities, reserves, capital, and expenses. A key provision of a viatical settlement is that the insured must be terminally ill. This means that the insured's life expectancy is generally not longer than how long? a) 12 to 24 months b) 48 to 60 months c) 6 to 10 years d) 11 to 15 years - ✔✔b) 48 to 60 months A person with a life expectancy of no more than 48 to 60 months is generally considered terminally ill for purposes of a viatical settlement. Over the life of a deferred annuity contract, how are the surrender charges affected? a) Charges will remain level. b) Charge will increase. c) Charges will decrease. d) Charges will fluctuate based on the contract value. - ✔✔c) Charges will decrease. The surrender charge is a percentage of the accumulated value of the annuity [Show More]

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