Life, Accident and Health Agent Examination Summary, Exams of Life Sciences

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Summary CA PSI Site - Life, Accident and Health Agent Examination (Life Agent) Admitted Insurance Company vs. Non-Admitted Insurance Company - ✅✅An admitted insurance company is authorized to transact insurance in California because it has a Certificate of Authority granted by the California Department of Insurance (CDI) A non-admitted insurance company is not authorized to transact insurance in California because of failing to comply with California requirements or did not seek admission Pure Risk vs. Speculative Risk - ✅✅Pure risks are insurable but Speculative risks are not Pure Risks - A possibility of loss, no loss, or gain Pure Risk - A possibility of loss or no loss; there is no possibility for gain Contract of Adhesion - ✅✅One party writes the contract without inout from the other party on a "take-it- or-leave-it" basis Aleatory Contract - ✅✅The exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss. Indemnity Contract - ✅✅An agreement to pay on behalf of another party under specified circumstances Unilateral Contract - ✅✅Only one party is legally bound to the contractual obligations after the premium is paid to the insurer Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract 4 elements of a valid contract - ✅✅1) Competent Parties 2) Legal Purpose 3) Agreement (offer and acceptance) 4) Consideration Preferred Risks vs Standard Risks - ✅✅Standard Risks are individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the mortality table Preferred Risks are individuals who meet certain requirements and qualify for lower premiums because of ideal health, height and weight. Individuals in this category have a longer than average life expectancy Human Life Value Approach vs. Needs Analysis Approach - ✅✅Human Life Value approach is a measure of the projected future earnings and services of a person at risk in the event of a premature death. The objective is to provide the proper amount of coverage as determined by the value of the individual to his/her dependents using the following factors: - The individual's age and gender - The individual's occupation, annual wage, and planned retirement age - Inflation Needs Analysis Approach determines a need for coverage upon the premature death of an individual. It always assumes the death of the individual to be immediate and factors the following steps into arriving at the proper amount of coverage needed: - Calculate all financial needs caused by immediate death, including debts, medical bills, and final expenses - Provide lifetime income to the spouse - Pay off mortgage or other debts - Provide funds for children's education Contributory Plan - ✅✅A type of group insurance plan where employees pay 100% of premium payments and at least 75% of employees participate in this policy. Partial Surrender - ✅✅A partial withdrawal is considered a partial surrender of a Universal or Variable Universal Life policy. o The partial surrender is actually paid from the policy value and reduces both the amount of the death benefit and the amount of cash value in the policy. Per Capita - ✅✅This is a method of distribution that will pay to surviving beneficiaries equally if named a beneficiary dies before the insured does Per Stirpes - ✅✅This is a method of distribution that will pay to surviving beneficiaries equally if named a beneficiary dies before the insured does Grace Period - ✅✅The grace period is the time period provided after the premium due dates before a policy lapses. • The grace period in California is 60 days. Incontestability clause - ✅✅Within the first 2 years of a policy, the insurer may contest a claim and void the contract upon proof of a material misstatement or fraud. Free Look - ✅✅Every policy of individual life insurance and annuities (other than variable contracts) that is used for delivery in California must contain a notice regarding a return of the policy for cancellation of 10-30 days after its receipt by the owner. o The minimum free look period is 10 days for persons under age 60. o Persons who are age 60 or older must be given a 30-day free look period. Uniform Simultaneous Death Act - ✅✅Provides that when the insured and primary beneficiary die as the result of the same event and the order of death cannot be determined, it is assumed the insured died last, protecting their secondary beneficiary or heirs. Cease and Desist order - ✅✅Given when unlicensed persons are caught transacting insurance without appropriate licensing, and penalties can be up to $5,000 a day. Immediate vs. Deferred Annuity - ✅✅Immediate Annuity: Annuity that does not have an accumulation period and is used to generate immediate income within a year of the issue date. Deferred Annuity: Annuity that will pay periodic benefits starting at some specified time in the future; begins more than 1 year from the issue date. Deferred annuities are ideal for accumulating a retirement fund. Life Income Joint & Survivor - ✅✅Joint annuity with lifetime income and is payable to 2 annuitants (in one check) while both are living. Upon the death of the first annuitant, survivor benefits continue, either paying the full amount of reduced to 2/3 or ½ for the survivor's income until the survivor dies. Joint Life Annuity - ✅✅Annuity is payable to 2 or more named annuitants while all are living. o Upon death of the first annuitant, the benefit stops. Endow - ✅✅Maturity date of policy, when it ends. Limit of Liability - ✅✅Also known as the face amount it is the death benefit payable or coverage provided on a life insurance policy. Capitation - ✅✅How HMO Primary Care Physicians are paid A fixed monthly fee made for each subscriber enrolled in the doctor's office regardless of the services provided. Health Maintenance Organization (HMO) - ✅✅An Health Maintenance Organization (HMO) is regarded as a managed health care system providing a comprehensive array of medical services on a prepaid basis, which means little or no out of pocket expenses. o Copayment is required for office visits and hospital services. Copayments discourage unnecessary use of medical resources, such as emergency room services for non-emergency care. o HMOs are deemed to be both a health care financing and servicing mechanism by emphasizing preventive medicine by providing routine medical exams, wellness programs, and diagnostic screenings. Services include usual physician, hospitalization, prescription drugs, laboratory, x-ray, urgent care. Primary Care Physician (PCP) - ✅✅Gatekeeper in HMOs PCP will either provide treatment after being the first contact for a person with an undiagnosed health concern, or make the determination to refer the subscriber to a specialist. Preferred Provider Organizations (PPO) - ✅✅An Preferred Provider Organizations (PPO) is an arrangement under which a selected group of independent hospitals and medical practitioners become preferred providers in a geographic area. o Providers perform services to subscribers and charge a discounted fee-for-service negotiated in advanced. o The contracting agency or organizer of a PPO might be a commercial insurance company, Blue Cross/Blue Shield, local group of hospitals or physicians, an HMO, large employers, or trade unions. o PPOs share the concept of cost reduction by health care management and differ from HMOs in that PPOs do not have separate physical facilities and not as capable of controlling expenses other than negotiating standard fees for services with its network provider. Exclusive Provider Organization (EPO) - ✅✅An EPO is a type of PPO that REQUIRES a subscriber to seek treatment from a limited number of network providers. Noncontributory Plan - ✅✅Employers pay the entire premium and 100% of the eligible employees must be covered. Social Security Blackout Period - ✅✅The time between when the youngest child reaches age 16 and the spouse is eligible for retirement benefits at age 60. According to the terms of the suicide clause found in a life insurance policy, if an insured commits suicide 6 months after the policy is issued, what will the insurer do ? - ✅✅Refund all the premiums paid What regard to the tax treatment of the death benefit in life insurance is true? - ✅✅Death benefits are exempt from taxation A hospital confinement indemnity insurance policy pays: - ✅✅A daily dollar benefit for each day the insured is confined to a hospital Disability income insurance offers various riders to supplement benefits from these policies. The Social Security rider: - ✅✅Helps establish a limit for the amount of income benefits paid to an insured who will receive substantial benefits that may or may not be paid from government programs. Sam's insurance policy pays a dividend. the agent that sold Sam the policy refers to the shareholders of the company as "participating", therefore it is a(n) ______________insurer. - ✅✅Mutual All of the following are examples of the dividend options available on a whole life insurance policy, except: A. One-year term option B. Application to reduce premium C. Paid-up additions D. Life income with period certain - ✅✅D A policy owner makes the last premium payment on his $250,000 non-par whole life policy today. The owner is 70 years of age. When will the cash value reach $250,000. A. About 13 years from now B. The cash value is $250,000 today C. Never, he didn't pay up to age 100 D. When he reaches the age of 100 - ✅✅D Arnold and Bertha are married and work for different firms. Arnold has group health insurance through his company that also insures Bertha. Likewise Bertha has group health insurance also covering Arnold. Select the correct statement below about how benefits are affected by the coordination of benefits provision in both plans. A. If Bertha files a medical claim Arnold's company is considered secondary. B. If Arnold files a medical claim Bertha's company is considered primary C. First the secondary insurer will decide what it won't pay for which will dictate what the primary insurer will pay D. Since both Arnold and Bertha are covered by a group plan neither insurer will pay if the other insurer is primary - ✅✅D All of the following are used in determining life insurance rates, except: A. Investment and interest return B. Insurance company expenses C. Mortality expenses D. Policy reserves - ✅✅Policy Reserves In the California Insurance Code there is a definition that reads, in short, "....a person who, for a fee, offers to advise any insured having any interest in life or disability insurance contracts..." This is the definition of : A. An insurance broker paid on a fee-for-service B. A solicitor C. A life and disability analyst - ✅✅C Disability income insurance pays a weekly or monthly income to replace a portion of the one's lost salary due to an inability to work. When a disability income insurance application is submitted, what reason might the underwritting department use to reject it ? A. Insurers are willing to only accept applications with extremely small risks exposure. B. Underwriters have to reject a certain number of applications per a certain number of approved applications C. Disability insurers have to eliminate applications that seem likely to have losses much more frequently or much more severely than what the insurer's rates anticipate. D. None of the above. - ✅✅C When any change in residence address occurs, every licensee and every applicant for a license must notify the Commissioner _______________. (Select the most correct response) A. Within 6 months after the move has taken place B. Within 6 months before the license is to expire C. 30 days before submitting a continuing education certificate. D. Immediately - ✅✅Immediately To protect (subject to statutory limitations) life and health owners and insureds in the event of impairment or insolvency of a member insurer. This is a description of: A. Medi-Cal B. The California Life and Health Insurance Guarantee Association C. OBRA D. None of the above - ✅✅The California Life and Health Insurance Guarantee Association Which of the following is not legal activity in this state ? A. Participating in a plan to offer free insurance if a person buys some form of service. B. Disregarding age in the determination of insurance rates. C. Refusing to apply the practice of twisting in sales. D. All the above are legal in the state of California - ✅✅A Employees that have group life or health policies covering them are required to be issued a/an ______. D. All the above are false. - ✅✅C The license of an agent is considered inactive when: A. All renewal fees are paid but there is a termination of all appointments B. The license has not been renewed C. Transactions of insurance are no longer executed following a 1 year period. D. - ✅✅A A health insurance contract states that if, during the first 30 days after the policy's effective date, an illness occurs, there will be no benefits paid out of the policy. What is this period of time called? A. Probationary period B. Illness waiver C. Waiver period D. Benefit period - ✅✅B All of the following are true regarding a policy owner that ceases making premium payments on a 10-pay life policy and selects the extended term insurance option, except: A. The face amount will be the same on the new extended term plan as the old 10-pay life policy B. Premium payments no longer have to be made. C. The extended term policy will be in force a certain period and then expire. D. The extended term policy will reflect the same cash value as the original policy - ✅✅D Which of the following is not an acceptable risk to the underwriting department of an insurance company ? A. Sub-standard B. Preferred C. Standard D. All are acceptable risks - ✅✅D All the following are factors in determining premiums charged for group disability income insurance, except: A. The average age of all members of the group B. The location of the insured C. How long of a waiting or elimination period the policy reflects D. How long the benefits will play - ✅✅B In life insurance policies, naming beneficiaries is an important part of the application process. Choose from below the best description of a contingent beneficiary. A. One with the first right to receive proceeds if there is no surviving primary beneficiary and the insured dies. B. One with the right to proceeds only if the primary and secondary beneficiary die in a common disaster. C. One with the right to proceeds if the insured dies. D. All the above are false - ✅✅A The insurer can change the premium assuming it is changed for all insureds in a class. However, the company cannot refuse to renew the policy, or cancel it. This is a/an ____ policy A. Guaranteed renewable B. Cancelable C. Optionally renewable D. Non-cancelable - ✅✅A Which of the following is a type of single deductible for all family members that, when satisfied, overrides any remaining family member's individual deductibles ? A. A calendar year deductible B. A per cause deductible C. A co-payment D. Family deductible - ✅✅D Choose the correct statement about a cost of living rider. The policy owner: A. Is only charged a flat fee to have the rider attached B. Could experience a decrease in amount of the policy if the CPI decreases. C. Pays an additional premium for the extra protection the rider provides and will see the face amount of the contract increase according to the increase of the index D. All the above - ✅✅C Which of the following supports the Medical Information Bureau ? A. Insurance companies B. The Department of Insurance C. Insurance agents D. None of the above - ✅✅A A disability policy is issued and premiums are paid on an annual basis on the 1st of January. At the first anniversary, the insured decides they do not want to renew the policy and they do not pay the premium. On the 8th day after the premium due date, the insured submits a claim for medical expenses. How will the company respond to the claim ? A. It will not be paid because the policy expired on the anniversary date. B. It will be paid because the insured did not request a formal cancellation C. It will be paid because the loss was not reported within the grace period. D. It will be paid because the loss occurred within the grace period. - ✅✅D A. 7 days B. 30 days C. 31 days D. 10 days - ✅✅D Mr. Jones answered questions on his application. What are they called? A. Warranties B. Responses C. Representations D. Perils - ✅✅C In the insurance business, risk can best be defined as A. Sharing the possibility of a loss B. Uncertainty regarding the future C. Uncertainty regarding financial loss D. Uncertainty regarding when death will occur - ✅✅C Tom buys his wife Mary a $50,000 diamond ring. When she is not wearing the ring, she keeps it in a safe deposit box at a local bank. This is an example of risk A. Avoidance B. Reduction C. Retention D. Transference - ✅✅B What is required when an applicant reveals conditions that require more information? A. Physical examination B. Attending physician's statement C. Investigative consumer report D. Agent's report - ✅✅A Which of the following statements defines partial disability ? A. A disabled employee while he is working part-time and receiving lost income under their long-term disability benefit B. An employee who loses sight in one eye because of an accident on the job C. An employer contributing half of the disability benefit to an employee out on long-term disability D. The prorated income an employer pays an injured employee out on short-term disability - ✅✅A A supplemental insurance policy that pays a set amount for each day that an individual is hospitalized is known as: A. Long term care supplement B. Temporary major medical C. Hospital confinement indemnity D. Hospital surgical expense - ✅✅C Which settlement option allows only the death benefit earnings to be paid to the beneficiary ? A. Cash option B. Fixed amount option C. Interest option D. Fixed period option - ✅✅A Which statement is true regarding participating in a group health insurance plan? A. A minimum of 75% of eligible members is required for a non-contributory group health plan B. A non-contributory group health plan must cover all eligible members C. A contributory group health plan must cover all eligible members D. A minimum participation of 50% of eligible members is required for a contributory group health plan - ✅✅B According to state law, what size print must be used for the licensee's license number on all price quotes, business cards, and printed material? A. There are no requirements for the license no. to be printed on any printed material B. Larger print than any other printed information on the material C. The same size print as the licensee's phone number, fax number or address D. Small print a the bottom of the material - ✅✅C Which non-forfeiture option uses cash surrender values to purchase paid-up term insurance for the full face amount of the policy? A. Extended paid-up insurance B. Reduced term insurance C. Extended term insurance D. Reduced paid-up insurance - ✅✅C All of the following statements about the gatekeeper system are true, except: A. Specialists can choose to be gatekeepers for their patients B. The insured must utilize their primary physicians who authorize all care for the insured C. Referrals to specialists must be authorized by the gatekeeper If an insurer pays an insured $25,000 in lost wages, $45,000 for physicians visits and hospital costs, and $15,000 for physical therapy treatments, and later discovers that the claim was fraudulent, the insured may be fined as much as: A. $25,000 B. $60,000 C. $85,000 D. $170,000 - ✅✅D What is the difference between a conditional premium receipt and a binding premium receipt? A. The applicant must be insurable in order to have coverage only under the binding receipt B. Only a conditional receipt always provides insurance that is effective from the date the receipt is given C. Only a binding receipt always provides insurance that is effective from the date receipt is given D. Premiums must be paid to receive only a conditional receipt - ✅✅C 62) Under a disability income insurance policy with an "own occupation" clause, an employee who can no longer perform the tasks of the job held at the time of injury is considered: A. Gainfully disabled B. Totally disabled C. Presumptively disabled D. Medically disabled - ✅✅B Health maintenance organizations (HMOs) are required to provide for all of the following services, except: A. Prescription drugs B. Emergency services C. Preventive services D. Physicians services - ✅✅A Under disability income insurance, bodily injury must meet the following criteria to be classified as accidental: A. Only the result need be accidental B. Only the cause need be accidental C. Both the cause and the result need be accidental D. The cause may be intentional, but the result must be accidental - ✅✅D Jean's healthcare provider is a "service provider". This mans: A. Her payment for services goes directly to the provider B. She will get better service than a "fee for service" provider C. Her payment for services are always paid to the insured D. All the above above are true statements - ✅✅A