FREE Life And Health Insurance Practice Questions and Answers

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Before a claim can be paid, insurance contracts say that a certain thing must happen in the future. Because of this, insurance contracts:

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A "unilateral contract" is one where only one side agrees to abide by the conditions of the agreement. Because they're "take it or leave it," most insurance contracts are unilateral. The right answer is "Conditional," because this word means that a claim can't be paid until a certain "condition" happens in the future.

Which is a speculative risk?

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Speculative risk is taken on purpose and can result in either a profit or a loss. Skydiving, frequent travel, and reckless driving are not regarded as speculative risks since they do not immediately lead to financial benefit. Gambling is a speculative risk since it is voluntary and has the potential to result in financial gain or loss.

Which types of payments to beneficiaries must be taxed by the IRS?

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Rarely do beneficiaries of life insurance death benefits have to pay taxes. Nevertheless, all interest payments must be declared as income. Death benefits provided to a trust are usually taxable.

In the event of a terminal illness, which death benefit clause will trigger payment of a portion of the death benefit before the insured's death?

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An accelerated death benefit pays some or all of a life insurance policy's death payment before the policyholder dies. It could pay you a large portion of your policy's death benefit without you having to sell your policy to a third party.

Which life insurance plan guarantees premiums for the policy's duration?

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Unlike term, universal, and variable life insurance, whole life policies carry lifetime premiums. Premiums for term life insurance are not fixed because they are based on how old the insured person is getting. The premiums for both universal and variable life insurance can change a lot because they are tied to changes in the economy.

An insurance policy that covers hospital confinement indemnity pays ____.

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When an employee or their dependent is hospitalized due to a covered disease or injury, hospital indemnity insurance will pay a certain amount each day. Employees can utilize these benefits to cover out-of-pocket costs beyond what their health insurance providers, such as co-payments, deductibles, and other incidental costs of living.

A ____ is a way to give family members a break from taking care of a person who needs constant care.

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It's a little break from the stresses of taking care of a loved one who need constant attention. Respite care can be provided for an afternoon or several days or weeks. Care can be given at home, at a hospital, or at a facility for adult daycare.

What makes a risk insurable?

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Risks that are normally covered by insurance are known as insurable risks. These kinds of insurable risk variables result in losses that are quantifiable and have set monetary values. Because of this consistency, insurance underwriters can provide more accurate coverage rate quotes. Insurable risks are by definition pure risks because there is nothing to benefit from them occurring.

If an insurance is unable to pay debts when they are due, the insurer is believed to be _______.

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Insolvency is a state of financial trouble in which a person or company can't pay its debts. The temporary inability to pay debts and other financial commitments. Insolvent companies are at risk of bankruptcy due to current financial issues.

The purpose of life insurance exclusions is to outline circumstances of death which may result in:

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The policy's exclusions specify the types of deaths for which coverage is not provided. For example, an insurance company might decide not to pay death benefits if the person who was covered died while doing something illegal. Another common exclusion in life insurance is suicide, and some plans even include a time limit on this provision.

The definition of disability under social security is the inability to engage _____.

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Social Security defines disability as the inability to do substantial gainful activity (SGA) because of a medically determined physical or mental impairment(s) that has lasted or is expected to last for at least 12 months or will cause death.

What's the significance of worker's compensation legislation?

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If an employee is hurt in an accident that occurs "out of or in the course of employment," the employer is responsible for paying for the employee's medical care and up to two-thirds of the employee's lost earnings under the workers' compensation law.

The insurer has the right to investigate the application for life insurance during the first two years after the policy's effective date and refuse to pay death benefits if any false or misleading information was submitted. This time frame is known as the:

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Within two years of the policy's start date, insurers can contest any life insurance policy. The contestable period protects insurance companies from fraud, In the contestable period, the insurer might withhold death benefit payments if the life insurance policy application contains mistakes, omissions, or falsified information.

One significant benefit of term life insurance is that it usually:

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Because term life insurance has no monetary value, it cannot be utilized to grow wealth. It covers mortgage payments, credit card payments, child support, and other expenses that may entail financial loss upon the insured's death over a certain period.  Term life offers more death benefits per premium dollar.

To buy life insurance on someone else, the buyer must prove:

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When someone buys life insurance for someone else, the insurer needs to make sure that the person buying the policy could lose money if the insured person died. Insurable interests include insurance on a spouse to make up for lost income, insurance on a parent to pay for funeral costs, and insurance on the parent of an adult who is disabled.

Which type of insurance guarantees that the policy can be renewed every year, regardless of the policyholder's health, but at a higher cost?

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The insurer is required to provide coverage as long as the insurance premiums are paid. The insurer can raise the premiums on a "guaranteed renewable" policy as long as the increase affects many policyholders and not just one.

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