Free Life and Health Insurance Trivia Questions and Answers — Questions and Answers
Question 1: Life insurance's main goal is to:
- If necessary, cover immediate medical costs to save the life of an insured person
- Compensate for lost wages if an insured individual is never able to work again
- If an insured person is found to have a serious sickness, provide a lump sum
- In the event of death, pay the insured person's debts and other financial obligations (Correct answer)
Correct answer: In the event of death, pay the insured person's debts and other financial obligations
The primary purpose of life insurance is to provide financial security to beneficiaries upon the death of the insured. The death benefit can be used to cover various financial obligations, such as outstanding debts, mortgage payments, living expenses for dependents, and funeral costs. It ensures that the insured's financial responsibilities are met even after they are gone.
Question 2: New Zealand studies show that in general:
- Individual adults and Kiwi families have adequate levels of life insurance
- Kiwi families have more life insurance than families in other countries
- Kiwis have chronic levels of underinsurance when it comes to life cover (Correct answer)
Correct answer: Kiwis have chronic levels of underinsurance when it comes to life cover
Studies in New Zealand, like those conducted by the Financial Services Council, consistently show that a significant portion of the population is underinsured for life cover. This means many individuals and families would face substantial financial hardship if a primary earner were to pass away. This underinsurance highlights a critical gap in financial planning for many Kiwis.
Question 3: When should I apply for life insurance?
- Tomorrow, because you shouldn’t do now what you can put off until then
- Today, because you don’t know what might happen to you tomorrow (Correct answer)
- As soon as you develop a serious medical condition, so you can be covered for it
- As soon as you have any dependents, whenever in the future that might be
Correct answer: Today, because you don’t know what might happen to you tomorrow
The best time to apply for life insurance is typically as early as possible, ideally when you are young and healthy. Life insurance premiums are generally lower when you are younger and have fewer health issues, and you never know when an unforeseen event might make you uninsurable or significantly increase costs. Delaying could mean higher premiums or even denial of coverage.
Question 4: Medical examinations and testing performed today are:
- Sometimes required for a life insurance application (Correct answer)
- Never required for a life insurance application
- Always required for a life insurance application
- Usually required for a life insurance application
Correct answer: Sometimes required for a life insurance application
While not always required, medical examinations and testing are sometimes necessary for a life insurance application, especially for higher coverage amounts or if the applicant has certain health conditions. Insurers use this information to assess risk and determine eligibility and premium rates. Many policies, particularly smaller ones, can be issued without a full medical exam.
Question 5: Today's top life insurance plans offer coverage outside of New Zealand:
- Only if you are on holiday overseas and not working
- Only if you are overseas for less than 12 months
- Only if your travel insurance does not cover you
- Whenever you are overseas, regardless of why or for how long (Correct answer)
Correct answer: Whenever you are overseas, regardless of why or for how long
Modern, top-tier life insurance plans often provide worldwide coverage, meaning the policy remains valid regardless of where the insured travels or resides internationally. This comprehensive coverage ensures that beneficiaries will receive the death benefit even if the insured passes away outside of New Zealand, without restrictions based on travel duration or purpose. It's a key feature of robust life insurance.
Question 6: Today's top life insurance plans offer coverage outside of New Zealand: Whenever you are overseas, regardless of why or for how long
- You have no obligation to notify the insurance company - you are already covered (Correct answer)
- You must notify the insurance company in order to be covered for that condition
- Notifying the insurance company is optional, but is recommended for claim purposes
- You need only notify the insurance company if the condition is life-threatening
Correct answer: You have no obligation to notify the insurance company - you are already covered
For top life insurance plans that offer worldwide coverage, there is typically no requirement to notify the insurer about overseas travel. The policy is designed to cover you globally from the outset, meaning your coverage is continuous and automatic regardless of your location. This provides peace of mind without administrative burdens.
Question 7: If you forget to pay your life insurance premium:
- Your policy is automatically cancelled if it remains unpaid for 14 days
- Your policy is automatically cancelled on the day after the premium is due
- Your policy can never be cancelled by the insurer for non-payment of premiums
- Your policy can only be cancelled after one month and only if the insurer notifies you (Correct answer)
Correct answer: Your policy can only be cancelled after one month and only if the insurer notifies you
Life insurance policies typically include a 'grace period,' which is a period (often 30 or 31 days) after the premium due date during which the policy remains in force even if the premium hasn't been paid. If the premium is paid within this grace period, the policy continues without interruption. If unpaid after the grace period, the insurer must usually notify the policyholder before cancellation.
Question 8: The best way to describe managed care is as ____.
- Health insurance that is designed to reduce the costs of services to its members by contracting with specific providers (Correct answer)
- Federal and private health insurance that offers reduced costs to its members
- Federal and private health insurance that offers both reduced costs to its members and unlimited providers to choose from
- Health insurance that was developed twenty years ago
Correct answer: Health insurance that is designed to reduce the costs of services to its members by contracting with specific providers
Managed care refers to a type of health insurance plan that aims to control costs by contracting with a network of healthcare providers and facilities. These plans emphasize preventive care, utilization review, and often require referrals for specialists, all to manage healthcare expenses while providing quality care to members. HMOs and PPOs are common examples.
Question 9: A health savings account is what?
- A savings method that is tax free and helps people save money against high deductible insurances (Correct answer)
- A type of savings designed to provide additional health options
- A type of savings that attempts to help healthy people save money when shopping for healthy items
- A type of savings that pays every office co-pay for users
Correct answer: A savings method that is tax free and helps people save money against high deductible insurances
A Health Savings Account (HSA) is a tax-advantaged savings account available to individuals enrolled in a High Deductible Health Plan (HDHP). Contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free. HSAs help individuals save for current and future healthcare costs while benefiting from significant tax advantages.
Question 10: Workers' compensation insurance covers lost wages and medical expenses resulting from workplace injuries. As a result, the worker gives up?
- Their job
- Their home
- Their right to see a doctor
- Their right to sue for negligence (Correct answer)
Correct answer: Their right to sue for negligence
Workers' compensation operates as a no-fault system, meaning injured employees receive benefits regardless of who was at fault for the injury. In exchange for this guaranteed coverage of lost wages and medical expenses, the worker gives up their right to sue their employer for negligence. This trade-off ensures prompt care and financial support without the need for lengthy legal battles.
Question 11: Leah gets hurt on the job and has to stay in bed for a week to heal. What indemnity benefit is she most likely to receive?
- Permanent partial disability benefits
- Temporary partial disability benefits
- Permanent total disability benefits
- Temporary total disability benefits (Correct answer)
Correct answer: Temporary total disability benefits
Leah's injury is temporary, as she only needs to stay in bed for a week, and it completely prevents her from working during that time. Temporary total disability benefits are designed to provide income replacement for a worker who is entirely unable to perform their job duties for a limited period due to a work-related injury or illness. Once she heals, she can return to her job.
Question 12: The policyowner can make periodic increases to the face amount at ordinary rates without proving insurability if the life policy has a ______.
- Guaranteed insurability rider (Correct answer)
- Nonforfeiture option
- Cost of living provision
- Paid-up additions option
Correct answer: Guaranteed insurability rider
A Guaranteed Insurability Rider allows the policyowner to purchase additional life insurance coverage at specific future dates or life events without needing to undergo a new medical examination or prove their insurability. This means they can increase their policy's face amount at standard rates, regardless of any changes to their health status. It's a valuable feature for those who anticipate needing more coverage later in life.
Question 13: The policyholder makes a yearly premium payment for her life insurance. A nontaxable dividend check has been sent to her annually up to this point. She prefers to utilize the dividends towards her next premium. Which choice allows this?
- Reduction of premium (Correct answer)
- Cash option
- Accumulation at interest
- Paid-up option
Correct answer: Reduction of premium
The 'reduction of premium' dividend option allows the policyholder to apply their annual dividend directly towards their next premium payment. This effectively lowers the out-of-pocket amount the policyholder needs to pay for their insurance. It's a convenient way to use dividends to offset the cost of maintaining the life insurance policy.
Question 14: An underwriter can order a _________ to learn more about a candidate's interests, resources, and lifestyle.
- Medical Information Bureau report
- Inspection report (Correct answer)
- Attending Physician's Statement
- Medical examination
Correct answer: Inspection report
An inspection report is a comprehensive investigation conducted by a third-party agency to gather information about an applicant's character, reputation, lifestyle, and financial standing. Underwriters use this report to assess the moral hazard and overall risk associated with insuring the applicant. It provides insights beyond medical records, helping to form a complete picture of the applicant's insurability.
Question 15: What is the name of a provision that indicates that the insured and the insurer shall share covered losses in an agreed-upon proportion?
- Co-insurance (Correct answer)
- Percentage sharing
- Comprehensive insurance
- Stop-loss provision
Correct answer: Co-insurance
Co-insurance is a provision in an insurance policy that specifies the percentage of covered medical expenses that the insured and the insurer will each pay after the deductible has been met. For example, an 80/20 co-insurance means the insurer pays 80% and the insured pays 20% of the remaining costs. This mechanism shares the financial burden of healthcare costs between the policyholder and the insurance company.
Question 16: Which of the following is a form of deductible that is charged to the insured after basic medical benefits have been paid but prior to the start of further medical coverage?
- Calendar deductible
- Out-of-pocket limit
- Corridor deductible (Correct answer)
- Carry-over provision
Correct answer: Corridor deductible
A corridor deductible is a specific type of deductible that applies after basic medical benefits have been exhausted but before major medical coverage begins. It acts as a gap in coverage that the insured must pay out-of-pocket. This deductible essentially bridges the 'corridor' between the basic and major medical portions of a health insurance plan.
Free Life and Health Insurance Trivia Questions and Answers
Life insurance's main goal is to: