Life And Health Insurance Practice Flashcards
16 cards from real Life & Health Insurance Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 16 Life And Health Insurance Practice flashcards as text
Which type of insurance guarantees that the policy can be renewed every year, regardless of the policyholder's health, but at a higher cost?
Answer: Renewable term
Renewable term insurance guarantees that the policyholder can renew their coverage at the end of each term without needing to provide new evidence of insurability. While this offers continued protection regardless of health changes, the premiums typically increase with each renewal due to the insured's advancing age.
What's the significance of worker's compensation legislation?
Answer: Employers would be held responsible for the cost of their employee's work injuries regardless of fault
Worker's compensation legislation established a no-fault system where employers are held responsible for the medical costs and lost wages of employees injured on the job. This means employees do not need to prove employer negligence to receive benefits, simplifying the process for injured workers.
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?
Answer: Accelerated death benefit
An accelerated death benefit clause allows an insured individual, typically diagnosed with a terminal illness, to receive a portion of their life insurance policy's death benefit while still alive. This provides financial relief for medical expenses or other needs during a critical time, before the full death benefit would normally be paid out.
A ____ is a way to give family members a break from taking care of a person who needs constant care.
Answer: Respite care
Respite care provides temporary relief for primary caregivers who are looking after a person with chronic illness or disability. It allows caregivers to take a break, attend to personal needs, or simply rest, while ensuring the care recipient continues to receive appropriate support.
If an insurance is unable to pay debts when they are due, the insurer is believed to be _______.
Answer: Insolvent
An insurer is considered insolvent when its liabilities exceed its assets, meaning it is unable to pay its debts or meet its financial obligations as they become due. This financial state can lead to the insurer being taken over by regulators to protect policyholders.
Which types of payments to beneficiaries must be taxed by the IRS?
Answer: Gains from interest
While the death benefit paid to beneficiaries from a life insurance policy is generally tax-free, any interest earned on that benefit while it is held by the insurer is considered taxable income. This applies if the beneficiary chooses to leave the funds with the insurer for a period, rather than taking a lump sum immediately.
An insurance policy that covers hospital confinement indemnity pays ____.
Answer: The daily benefit coverage amount stated in the policy for each day the insured is confined in the hospital
Hospital confinement indemnity policies pay a predetermined, fixed daily benefit amount for each day the insured is hospitalized, regardless of the actual expenses incurred. This type of policy provides a supplemental income benefit rather than covering the specific costs of hospital services.
The definition of disability under social security is the inability to engage _____.
Answer: Any substantial gainful activity
The Social Security Administration has a very strict definition of disability, requiring that an individual be unable to engage in any substantial gainful activity (SGA) due to a severe medical condition that is expected to last at least 12 months or result in death. This means they cannot perform their previous work or adjust to other work.
Which is a speculative risk?
Answer: Gambling
A speculative risk involves the possibility of both gain and loss, such as investing in the stock market or gambling. Insurance typically covers pure risks, which only involve the possibility of loss or no loss, not the chance of gain.
What makes a risk insurable?
Answer: All of the above
For a risk to be insurable, it must meet several criteria: it must be measurable in terms of potential financial loss, it must be a pure risk (only loss or no loss, not gain), and it must have a defined dollar value. All these characteristics allow insurers to accurately assess and price the risk.
Before a claim can be paid, insurance contracts say that a certain thing must happen in the future. Because of this, insurance contracts:
Answer: Conditional
Insurance contracts are considered conditional because the insurer's obligation to pay a claim depends on certain conditions being met by the policyholder. These conditions include paying premiums, providing proof of loss, and adhering to the policy's terms and conditions.
Which life insurance plan guarantees premiums for the policy's duration?
Answer: Whole
Whole life insurance is a type of permanent life insurance that guarantees level premiums for the entire duration of the policyholder's life. It also builds cash value over time, which can be accessed by the policyholder during their lifetime.
One significant benefit of term life insurance is that it usually:
Answer: Costs less than permanent insurance
Term life insurance provides coverage for a specific period (the 'term') and does not accumulate cash value. Because it only offers a death benefit for a limited time and lacks the savings component of permanent insurance, its premiums are typically much lower.
To buy life insurance on someone else, the buyer must prove:
Answer: Insurable interest
To purchase life insurance on someone else, the buyer must demonstrate an 'insurable interest,' meaning they would suffer a financial or emotional loss if the insured person were to die. This requirement prevents people from taking out policies on strangers for speculative purposes.
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:
Answer: Contestable period
The contestable period is a specific timeframe, usually the first two years after a life insurance policy is issued, during which the insurer can investigate the application for material misrepresentations. If false or misleading information is found, the insurer may have the right to deny a claim or void the policy.
The purpose of life insurance exclusions is to outline circumstances of death which may result in:
Answer: Non-payment of death benefits
Life insurance exclusions are specific conditions or circumstances outlined in the policy under which the insurer will not pay the death benefit. These typically include events like suicide within a certain period, acts of war, or death resulting from illegal activities, ensuring the insurer is not liable for certain high-risk situations.