Life & Health Insurance Exam Life and Health Insurance Assessment 4 — Questions and Answers
Question 1: The insuring clause in a life insurance policy is significant because it:
- Lists all policy exclusions
- States the insurer's promise to pay the death benefit (Correct answer)
- Describes the premium payment schedule
- Names the primary beneficiary
Correct answer: States the insurer's promise to pay the death benefit
The insuring clause is the core contractual promise where the insurer agrees to pay the face amount upon the insured's death.
Question 2: Under Medicaid, eligibility is primarily based on:
- Age (must be 65 or older)
- Financial need and income level (Correct answer)
- Employment status only
- Prior premium payment history
Correct answer: Financial need and income level
Medicaid is a needs-based program jointly funded by federal and state governments, with eligibility determined primarily by income and financial resources.
Question 3: A 'spendthrift clause' in a life insurance policy is intended to:
- Limit the insurer's liability
- Protect policy proceeds from the beneficiary's creditors (Correct answer)
- Allow the insurer to defer paying claims
- Restrict the beneficiary from changing the policy
Correct answer: Protect policy proceeds from the beneficiary's creditors
A spendthrift clause prevents beneficiaries from assigning or pledging their interest and protects proceeds from their creditors until distributed.
Question 4: In a health insurance policy, a 'stop-loss' provision benefits the insured by:
- Stopping premium increases after age 65
- Capping the insured's out-of-pocket expenses for the year (Correct answer)
- Limiting the number of claims per year
- Preventing the insurer from canceling the policy
Correct answer: Capping the insured's out-of-pocket expenses for the year
A stop-loss (out-of-pocket maximum) provision caps the total amount the insured must pay in cost-sharing each year, after which the insurer covers 100%.
Question 5: Which of the following is a characteristic of a participating life insurance policy?
- Premiums are always lower than nonparticipating policies
- The policyowner may receive dividends from the insurer (Correct answer)
- Coverage is provided by the government
- Cash values are invested in mutual funds
Correct answer: The policyowner may receive dividends from the insurer
Participating policies are typically issued by mutual insurers and may pay dividends to policyowners when the insurer experiences favorable experience.
Question 6: An agent who accepts an application and initial premium but does not issue a binding receipt is providing coverage:
- Immediately upon application submission
- Only after the insurer underwrites and approves the policy (Correct answer)
- After a mandatory 10-day waiting period
- Never, because no receipt was issued
Correct answer: Only after the insurer underwrites and approves the policy
Without a binding receipt, coverage does not begin until the insurer accepts the application and issues the policy.
Question 7: Under Social Security, the number of work credits needed to be 'fully insured' for retirement benefits is:
- 20 credits
- 30 credits
- 40 credits (Correct answer)
- 50 credits
Correct answer: 40 credits
Workers need 40 credits (approximately 10 years of work) to be fully insured for Social Security retirement benefits.
Life & Health Insurance Exam Life and Health Insurance Assessment 4
The insuring clause in a life insurance policy is significant because it: