Life & Health Insurance Exam Life and Health Insurance Assessment 5 — Questions and Answers
Question 1: The 'free look' provision in a life insurance policy gives the policyowner the right to:
- Review and return the policy for a full premium refund within a specified period (Correct answer)
- Examine competitor policies before committing
- Request a rate reduction within 30 days
- Change beneficiaries without insurer approval
Correct answer: Review and return the policy for a full premium refund within a specified period
The free look period (typically 10–30 days) allows a new policyowner to review the policy and return it for a full refund if unsatisfied.
Question 2: A 'guaranteed renewable' health insurance policy means the insurer:
- Must renew the policy but may increase premiums for an entire class of insureds (Correct answer)
- Cannot increase premiums under any circumstances
- Must renew and cannot change any policy terms
- Renews coverage only if the insured remains employed
Correct answer: Must renew the policy but may increase premiums for an entire class of insureds
Guaranteed renewable means the insurer must continue coverage at the insured's option, but can raise premiums on a class-wide basis.
Question 3: Which of the following annuity payout options provides the highest monthly income to the annuitant?
- Life only (straight life) (Correct answer)
- Life with 10-year certain
- Joint and 100% survivor
- Life with 20-year certain
Correct answer: Life only (straight life)
A straight life annuity pays the highest monthly benefit because there is no guarantee period or survivor benefit, so payments stop at death.
Question 4: Under an HMO health plan, a primary care physician (PCP) typically serves as a:
- Claims adjuster
- Gatekeeper who authorizes specialist referrals (Correct answer)
- Network administrator
- Secondary payer
Correct answer: Gatekeeper who authorizes specialist referrals
In an HMO, the PCP acts as a gatekeeper, coordinating care and providing referrals required before the insured can see specialists.
Question 5: A life insurance policy loan that is not repaid by the insured's death will:
- Be forgiven by the insurer as a goodwill gesture
- Be deducted from the death benefit paid to the beneficiary (Correct answer)
- Cause the policy to be declared void
- Trigger a tax penalty on the entire policy value
Correct answer: Be deducted from the death benefit paid to the beneficiary
Any outstanding policy loan balance plus accumulated interest is subtracted from the death benefit before the beneficiary receives payment.
Question 6: In group life insurance, the 'master policy' is held by the:
- Individual employees
- Employer or group sponsor (Correct answer)
- State insurance department
- Named beneficiaries
Correct answer: Employer or group sponsor
In group life insurance, the master policy is issued to the employer (or association), while employees receive individual certificates of coverage.
Question 7: A 'cost of living adjustment' (COLA) rider on a disability income policy is designed to:
- Reduce premiums as the insured ages
- Increase benefit payments to keep pace with inflation during a disability (Correct answer)
- Extend the benefit period automatically
- Convert disability benefits to life insurance
Correct answer: Increase benefit payments to keep pace with inflation during a disability
A COLA rider adjusts disability income benefits upward (often tied to CPI) to help the insured maintain purchasing power during a long-term disability.
Life & Health Insurance Exam Life and Health Insurance Assessment 5
The 'free look' provision in a life insurance policy gives the policyowner the right to: