Life & Health Insurance Exam Life and Health Insurance Guide Exam 3 — Questions and Answers
Question 1: An annuity owner dies during the accumulation phase before annuitization. The beneficiary will typically receive:
- Nothing, as annuities have no death benefit
- Only the premiums paid
- The greater of the account value or total premiums paid (Correct answer)
- The annuity's future projected value
Correct answer: The greater of the account value or total premiums paid
Most deferred annuities provide a death benefit equal to the greater of the current account value or the total premiums paid, protecting against market loss.
Question 2: Which of the following best describes a 'stop-loss' provision in a major medical health policy?
- A limit on how much the insurer will pay per year
- A maximum out-of-pocket amount after which the insurer pays 100% of covered expenses (Correct answer)
- A provision that stops premium increases after a certain age
- A clause preventing the insurer from canceling the policy
Correct answer: A maximum out-of-pocket amount after which the insurer pays 100% of covered expenses
A stop-loss (or out-of-pocket maximum) provision caps the insured's total annual cost-sharing; once reached, the insurer covers 100% of covered expenses.
Question 3: A producer who misrepresents policy provisions to induce a policyholder to replace existing coverage with a new policy is committing:
- Twisting (Correct answer)
- Churning
- Rebating
- Defamation
Correct answer: Twisting
Twisting is the illegal practice of using misrepresentation or incomplete comparisons to persuade a policyholder to replace one policy with another.
Question 4: Under HIPAA, a pre-existing condition exclusion for group health plans can apply for a maximum of how many months?
- 6 months
- 12 months (Correct answer)
- 18 months
- 24 months
Correct answer: 12 months
HIPAA limits pre-existing condition exclusions in group health plans to a maximum of 12 months (18 months for late enrollees).
Question 5: A universal life insurance policy's death benefit option that keeps the face amount level while the cash value fluctuates is called:
- Option A (Level Death Benefit) (Correct answer)
- Option B (Increasing Death Benefit)
- Option C (Return of Premium)
- Option D (Decreasing Death Benefit)
Correct answer: Option A (Level Death Benefit)
Universal life Option A (or Option 1) maintains a level death benefit, with the net amount at risk decreasing as cash value grows.
Question 6: What does 'subrogation' mean in the context of health insurance?
- The insurer's right to cancel a policy for non-payment
- The insurer's right to recover benefits paid from a liable third party (Correct answer)
- The insured's right to appeal a denied claim
- A coordination of benefits procedure between two insurers
Correct answer: The insurer's right to recover benefits paid from a liable third party
Subrogation gives the insurer the legal right to pursue a third party responsible for an insured's loss to recover claims paid.
Question 7: A Medigap policy can ONLY be sold to someone enrolled in:
- Medicaid only
- Medicare Advantage (Part C)
- Original Medicare (Parts A and B) (Correct answer)
- Any Medicare plan
Correct answer: Original Medicare (Parts A and B)
Medigap (Medicare Supplement) policies are designed to fill gaps in Original Medicare (Parts A and B) and cannot be used with Medicare Advantage plans.
Life & Health Insurance Exam Life and Health Insurance Guide Exam 3
An annuity owner dies during the accumulation phase before annuitization.
The beneficiary will typically receive: