Life & Health Insurance Exam Life and Health Insurance Guide Exam 4 — Questions and Answers
Question 1: A life insurance policy lapses due to non-payment of premium. The insured later requests reinstatement. Which of the following is NOT typically required for reinstatement?
- Payment of all past-due premiums with interest
- Evidence of insurability
- Payment of any outstanding policy loans
- Assignment of the policy to the insurer (Correct answer)
Correct answer: Assignment of the policy to the insurer
Reinstatement generally requires payment of back premiums with interest, satisfying any policy loans, and proof of insurability, but does not require assigning the policy to the insurer.
Question 2: Which type of annuity guarantees a fixed payout for the annuitant's lifetime, with payments continuing to a beneficiary for a specified period if the annuitant dies early?
- Life only annuity
- Joint and survivor annuity
- Life with period certain annuity (Correct answer)
- Refund annuity
Correct answer: Life with period certain annuity
A life with period certain annuity pays for life but guarantees payments for a minimum period (e.g., 10 years) to a beneficiary if the annuitant dies before that period ends.
Question 3: An employer-sponsored group health plan that self-funds claims but purchases stop-loss coverage is known as a:
- Fully insured plan
- Self-insured (self-funded) plan (Correct answer)
- High-deductible health plan
- Health maintenance organization
Correct answer: Self-insured (self-funded) plan
A self-insured plan means the employer bears the risk for employee health claims directly, often purchasing stop-loss insurance to limit catastrophic exposure.
Question 4: The 'free-look' period for a new individual life insurance policy is typically how many days?
- 5 days
- 10 days (Correct answer)
- 30 days
- 60 days
Correct answer: 10 days
Most states require a minimum 10-day free-look period during which the policyholder may return the policy for a full premium refund.
Question 5: An insured has a $500 deductible and 80/20 coinsurance with a $2,000 stop-loss. Total covered medical bills are $10,500. How much does the insured pay in total?
- $500
- $2,000
- $2,500 (Correct answer)
- $3,000
Correct answer: $2,500
The insured pays the $500 deductible plus 20% of the remaining $10,000 ($2,000), but the stop-loss caps out-of-pocket at $2,000; total = $500 + $2,000 = $2,500.
Question 6: Which nonforfeiture option allows a lapsed whole life policyholder to receive paid-up coverage at a reduced face amount?
- Extended term insurance
- Reduced paid-up insurance (Correct answer)
- Cash surrender value
- Automatic premium loan
Correct answer: Reduced paid-up insurance
Reduced paid-up insurance uses the cash surrender value as a single premium to purchase a permanent policy for a reduced face amount with no further premiums required.
Question 7: A health insurance applicant fails to disclose a prior heart attack on the application. This is an example of:
- Misrepresentation
- Concealment (Correct answer)
- Fraud
- Waiver
Correct answer: Concealment
Concealment is the intentional withholding of material information that would affect the insurer's decision to issue or price the policy.
Life & Health Insurance Exam Life and Health Insurance Guide Exam 4
A life insurance policy lapses due to non-payment of premium.
The insured later requests reinstatement.
Which of the following is NOT typically required for reinstatement?