Life & Health Insurance Exam Life and Health Insurance Guide Exam 5 — Questions and Answers
Question 1: A variable life insurance policy's death benefit and cash value fluctuate based on:
- The insurer's general account performance
- The performance of separate account investment subaccounts (Correct answer)
- Current interest rates set by the Federal Reserve
- The policyholder's age and health at renewal
Correct answer: The performance of separate account investment subaccounts
Variable life insurance ties cash value and potentially the death benefit to investment subaccounts within a separate account, shifting investment risk to the policyowner.
Question 2: Under the coordination of benefits (COB) rules, which plan pays claims first when an individual is covered by two group health plans?
- The plan with the lower deductible
- The plan that has been in force longer
- The plan under which the individual is the primary insured (not a dependent) (Correct answer)
- The plan chosen by the insured at enrollment
Correct answer: The plan under which the individual is the primary insured (not a dependent)
COB rules establish that the plan covering the individual as an employee (primary insured) pays first, while the plan covering them as a dependent pays second.
Question 3: Which provision in a health insurance policy requires the insurer to continue coverage despite the policyholder's failure to pay premiums, using dividends or cash value to pay them?
- Waiver of premium
- Automatic premium loan (Correct answer)
- Grace period
- Reinstatement
Correct answer: Automatic premium loan
The automatic premium loan provision automatically borrows from available cash value to pay an overdue premium, preventing unintended lapse.
Question 4: A long-term care insurance policy that adjusts benefits for inflation at a fixed rate each year has what type of rider?
- Accelerated benefit rider
- Simple inflation protection rider (Correct answer)
- Compound inflation protection rider
- Cost-of-living adjustment rider
Correct answer: Simple inflation protection rider
A simple inflation protection rider increases benefits by a fixed percentage of the original benefit amount each year, while compound inflation grows on the previously increased amount.
Question 5: A Medicare Advantage plan must provide benefits that are at least equivalent to:
- Medicaid benefits
- Original Medicare Parts A and B benefits (Correct answer)
- Medicare Part D benefits only
- All Medicare Supplement plan benefits
Correct answer: Original Medicare Parts A and B benefits
Medicare Advantage plans are required by law to cover all services included under Original Medicare Parts A and B, though they may structure cost-sharing differently.
Question 6: An insurer cancels an individual health insurance policy mid-term without cause. Under what circumstance is this allowed?
- It is never allowed once the policy is issued
- Only if the insured commits fraud or material misrepresentation (Correct answer)
- If the insured changes occupations
- If the insured files more than two claims in a year
Correct answer: Only if the insured commits fraud or material misrepresentation
After a policy is issued, insurers generally cannot cancel individual health coverage mid-term except for non-payment of premiums or fraud/material misrepresentation by the insured.
Question 7: A life insurance policy where the policyowner can increase or decrease premium payments and adjust the face amount is a:
- Whole life policy
- Term life policy
- Universal life policy (Correct answer)
- Variable annuity
Correct answer: Universal life policy
Universal life insurance provides flexible premiums and adjustable death benefits within certain limits, distinguishing it from the fixed structure of whole or term life.
Life & Health Insurance Exam Life and Health Insurance Guide Exam 5
A variable life insurance policy's death benefit and cash value fluctuate based on: