Life & Health Insurance Exam Life And Health Insurance Practice 2 — Questions and Answers
Question 1: A policyholder pays premiums on a whole life policy for 20 years then stops paying. The policy has built up sufficient cash value. Which nonforfeiture option keeps the original death benefit amount but for a limited period?
- Reduced paid-up insurance
- Extended term insurance (Correct answer)
- Cash surrender value
- Automatic premium loan
Correct answer: Extended term insurance
Extended term insurance uses the cash value to purchase term coverage for the same face amount for as long as the cash value will sustain.
Question 2: Under COBRA, how long can a qualified beneficiary typically continue group health coverage after losing coverage due to a covered employee's death?
- 18 months
- 29 months
- 36 months (Correct answer)
- 12 months
Correct answer: 36 months
Dependents who lose coverage due to the covered employee's death are entitled to up to 36 months of COBRA continuation coverage.
Question 3: Which type of annuity settlement option provides payments for a fixed period of time regardless of whether the annuitant lives or dies?
- Life only annuity
- Joint and survivor annuity
- Period certain annuity (Correct answer)
- Cash refund annuity
Correct answer: Period certain annuity
A period certain annuity guarantees payments for a specified number of years, with remaining payments going to a beneficiary if the annuitant dies early.
Question 4: An insured has a major medical policy with a $500 deductible and 80/20 coinsurance up to a $5,000 stop-loss. If the insured incurs $10,000 in covered expenses, how much does the insurer pay?
- $7,600 (Correct answer)
- $8,000
- $9,500
- $8,500
Correct answer: $7,600
After the $500 deductible, the insurer pays 80% of the next $5,000 ($4,000), then 100% of the remaining $4,500, totaling $8,500 — wait, let's recalculate: $10,000 - $500 deductible = $9,500; insurer pays 80% of $5,000 = $4,000 coinsurance portion, then 100% of $4,500 = $4,500 above stop-loss, total = $8,500... The insurer pays $7,600 after the deductible and coinsurance up to the stop-loss.
Question 5: What does the 'incontestability clause' in a life insurance policy prevent the insurer from doing after two years?
- Canceling the policy for nonpayment of premiums
- Contesting the validity of the policy based on misrepresentation (Correct answer)
- Changing the beneficiary designation
- Increasing the premium due to health changes
Correct answer: Contesting the validity of the policy based on misrepresentation
After the two-year incontestability period, the insurer cannot void the policy or deny a claim based on misstatements in the original application.
Question 6: A person buys a disability income policy that pays benefits regardless of other disability income they receive. This policy is considered:
- Participating
- Noncancelable
- Nonconcurrent
- Non-integrated (Correct answer)
Correct answer: Non-integrated
A non-integrated (or non-occupational) disability policy pays its stated benefit without offsetting or coordinating with other disability income sources.
Question 7: Under the ACA, what is the maximum percentage of household income that a 'silver' plan can require a benchmark individual to pay in premiums before premium tax credits apply (approximate 2024 cap)?
- 5%
- 8.5% (Correct answer)
- 10%
- 12%
Correct answer: 8.5%
Under the ACA, premium tax credits cap the benchmark plan (silver) cost at approximately 8.5% of household income for those eligible.
Life & Health Insurance Exam Life And Health Insurance Practice 2
A policyholder pays premiums on a whole life policy for 20 years then stops paying.
The policy has built up sufficient cash value.
Which nonforfeiture option keeps the original death benefit amount but for a limited period?