Life & Health Insurance Exam Life And Health Insurance Practice 3 — Questions and Answers
Question 1: A universal life insurance policy has two death benefit options. Option B (increasing death benefit) pays:
- Only the face amount at death
- The face amount plus the policy's accumulated cash value (Correct answer)
- The face amount minus outstanding loans
- The greater of the face amount or the cash value
Correct answer: The face amount plus the policy's accumulated cash value
Option B provides a death benefit equal to the face amount plus the accumulated cash value, resulting in an increasing total death benefit over time.
Question 2: Which provision in a health insurance policy requires the insurer to reinstate a lapsed policy if the insured pays overdue premiums within a specified period, typically 10 days?
- Grace period provision
- Reinstatement provision (Correct answer)
- Continuation provision
- Waiver of premium provision
Correct answer: Reinstatement provision
The reinstatement provision allows a lapsed policy to be reinstated upon payment of overdue premiums, usually requiring evidence of insurability for health claims.
Question 3: An employer-sponsored group health plan that self-insures its claims but uses an insurance company only for administrative services is called:
- A fully-insured plan
- An ASO (Administrative Services Only) arrangement (Correct answer)
- A preferred provider organization
- A health reimbursement arrangement
Correct answer: An ASO (Administrative Services Only) arrangement
In an ASO arrangement, the employer bears the risk for claims and pays an insurance company only to handle administrative tasks like claims processing.
Question 4: Which Medicare supplement plan (Medigap) is the only plan that covers the Medicare Part A deductible for hospital stays for policies sold after January 1, 2020?
- Plan F
- Plan G (Correct answer)
- Plan N
- Plan C
Correct answer: Plan G
After 2020, newly eligible Medicare beneficiaries can only purchase Plans G and N (not F or C), and Plan G covers the Part A deductible.
Question 5: A life insurance policy that builds cash value using a fixed interest rate set by the insurer, with no direct investment choices for the policyholder, is best described as:
- Variable life insurance
- Indexed universal life insurance
- Whole life insurance (Correct answer)
- Variable universal life insurance
Correct answer: Whole life insurance
Whole life insurance accumulates cash value at a fixed interest rate guaranteed by the insurer, with no policyholder control over investment allocation.
Question 6: What is the purpose of a 'free-look period' in an individual life insurance or annuity policy?
- Allows the insurer to inspect the insured's medical records
- Gives the policyowner a set number of days to return the policy for a full refund (Correct answer)
- Permits the insurer to change policy terms within 10 days of issue
- Allows the insured to increase coverage without a medical exam
Correct answer: Gives the policyowner a set number of days to return the policy for a full refund
The free-look period (typically 10-30 days) gives the policyowner the right to return the policy and receive a full premium refund if dissatisfied.
Question 7: A health insurance policy provision that prevents the insured from collecting more than 100% of actual covered medical expenses from all combined policies is called:
- Subrogation
- Coordination of benefits (Correct answer)
- Continuation of benefits
- Indemnification limit
Correct answer: Coordination of benefits
Coordination of benefits (COB) ensures that when an insured has multiple health policies, total payments from all policies do not exceed 100% of actual covered expenses.
Life & Health Insurance Exam Life And Health Insurance Practice 3
A universal life insurance policy has two death benefit options.
Option B (increasing death benefit) pays: