Life & Health Insurance Exam Life And Health Insurance Practice 5 — Questions and Answers
Question 1: Which of the following statements about the 'misstatement of age' provision in a life insurance policy is correct?
- The insurer may void the policy if the age was misstated
- The death benefit is adjusted to what the premium would have purchased at the correct age (Correct answer)
- The insured must pay the difference in premiums plus interest
- The insurer refunds all premiums and cancels the policy
Correct answer: The death benefit is adjusted to what the premium would have purchased at the correct age
If the insured's age was misstated on the application, the insurer adjusts the death benefit to the amount the premiums paid would have purchased at the correct age, rather than voiding the policy.
Question 2: A Medicare Advantage plan that requires members to use a network of providers and get referrals from a primary care physician is a:
- Medicare PPO plan
- Medicare HMO plan (Correct answer)
- Medicare PFFS plan
- Medicare MSA plan
Correct answer: Medicare HMO plan
A Medicare Advantage HMO plan requires members to use the plan's network and typically requires referrals to see specialists.
Question 3: Under the Mental Health Parity and Addiction Equity Act (MHPAEA), group health plans that offer mental health benefits must:
- Cover unlimited mental health visits at no cost
- Apply the same financial requirements and treatment limitations to mental health benefits as to medical/surgical benefits (Correct answer)
- Offer separate, expanded mental health deductibles
- Provide mental health coverage only through a carve-out plan
Correct answer: Apply the same financial requirements and treatment limitations to mental health benefits as to medical/surgical benefits
MHPAEA requires that mental health and substance use disorder benefits not have more restrictive financial requirements or treatment limitations than medical and surgical benefits.
Question 4: A life insurance rider that allows the policyholder to purchase additional coverage at specified future dates without evidence of insurability is called:
- Accidental death benefit rider
- Waiver of premium rider
- Guaranteed insurability rider (Correct answer)
- Return of premium rider
Correct answer: Guaranteed insurability rider
The guaranteed insurability (or guaranteed purchase option) rider lets the policyowner buy additional life insurance at predetermined intervals without needing to prove good health.
Question 5: A life insurance policy loan that is not repaid before the insured dies results in:
- The policy being canceled with a refund of cash value
- The outstanding loan balance plus interest being deducted from the death benefit paid to the beneficiary (Correct answer)
- The insurer suing the beneficiary for repayment
- The beneficiary inheriting the debt obligation personally
Correct answer: The outstanding loan balance plus interest being deducted from the death benefit paid to the beneficiary
Outstanding policy loans and accrued interest are subtracted from the death benefit at the time of the claim, reducing the amount paid to the beneficiary.
Question 6: Which of the following defines 'stop-loss' coverage in the context of a self-funded employer health plan?
- A limit on how many claims employees can file per year
- Insurance purchased by the employer to cap its financial exposure for catastrophic or aggregate claims (Correct answer)
- A provision requiring employees to pay all claims above a threshold
- A government program reimbursing small employers for high claims
Correct answer: Insurance purchased by the employer to cap its financial exposure for catastrophic or aggregate claims
Stop-loss insurance protects self-funded employers by reimbursing them when individual claims (specific stop-loss) or total claims (aggregate stop-loss) exceed predetermined thresholds.
Question 7: The primary purpose of the 'entire contract' provision in a life insurance policy is to:
- Allow the insurer to modify the policy terms at any time
- Ensure that the policy document and attached application constitute the complete agreement between the insurer and policyowner (Correct answer)
- Prevent the policyowner from assigning the policy to another party
- Require the insurer to honor all verbal promises made by agents
Correct answer: Ensure that the policy document and attached application constitute the complete agreement between the insurer and policyowner
The entire contract provision states that the policy, along with the original application attached as an exhibit, forms the complete and binding contract — no outside documents or verbal statements are part of the agreement.
Life & Health Insurance Exam Life And Health Insurance Practice 5
Which of the following statements about the 'misstatement of age' provision in a life insurance policy is correct?