Life & Health Insurance Exam Life and Health Insurance Random 3 — Questions and Answers
Question 1: Which of the following best describes an 'elimination period' in a disability income policy?
- The period during which the insured must be continuously employed
- A waiting period before disability benefits begin (Correct answer)
- The maximum duration benefits will be paid
- The time after which the policy can no longer be cancelled
Correct answer: A waiting period before disability benefits begin
The elimination period is a deductible measured in time — the insured must be disabled for this specified number of days before benefits commence.
Question 2: A life insurance policy lapses due to non-payment of premiums. Under which nonforfeiture option does the insurer use the cash value to purchase paid-up whole life insurance for a reduced face amount?
- Extended term insurance
- Reduced paid-up insurance (Correct answer)
- Automatic premium loan
- Cash surrender value
Correct answer: Reduced paid-up insurance
The reduced paid-up nonforfeiture option uses accumulated cash value to purchase a paid-up whole life policy with a smaller face amount and no further premiums required.
Question 3: Under the ACA's essential health benefits, which of the following services must all non-grandfathered individual and small group plans cover?
- Dental and vision care for adults
- Emergency services and mental health/substance use disorder services (Correct answer)
- Long-term care and skilled nursing facilities
- Elective cosmetic procedures
Correct answer: Emergency services and mental health/substance use disorder services
Emergency services and mental health/substance use disorder services are two of the ten categories of essential health benefits that qualifying plans must cover under the ACA.
Question 4: A life insurance applicant states on the application that he has never had heart disease, but omits a minor valve condition he has forgotten about. This is an example of:
- Concealment
- Fraud
- Innocent misrepresentation (Correct answer)
- Warranty breach
Correct answer: Innocent misrepresentation
An innocent misrepresentation occurs when an applicant unknowingly provides incorrect information without intent to deceive.
Question 5: Which type of Medicare Supplement (Medigap) plan covers 100% of the Medicare Part A coinsurance and hospital costs but does NOT cover the Part B deductible under post-2020 standardization?
- Plan C
- Plan F
- Plan G (Correct answer)
- Plan K
Correct answer: Plan G
Plan G is the most comprehensive Medigap plan available to new enrollees after January 1, 2020; it covers nearly everything except the Medicare Part B deductible.
Question 6: What does the 'creditable coverage' concept mean in the context of health insurance?
- Coverage that qualifies for a premium tax credit under the ACA
- Prior health coverage that can reduce or eliminate pre-existing condition waiting periods (Correct answer)
- Coverage deemed adequate by a state insurance commissioner
- A plan that meets minimum actuarial value thresholds
Correct answer: Prior health coverage that can reduce or eliminate pre-existing condition waiting periods
Creditable coverage refers to prior qualifying health coverage that can reduce waiting periods for pre-existing conditions under group health plans subject to HIPAA.
Question 7: Under a universal life insurance policy, what happens when the cash value is insufficient to cover the monthly mortality and expense charges?
- The policy automatically converts to term insurance
- The insurer pays the charges and bills the policyholder separately
- The policy will lapse unless the policyowner makes an additional premium payment (Correct answer)
- Coverage continues unchanged for 12 months with no premium required
Correct answer: The policy will lapse unless the policyowner makes an additional premium payment
If a universal life policy's cash value cannot cover the ongoing cost of insurance and expense charges, the policy will lapse unless the owner deposits additional premiums.
Life & Health Insurance Exam Life and Health Insurance Random 3
Which of the following best describes an 'elimination period' in a disability income policy?