Life & Health Insurance Exam Life & Health Insurance Policy Provisions and Riders 3 — Questions and Answers
Question 1: An insured has a major medical policy with a $500 deductible and 80/20 coinsurance. After the deductible, a $10,000 bill is submitted. How much does the insured owe in coinsurance?
- $500
- $1,900
- $2,000 (Correct answer)
- $2,500
Correct answer: $2,000
After the $500 deductible, the remaining $9,500 is split 80/20; the insured pays 20% of $9,500 = $1,900 (plus the $500 deductible = $2,400 total), but coinsurance alone is $1,900.
Question 2: A Return of Premium rider on a life insurance policy provides what benefit?
- Returns the cash value to the beneficiary
- Returns all premiums paid if the insured outlives the policy term (Correct answer)
- Doubles the death benefit if premiums are returned
- Refunds premiums upon total disability
Correct answer: Returns all premiums paid if the insured outlives the policy term
The Return of Premium rider refunds all premiums paid to the policyholder if they survive to the end of the policy term.
Question 3: Under the Entire Contract provision, what documents make up the entire insurance contract?
- The policy and the agent's verbal promises
- The policy and the attached application (Correct answer)
- The policy, application, and agent's commission schedule
- The policy declarations page only
Correct answer: The policy and the attached application
The Entire Contract provision states the policy and the attached application together constitute the full contract.
Question 4: What does the 'other insurance' provision in a health policy primarily prevent?
- Coverage from lapsing due to nonpayment
- Profit from collecting more than 100% of medical expenses (Correct answer)
- Insurers from denying claims after two years
- Policyholders from switching insurers
Correct answer: Profit from collecting more than 100% of medical expenses
The 'other insurance' provision, including Coordination of Benefits, prevents insureds from collecting more than their actual medical expenses from multiple policies.
Question 5: A disability income policy has a 90-day elimination period. The insured becomes disabled on January 1. When would the first benefit payment typically be made?
- January 1
- February 1
- April 1 (Correct answer)
- July 1
Correct answer: April 1
After a 90-day elimination period starting January 1, benefits begin April 1 (the first day after the elimination period ends).
Question 6: Which life insurance policy provision allows a policyowner to use the policy's cash value to keep insurance in force during the grace period if premium is not paid?
- Automatic Premium Loan provision (Correct answer)
- Waiver of Premium rider
- Reduced Paid-Up option
- Extended Term option
Correct answer: Automatic Premium Loan provision
The Automatic Premium Loan provision automatically borrows from the cash value to pay a premium that is not paid by the end of the grace period.
Question 7: Which of the following best describes the 'change of occupation' provision in a disability income policy?
- Benefits are automatically increased when the insured changes to a higher-risk job
- Benefits may be reduced or premiums adjusted if the insured moves to a higher-risk occupation (Correct answer)
- The policy is cancelled immediately upon any occupation change
- Benefits double if the insured moves to a lower-risk occupation
Correct answer: Benefits may be reduced or premiums adjusted if the insured moves to a higher-risk occupation
If an insured changes to a higher-risk occupation, the insurer may reduce benefits to the amount the premium would have purchased at the new occupation's rate.
Life & Health Insurance Exam Life & Health Insurance Policy Provisions and Riders 3
An insured has a major medical policy with a $500 deductible and 80/20 coinsurance.
After the deductible, a $10,000 bill is submitted.
How much does the insured owe in coinsurance?