PSI Insurance Exam 5 — Questions and Answers
Question 1: Under COBRA, how long may a qualified beneficiary continue group health coverage after the employee voluntarily terminates employment?
- 12 months
- 18 months (Correct answer)
- 29 months
- 36 months
Correct answer: 18 months
Most COBRA qualifying events (voluntary termination, reduction in hours) entitle the beneficiary to 18 months of continuation coverage.
Question 2: A homeowner's policy Section II provides which type of coverage?
- Dwelling and other structures
- Personal property
- Personal liability and medical payments (Correct answer)
- Loss of use
Correct answer: Personal liability and medical payments
Section II of a homeowner's policy covers personal liability and medical payments to others, protecting against lawsuits from bodily injury or property damage.
Question 3: The maximum amount an insurer will pay for all covered losses under a policy during the policy period is called the:
- Per-occurrence limit
- Aggregate limit (Correct answer)
- Sublimit
- Retained limit
Correct answer: Aggregate limit
The aggregate limit caps the total amount the insurer will pay for all claims combined during the policy period.
Question 4: A life insurance policy provision that allows the policyowner to reinstate a lapsed policy within a specified period by paying back premiums with interest requires evidence of:
- No additional evidence is needed
- Insurability (Correct answer)
- Financial hardship
- Prior claims history
Correct answer: Insurability
Reinstatement provisions require the policyowner to provide evidence of insurability in addition to paying all overdue premiums plus interest.
Question 5: Which nonforfeiture option uses a lapsed whole life policy's cash value to buy a reduced paid-up policy of the same type?
- Extended term
- Reduced paid-up (Correct answer)
- Cash surrender
- Automatic premium loan
Correct answer: Reduced paid-up
The reduced paid-up nonforfeiture option uses accumulated cash value to purchase a fully paid-up policy with a lower face amount than the original.
Question 6: An employer-sponsored retirement plan that defines the benefit the employee will receive at retirement is a:
- 401(k) plan
- Defined contribution plan
- Defined benefit plan (Correct answer)
- SIMPLE IRA
Correct answer: Defined benefit plan
A defined benefit plan promises a specific monthly benefit at retirement, usually based on salary history and years of service.
Question 7: Under the standard fire policy, which of the following is NOT a covered peril?
- Lightning
- Fire
- Flood (Correct answer)
- Removal of property to protect it from fire
Correct answer: Flood
Standard fire policies cover fire, lightning, and removal of property; flood is excluded and requires a separate flood insurance policy.
PSI Insurance Exam 5
Under COBRA, how long may a qualified beneficiary continue group health coverage after the employee voluntarily terminates employment?