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Test your basic knowledge |
CA Life Agent Exam
Start Test
Study First
Subject
:
certifications
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Written contract to transfer risk of premature death from one party to another; pays stated sum upon death; creates instant estate.
Annuity
Trusts
Annuity Classifications (5 of 5): # of lives
Life insurance policy
2. Group plan initially self-funded by employer (like SIR); after which - group plan Insurer covers (up to policy limit); requires TPA.
Guaranteed Insurability (aka Additional Purchase or Future Increase) Disability rider
Trusts
Limited Pay Whole Life policy
Employer-Administered plan
3. Allows for Term policy renewal @ higher premium w/out medical exam; guarantees insurability; based on actual/attained age.
Dread Disease policy
Renewability provision
Family Maintenance policy
Long Term Care (LTC) policy
4. 1: Straight aka Pure Life - lifetime income but no survivorship refund; 2: Life w/ Period Certain - lifetime income w/ death benefit of monthly annuity for remaining predetermined term. 3: Annuity Certain - monthly income paid for predetermined term
Valid life insurance contracts must identify...
Premium modes
Earned vs. Unearned premium
Annuity Classifications (4 of 5): Disposition "pay-out" of proceeds
5. Mortality is the statistical possibility of death @ each age. Morbidity is the statistical possibility & extent of disability @ each age.
1035 Exchange
Mortality vs. Morbidity tables
Types of Renewability provisions
Small Employer Medical Expense plan
6. Savings account for medical expenses; Tax-deductible contributions; tax-deferred growth; tax-free for qualified use; taxable for non-qualified use.
Cash value
Entire Contract provision
Medical Savings Account (MSA) & Health Savings Account (HSA)
Exclusions to Work. Comp.
7. Policy owner has right to determine mode of premium payment but Insurer can charge admin. fee if not annual.
Medicare
Insurable interest
Payment of Premium provision
Revocable vs. Irrevocable beneficiary
8. Earned premium is $ paid for coverage to date. Unearned premium is $ paid & returnable due to coverage not provided.
Factors that determine premium
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Long Term Care (LTC) policy
Earned vs. Unearned premium
9. 1: Single (lump sum) premium; 2: Periodic premiums - can be level (fixed $) OR flexible from mth. to mth. (w/ req. min.)
Annuity Classifications (1 of 5): How premium is paid
Policy delivery
Transplant/Cosmetic Surgery rider
Tax implications of Disability policy
10. PURELY employer-funded account to reimburse employees for qualified medical expenses not covered by group health plan.
Universal (aka Flexible Premium Adjustable) Life policy (3 of 4)
Residual disability rider
Annuity Classifications (2 of 5): When benefits begin
Health Reimbursement Account (HRA)
11. Same as WL but policy owner can adjust death benefit w/ corresponding premium adjustments; mostly obsolete.
Cash value
Equity Index Whole Life policy
Adjustable Whole Life policy
Estoppel
12. IRS allows tax-free transfer of cash values between 2 LIKE policies (i.e. Life to Life - Annuity to Annuity - or Life to Annuity).
Errors & Omissions (E&O)
Medi-Cal Share Cost plan
1035 Exchange
Basic Medical plan
13. Palliative - treatment to manage pain; Curative - treatment to cure illness/condition.
Return of Cash Value rider
Transplant/Cosmetic Surgery rider
Medicare Supplement or Medigap policy
Palliative vs. Curative care
14. Grows @ fixed min. interest rate but w/ possible higher rate tied to equity index (i.e S&P Equity Index) appreciation; gains shared w/ Insurer.
Conformity with State Statute provision
Credit Life policy
Indeterminate Premium Whole Life policy
Equity Indexed annuity
15. Benefits automatically increase annually based on inflationary index (i.e. Consumer Price Index) OR flat rate (5% max.).
Joint Life (aka "First to die") policy
Variable Life policy (1 of 2)
Cost of Living Adjustment (COLA) Disability rider
CHAMPUS (aka TriCare)
16. Same as WL but cash value increases @ current interest rates (not set); premium can start low or high & may change.
Current Assumption (aka Interest-Sensitive) Whole Life policy
Types of reinsurance
Policy loans
Non-Occupational Disability policy
17. Expands individual WL policy to include Term Life for dependents (spouse - children - etc.).
Misstatement of Age/Sex provision
Factors that determine premium
Accidental Death & Dismemberment (AD&D) Disability rider
Family or Dependents rider
18. Privately-sold policies to provide benefits not covered by Medicare; divided into 12 plans listed alphabetically A - L; 30-day free look; guaranteed renewable.
24 Hour Coverage (CA)
Workers' Compensation insurance
Medicare Supplement or Medigap policy
Total disability (as commonly defined)
19. Grows @ fixed interest rate for set term but cash value may adjust to prevailing rate (+ or -) if fully surrendered before term ends; % w/drawal ok.
Tax implications of an Annuity (1 of 2)
Market Value Adjusted (aka Modified Guaranteed) annuity
Term Life policy
Variable Life policy (2 of 2)
20. Financial interest in insured party that must exist @ time of application OR policy issuance. Requires consent (except minors).
Juvenile Life (aka Jumping Juvenile) policy
Insurable interest
Spendthrift provision
Beneficiary provisions
21. Same as Universal Life but cash value put in investment vehicles chosen by policy owner (stocks - bonds - munis.); cash value NOT guaranteed.
Parole Pardon Rule
Return of Cash Value rider
Variable Universal Life policy
Employee Retirement Income Security Act (ERISA)
22. Compensates business for loss due to disability of key employee; premiums not deductible but benefits tax-free.
Return of Cash Value rider
Key Employee Disability policy
Types of Insurers (by ownership)
Market Value Adjusted (aka Modified Guaranteed) annuity
23. Time extension of benefits based on "qualifying" event. 18 mth. extension if laid off or fired; 36 mth. extension if death - divorce or child leaves home.
Annuity Classifications (5 of 5): # of lives
Fraud
COBRA Time Limitations
Types of reinsurance
24. Identical to Incontestable Clause in Life policy.
Time Limit on Certain Defenses provision
AIDS/HIV discrimination
Medicare Part A (aka Hospital Insurance or HI)
Common Disability Exclusions
25. Disability income is based on "earned income" (salary - bonus - commission) - not unearned income (interest - investment - rents).
Variable Universal Life policy
Return of Premium rider
Parole Pardon Rule
Loss of Earnings Test
26. If total premiums paid w/in 1st 7 yrs. exceed net level premium that should have been paid - policy is an MEC.
7 Pay Test
Penalties for violating AIDS/HIV privacy laws
Business Continuation (aka Buy-Sell) policy
Claim Form (aka Proof of Loss Form) provision
27. Allows Insured to increase death benefit w/out medical exam (subject to age max.) w/ additional premium rate determined @ attained age.
Errors & Omissions (E&O)
Guaranteed Insurability Life rider
Employee Retirement Income Security Act (ERISA)
Relation of Earnings to Insurance provision
28. Premiums determined by target cash values or death benefit; partial cash value w/drawals allowed; transparent policy w/ unbundled premium.
Peril vs. Hazard
Partial disability rider
Binding receipt (aka Temporary Insurance Agreement)
Universal (aka Flexible Premium Adjustable) Life policy (2 of 4)
29. The state in which the contract is accepted or delivered is the state that possesses regulatory jurisdiction over Group plan.
Annuity Classifications (2 of 5): When benefits begin
Modified Endowment Contract (MEC)
Permanent vs. Temporary disability
Doctrine of Comity
30. Prepaid med. benefits for members ONLY w/ approved primary care M.D. (HMO employee); focus on preventative care; low co-pay.
Health Maintenance Organization (HMO)
Current Assumption (aka Interest-Sensitive) Whole Life policy
Health Insurance Portability and Accountability Act (HIPAA)
Dividends
31. A company providing lump sum buyout (50-90% of total) of Life policy; becomes owner & beneficiary & assumes premium payments; usually terminally ill viator.
Equity Index Whole Life policy
Annuity Classifications (4 of 5): Disposition "pay-out" of proceeds
Viatical Settlement Provider (VSP)
Tax implications of Disability policy
32. Annuity distributions prior to age 59 1/2 incur a 10% IRS penalty EXCEPT for death - disability - immediate annuity - or rollover.
Health Reimbursement Account (HRA)
Permanent vs. Temporary disability
Law of Large Numbers
IRS Penalties for Annuities
33. WL policy covering 2 or more Insureds but payable upon death of FIRST Insured - after which policy ends.
Dividend options
Juvenile Life (aka Jumping Juvenile) policy
Single Pay Whole Life policy
Joint Life (aka "First to die") policy
34. Policy owner has 90 days from date of loss to submit proof of loss to Insurer; valid claim must be paid immediately upon receipt.
Settlement options for Life policy (1 of 2)
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Proof of Loss provision
Common Disaster (Simultaneous Death Act) clause/provision
35. Allows policy owner to w/draw set % of death benefit upon verification of terminal illness w/ expectancy 12-24 mths.; generally tax-free.
Revocable vs. Irrevocable beneficiary
Accelerated Benefits (aka Terminal Illness or Living Benefits) rider
Elimination (aka Waiting) period
Universal (aka Flexible Premium Adjustable) Life policy (3 of 4)
36. Privately-provided or Medicare-provided (if no private carrier) prescription drug plans for qualified individuals but w/ premium - deductible & co-pay.
Concealment
Medicare Part D
Types of Accident & Health insurance
Proof of Loss provision
37. Provides 24 hr. health coverage both "on" & "off" job - but may cause coverage duplication & coordination challenges.
24 Hour Coverage (CA)
Grace Period provision
Return of Cash Value rider
Social Security Benefit (Supplement) rider
38. After 2-3 yrs. - Whole Life policy equity builds tax-deferred @ fixed interest rate until it equals death benefit; borrowable but taxable.
Cash value
Insuring clause/provision (aka Insuring Agreement)
Elimination (aka Waiting) period
Claim Form (aka Proof of Loss Form) provision
39. Treating or mitigating loss exposures through 1: avoidance; 2: retention (deductibles); 3: sharing; 4: reduction; or 5: transfer.
Risk management
Grace Period provision
Social Security Benefit (Supplement) rider
Current Assumption (aka Interest-Sensitive) Whole Life policy
40. Non-qualified Annuity - Non-deductible contributions & tax-deferred growth. At pay-out - tax-free principal but taxable growth.
Business Overhead Expense (BOE) Disability policy
Mortality vs. Morbidity tables
Annuity
Tax implications of an Annuity (1 of 2)
41. Although death benefit is tax-free - it is included in gross estate value so federal &/or state taxes may apply to a portion in excess of fixed federal limit.
Renewability provision
Family or Dependents rider
Primary Insurance Amount (PIA)
Tax implications of an Estate
42. Death benefit determined by Insured's projected lost earnings potential.
Human Life Value approach
Medicare Part A & B "Gaps"
Supplemental Major Medical plan
Reinstatement provision
43. Prohibited w/ regard to testing for people of same class; test results must remain confidential; coverage may be declined (once discovered).
Loss of Earnings Test
AIDS/HIV discrimination
Types of Medical Plans
Viatical Settlement Provider (VSP)
44. Agents - represent Insurer; Brokers - represent themselves & Insured; Solicitors - represent one agent to solicit leads.
Renewability provision
Types of Licensed Producers
Total disability (more restrictive definition)
Family or Dependents rider
45. Tendency of poorer risks to seek insurance.
Adverse selection
Occupational Disability policy
COBRA Time Limitations
Risk management
46. Federal law allows employees/their dependents to continue group benefits w/in 60 days after termination (if employer has 20+ employees); Insured pays premium @ 102% of group cost.
Medicare
Law of Large Numbers
Pure risk vs. Speculative risk
Consolidated Omnibus Budget Reconciliation Act (COBRA)
47. Covers entire family w/ WL for breadwinner & (convertible) Level Term for spouse & children (until certain age).
Family policy
Payor (aka Waiver of Payor's Premium) rider
Medical Savings Account (MSA) & Health Savings Account (HSA)
Annuity
48. Facultative - case by case agreements; Automatic/Treaty - automatic acceptance of risk percentage per previous agreement.
Types of reinsurance
Peril vs. Hazard
Types of Accident & Health (A&H) providers
Social Security (aka Old Age Survivors Disability Health Insurance or OASDHI)
49. Death benefit is NOT taxable. Cash value grows tax-deferred but cost basis (base premium) is not taxable - only interest is.
Annuity Classifications (3 of 5): Source of income
Tax implications of Death Benefit & Cash Value
Whole (aka Permanent or Straight) Life policy
Retrocession
50. Responsible adult trustee designated to manage death benefits for minor child beneficiary until adulthood.
Trial Application (aka Request for Offer)
Business Overhead Expense (BOE) Disability policy
Trusts
Market Value Adjusted (aka Modified Guaranteed) annuity