California Life & Health Insurance License, Practice Exams

Long-term care policies are generally required to be:

1. Guaranteed renewable ✓
2. Cancelable by the insurer at any time
3. Renewable only with new medical evidence each year
4. Convertible into a life insurance policy on demand

Why: LTC policies must be at least guaranteed renewable: the insurer must renew, though it may adjust premiums on a class basis.

For a subsequent violation of a cease-and-desist or court order while it remains in effect, the commissioner may, after a hearing, suspend or revoke the violator's license for a period not exceeding:

1. A period not exceeding 90 days
2. A period not exceeding six months
3. A period not exceeding one year ✓
4. A period not exceeding three years

Why: Section 790.07 authorizes suspension or revocation of the license for a period not exceeding one year for a subsequent violation.

A group long-term disability plan uses 'own occupation' for 24 months, then 'any occupation.' After 24 months, an insured who can work at a suitable job:

1. No longer qualifies for benefits ✓
2. Continues to receive full benefits indefinitely
3. Receives double benefits as compensation
4. Restarts a new elimination period

Why: Once the definition shifts to any occupation, an insured able to work in a suitable job no longer meets the disability standard.

A waiver of premium provision in a long-term care policy:

1. Stops premium payments while the insured is receiving covered benefits ✓
2. Refunds every premium the insured has paid once they reach the age of eighty
3. Cancels the policy automatically after the first claim
4. Lowers the premium each year the insured stays healthy

Why: LTC waiver of premium suspends premium payments while the insured is confined or receiving qualifying benefits.

Social Security Disability Insurance (SSDI) benefits begin only after a waiting period of:

1. 5 months from the onset of the qualifying disability ✓
2. 30 days after the worker first stops being able to work
3. 2 full years following the date of the disabling event
4. 10 days after the Social Security claim form is submitted

Why: SSDI imposes a 5-month waiting period before benefits are payable, and uses a strict definition of disability.

Under the interest-only settlement option, the insurer:

1. Holds the proceeds and pays only the interest earned to the payee ✓
2. Pays a fixed dollar amount each period until the funds are fully exhausted
3. Distributes equal payments over a stated number of years and then stops
4. Guarantees income payments for the entire remaining life of the payee

Why: Interest-only leaves the principal with the insurer and pays out just the interest; the principal is paid later.

Regarding AIDS or AIDS-related complex claims, after how many days does delaying payment of hospital, medical, or surgical benefits to investigate a preexisting condition become an unfair claims settlement practice?

1. More than 30 days
2. More than 45 days
3. More than 60 days ✓
4. More than 90 days

Why: Section 790.03(h)(16) makes it an unfair practice to delay AIDS/ARC benefit payment for more than 60 days to investigate whether the condition preexisted coverage (excluding time awaiting provider information).

An applicant for a large policy must justify the amount with their income and net worth. This is:

1. Financial underwriting ✓
2. Medical underwriting
3. Field underwriting
4. Reinsurance

Why: Financial underwriting confirms the requested coverage is reasonable relative to the applicant's financial circumstances.

A hospital indemnity (fixed indemnity) policy pays:

1. A set dollar amount per day or event, regardless of actual charges ✓
2. The full billed cost of the hospital stay after a deductible
3. Benefits only if the insured has no other health coverage at all
4. A lump sum equal to the insured's annual salary upon admission

Why: A hospital indemnity policy pays a predetermined fixed amount (e.g., per day of confinement) independent of the actual expenses incurred; it is supplemental.

A mortgage protection (mortgage redemption) policy is usually written as decreasing term, and its death benefit is paid to:

1. The insured's family or estate ✓
2. The lending bank as the named first-position beneficiary on the policy contract
3. The state insurance guaranty fund
4. The producer who arranged the original mortgage loan

Why: Mortgage protection is owned by the borrower and pays the family/estate (who then choose to pay off the loan); credit life, by contrast, pays the creditor directly.

A 'life settlement' is the sale of a life insurance policy by an insured who is NOT terminally ill to a third party for:

1. More than the cash value but less than the face amount ✓
2. Exactly the total of all premiums the owner has paid
3. The full face amount, paid immediately in cash
4. Nothing, because only terminally ill insureds may sell

Why: In a life settlement, a (often older, non-terminal) policyowner sells the policy for more than its cash surrender value but less than the death benefit; a viatical involves a terminally ill insured.

For California 'group disability insurance' written under a master policy issued to a single employer, what is the minimum number of employees that must be covered?

1. Not less than two employees ✓
2. Not less than five employees
3. Not less than ten employees
4. Not less than twenty-five employees

Why: Sec. 10270.5(a)(1) defines employer group disability insurance as covering not less than two employees.

Distributions from a qualified annuity (funded with pre-tax dollars) are:

1. Fully taxable as ordinary income when received ✓
2. Entirely income-tax-free in all circumstances
3. Taxed only on the portion above the cost basis
4. Subject to capital-gains rates on the whole amount

Why: Because a qualified annuity has no after-tax cost basis, the entire distribution is taxable as ordinary income; required minimum distributions also apply.

A withdrawal of gain from a nonqualified deferred annuity before age 59½ generally triggers:

1. A 10% IRS penalty plus ordinary income tax on the gain ✓
2. Tax-free treatment because annuities are always exempt
3. A flat 20% capital-gains tax on the entire account value
4. Loss of the contract and forfeiture of all principal paid in

Why: Premature distributions of annuity gain before 59½ incur a 10% penalty plus ordinary income tax; nonqualified annuity earnings come out LIFO (gain first).

An issuer must give every Medicare supplement applicant a particular federally developed guide at the time of application. Which guide is required?

1. The Long-Term Care Insurance Shoppers Guide
2. The Guide to Health Insurance for People with Medicare ✓
3. The NAIC Buyer's Guide to Annuities
4. The California Consumer Rate Guide

Why: Sec. 10192.17(f)(1) requires delivery of the 'Guide to Health Insurance for People with Medicare' developed jointly by the NAIC and CMS.

A child is covered under both parents' plans; the father's birthday is March 3 and the mother's is May 10. Under the birthday rule, the primary plan is the:

1. Father's plan ✓
2. Mother's plan
3. Plan with the higher benefit limit
4. Plan purchased most recently

Why: The birthday rule makes primary the plan of the parent whose birthday falls earlier in the calendar year — here, March (the father).

Retirement plan 'catch-up' contributions allow individuals to contribute additional amounts once they reach age:

1. 50 ✓
2. 40
3. 59 and one half
4. 65

Why: Participants age 50 and older may make catch-up contributions above the standard annual limits to IRAs and employer plans.

'Unfair discrimination' in insurance means:

1. Charging different rates to individuals of the same class and risk ✓
2. Declining an applicant who genuinely presents a substandard risk
3. Offering preferred rates to applicants who do not use tobacco
4. Setting premiums using actuarially sound mortality tables

Why: Unfair discrimination is applying different rates or terms to insureds of the same class and equal risk; risk-based distinctions are permitted.

A return-of-premium (ROP) term policy:

1. Refunds the premiums paid if the insured outlives the level term ✓
2. Pays double the original face amount if the insured dies within the first ten policy years
3. Automatically converts into a whole life contract at the end of the level term period
4. Returns a portion of the death benefit to the insurer when the insured dies

Why: ROP term refunds the premiums paid if the insured survives the level term period.

During the 30-day senior cancellation period, premium for a variable annuity may be invested only in what, unless the owner specifically directs otherwise?

1. Fixed-income investments and money-market funds ✓
2. High-yield equity subaccounts
3. Index-linked accounts
4. Any subaccount the agent selects

Why: Sec. 10127.10(a) limits investment during the senior cancellation period to fixed-income investments and money-market funds unless the owner directs otherwise.

When an organization applies for a license, how does Section 1672 treat the qualifying examination?

1. The organization itself must sit for and pass the qualifying examination before any natural person named on the application may be licensed
2. No examination is required for any organizational applicant
3. The qualifying examination is administered only to natural persons named on the application ✓
4. Only the organization's controlling person must take the examination

Why: Sec. 1672 provides that both the organization and all natural persons named must meet the qualifications, but the qualifying examination is administered only to natural persons.

A producer plans an in-home meeting to discuss life insurance with a senior. Under Section 789.10, the written notice must generally be delivered within what window before the initial in-home meeting?

1. At least 24 hours but not more than 14 days prior to the meeting ✓
2. At least 48 hours but not more than 30 days prior to the meeting
3. At least 72 hours but not more than 10 days prior to the meeting
4. At any reasonable time before the in-home meeting actually begins

Why: Section 789.10(b) requires delivery of the written notice no less than 24 hours and no more than 14 days prior to the initial in-home meeting (with a same-day exception for an existing client who requests it).

When a long-term care policy is replaced and the replacement premium is greater than the original, how is the agent's first-year sales commission calculated?

1. On the full annual premium of the new replacement coverage
2. On the difference between the replacement coverage premium and the original coverage premium ✓
3. On the original coverage premium only, at the renewal commission rate under the policy's terms
4. On the average of the original and replacement coverage premiums

Why: Sec. 10234.97 requires the first-year commission on replaced LTC coverage to be based on the difference between the replacement and original premiums (renewal rate only if not greater).

An exclusive provider organization (EPO) plan generally:

1. Covers care only from network providers, with no out-of-network benefits ✓
2. Lets members see any provider nationwide at the same low cost share
3. Requires a referral from a primary care physician for routine visits
4. Pays a fixed indemnity amount per day regardless of actual charges

Why: An EPO covers only in-network care (no out-of-network benefits except emergencies) but usually does not require referrals.

The HIPAA Privacy Rule primarily protects:

1. Individuals' protected health information from improper disclosure ✓
2. Insurers from having to pay disputed claims
3. Producers from errors-and-omissions lawsuits under the policy's terms
4. Employers from paying group premiums

Why: HIPAA's Privacy Rule safeguards protected health information (PHI), generally requiring authorization before disclosure.

A nonresident producer who moves from one state to another must file a change of address and provide certification from the new resident state within what period, and is a fee required?

1. Within 60 days, and the standard nonresident application fee is required
2. Within 30 days, and no fee or license application is required ✓
3. Within 15 days, and a $50 reinstatement fee is required
4. Within 90 days, and a new prelicensing course of study must be completed

Why: Sec. 1639.1(b) requires the change of address and certification from the new resident state within 30 days of the change of legal residence, with no fee or license application required.

A final expense (burial) policy is typically:

1. A small whole life policy meant to cover funeral and final costs ✓
2. A large term policy intended to replace decades of lost income
3. A variable policy whose death benefit fluctuates with the market
4. A group policy issued automatically to all employees at hire

Why: Final expense is a modest permanent (whole life) policy designed to cover burial and end-of-life expenses, often with simplified underwriting.