Life & Health Insurance Exam, General, Practice Exams

The elimination period in a disability income policy functions as:

1. A flat dollar deductible the insurer subtracts from every monthly benefit check before paying
2. A time deductible the insured must wait through before benefits begin ✓
3. The outside limit, stated in years, on how long monthly benefits will ever be paid
4. A 31-day window for paying an overdue premium

Why: The elimination (waiting) period is a 'time deductible'; a longer elimination period lowers the premium because the insurer pays for fewer short claims.

A Medicare Supplement (Medigap) policy must provide a free-look period of at least:

1. 30 days ✓
2. 10 days
3. 24 hours
4. 6 months

Why: Medicare Supplement policies carry a 30-day free-look, longer than the typical 10-day individual health free-look.

A collateral assignment of a life insurance policy transfers:

1. The right to change the insured named in the contract
2. Some rights temporarily to a lender as security for a loan ✓
3. The death benefit to the state's insurance guaranty fund
4. Complete and permanent ownership of the policy to another person

Why: A collateral assignment is a partial, temporary transfer; the lender is entitled only to the amount of the debt, with the balance going to the named beneficiary.

A spendthrift clause attached to a settlement option:

1. Permits the insurer to cut payments if its investments lose value
2. Protects the proceeds held by the insurer from the beneficiary's creditors ✓
3. Requires the beneficiary to exhaust the proceeds within one year of the insured's death
4. Lets the beneficiary withdraw the whole balance or pledge it to a lender at will

Why: A spendthrift clause shields proceeds left with the insurer under a settlement option from claims of the beneficiary's creditors.

A reciprocal insurer is:

1. An unincorporated group of members who insure each other through an attorney-in-fact ✓
2. A federal chartering agency that licenses insurers under the McCarran-Ferguson Act
3. A stock company whose shareholders elect the board and receive taxable dividends
4. A fraternal benefit society organized in lodges that sells only to its own members

Why: A reciprocal is an unincorporated association whose subscribers exchange insurance among themselves, managed by an attorney-in-fact.

A 'dual eligible' individual is someone who qualifies for:

1. Both an HSA and a flexible spending account together
2. Both Medicare and Medicaid ✓
3. Medicare Part A but not Part B coverage
4. Two separate private major medical plans at once

Why: Dual eligibles qualify for both Medicare and Medicaid; Medicaid may help cover Medicare premiums and cost sharing for those with limited income.

Agreements among insurers to restrain trade or force someone out of business are the unfair practices known as:

1. Defamation of a competitor
2. Boycott, coercion, and intimidation ✓
3. Rebating and commission sharing
4. Twisting and churning of policies

Why: Boycott, coercion, and intimidation are unfair trade practices involving combinations or threats that restrain or monopolize the business of insurance.

A 'shared care' rider on long-term care policies allows:

1. Two unrelated insureds to split a single premium payment
2. A child to inherit the parent's unused benefits tax-free
3. The insurer to reduce benefits when both spouses are healthy
4. Spouses to draw from each other's pool of benefits ✓

Why: A shared care rider lets a couple access one another's benefit pool if one spouse exhausts their own coverage.

A characteristic of an insurable risk is that the loss must be:

1. Catastrophic to the insurer
2. Certain to occur
3. Definite and measurable ✓
4. Deliberately caused by the insured

Why: Insurable losses must be definite, measurable, fortuitous, predictable across a large pool, and not catastrophic to the insurer.

Which policy combines flexible premiums with cash value invested in separate accounts and requires a securities license to sell?

1. Universal life with flexible premiums crediting a declared interest rate to cash value
2. Group annually renewable term funded by the employer
3. Variable universal life with separate-account investing ✓
4. Whole life with a guaranteed level premium

Why: Variable universal life adds separate-account investing (securities-licensed) to universal life's flexible premiums.

The 'needs approach' to setting the amount of life insurance focuses on:

1. The projected cash value the policy is expected to build over twenty years
2. The total dollar amount of premium the applicant is willing to pay monthly
3. A simple fixed multiple of the insured's current gross annual salary
4. The family's actual financial obligations and goals ✓

Why: The needs approach totals the specific obligations and goals the coverage must fund, versus the human-life-value (income multiple) approach.

Medicare Part D prescription drug coverage is provided:

1. Through private plans approved by Medicare ✓
2. Only to those who also have Medicaid
3. Directly by the federal hospital insurance trust
4. Automatically with no enrollment needed

Why: Part D drug coverage is offered by private insurers approved by Medicare; beneficiaries enroll in a stand-alone or Advantage drug plan.

A 67-year-old kept employer group coverage past 65 and now retires. They enroll in Medicare Part B during a:

1. Period available only to those on Medicaid
2. One-time birthday enrollment window
3. Special enrollment period, with no late penalty ✓
4. General enrollment period, with a permanent penalty

Why: Maintaining active employer coverage past 65 provides a Special Enrollment Period to take Part B later without penalty.

A 68-year-old retiree wants income payments to begin next month from a lump sum. The suitable product is a(n):

1. 20-year level term policy
2. Variable universal life policy
3. Single-premium immediate annuity ✓
4. Flexible-premium deferred annuity

Why: A single-premium immediate annuity converts a lump sum into income beginning within one payment period.

An inflation protection feature in a long-term care policy:

1. Gradually shortens the policy's elimination period after each year in force
2. Raises the benefit over time to offset rising costs ✓
3. Guarantees that the insurer can never increase the policy's premium rate
4. Refunds a part of the premium if long-term care services are never needed

Why: Inflation protection increases the daily/monthly benefit over time so coverage keeps pace with rising long-term care costs.

Annuity suitability rules require a producer recommending an annuity to:

1. Recommend whichever annuity product happens to pay the producer the highest available commission
2. Have reasonable grounds that it fits the consumer's financial needs and situation ✓
3. Sell only immediate annuities to consumers over the age of sixty
4. Guarantee the annuity will outperform every available alternative

Why: Suitability standards require the recommendation be appropriate based on the consumer's financial situation, needs, and objectives.

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

1. Entirely income-tax-free in all circumstances
2. Taxed only on the portion above the cost basis
3. Fully taxable as ordinary income when received ✓
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.

An applicant pays the initial premium and receives a conditional receipt, then dies before the policy is issued — but would have been insurable. The insurer:

1. Pays the death claim ✓
2. Denies the claim because no policy issued
3. Pays half pending an investigation
4. Refunds the premium and pays nothing

Why: Under a conditional receipt, coverage is effective as of the receipt (or exam) date if the applicant was insurable as applied for, so the claim is paid.

An insured and the sole primary beneficiary die in the same crash, order of death unknown. Under the Uniform Simultaneous Death Act, proceeds go to:

1. The contingent beneficiary or the insured's estate ✓
2. Whoever was pronounced dead first at the scene
3. The insurer, as unclaimed property
4. The primary beneficiary's own heirs, through that beneficiary's estate

Why: The Act presumes the insured survived the beneficiary, so the proceeds pass to the contingent beneficiary or the insured's estate.

The McCarran-Ferguson Act established that the insurance business is primarily regulated by:

1. A single federal insurance agency in Washington
2. International treaty organizations and trade bodies
3. The individual states ✓
4. The Internal Revenue Service and the U.S. Treasury

Why: McCarran-Ferguson (1945) affirmed that regulation of insurance is left to the states, except where federal law specifically applies.

Under the interest-only settlement option, the insurer:

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

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

Under federal COBRA, continuation coverage after termination of employment or a reduction in hours is generally available for up to:

1. 6 months
2. 12 months
3. 18 months ✓
4. 36 months

Why: COBRA provides up to 18 months following termination or reduced hours (36 months for certain other qualifying events).

The reinstatement provision of a lapsed life policy generally allows the owner to restore coverage by:

1. Surrendering a different policy they own with the insurer
2. Waiting until the original contestable period has expired
3. Paying back premiums with interest and proving insurability ✓
4. Simply notifying the insurer that they wish to continue it

Why: Reinstatement typically requires payment of overdue premiums with interest, repayment or reinstatement of any loan, and evidence of insurability, usually within a set period after lapse.

A key feature of convertible term insurance is that it can be changed to a permanent policy:

1. Only if the insured becomes totally disabled first
2. Only after a new medical exam confirms insurability
3. Only during the first policy year
4. Without providing evidence of insurability ✓

Why: Convertible term can be converted to permanent coverage without evidence of insurability.

The National Association of Insurance Commissioners (NAIC) primarily:

1. Sets and enforces nationwide insurance premium rates
2. Directly licenses every insurance producer in the United States
3. Develops model laws and standards that states may choose to adopt ✓
4. Pays claims when an insurance company becomes insolvent

Why: The NAIC is a coordinating body of state regulators that drafts model laws and promotes uniformity; it has no direct regulatory authority of its own.

'Misrepresentation' as an unfair trade practice means:

1. Returning part of an unearned premium to a policyowner who cancels coverage before the end of the policy period
2. Making false statements about a policy's terms or benefits to induce action ✓
3. Recommending the lowest-cost policy an applicant qualifies for after comparing the rates of several insurers
4. Charging an applicant in poor health a higher premium that reflects the substandard rate class underwriting assigned

Why: Misrepresentation is issuing or circulating untrue statements about the terms, benefits, or nature of a policy.

An owner assigns a policy to a bank only as security for a loan. This is a(n):

1. Irrevocable beneficiary designation
2. Change of insured
3. Collateral assignment ✓
4. Absolute assignment

Why: A collateral assignment is a partial, temporary transfer for loan security; the lender is entitled only to the amount owed.

Which managed-care plan typically requires members to select a primary care physician and obtain referrals to see specialists?

1. EPO
2. HMO ✓
3. Indemnity plan
4. PPO

Why: An HMO uses a primary care physician 'gatekeeper' and referrals, with care generally limited to the network; a PPO allows out-of-network care at higher cost without referrals.

The federal Gramm-Leach-Bliley Act requires financial institutions, including insurers, to:

1. Protect the privacy of customers' nonpublic personal information ✓
2. Sell insurance only through federally chartered national banks
3. Report all claims directly to the Internal Revenue Service
4. Charge identical premiums to every applicant in the country

Why: Gramm-Leach-Bliley requires privacy notices and limits on sharing nonpublic personal financial information, with an opt-out for consumers.

A single-premium deferred annuity (SPDA) is funded by:

1. Premiums that the insurer deducts directly from Social Security checks
2. A series of flexible payments made over the annuitant's working years
3. One lump-sum payment, with income beginning at a later date ✓
4. Mandatory monthly payroll deductions required by the employer plan

Why: An SPDA is purchased with one lump sum; the accumulation grows tax-deferred until payouts begin at a future date.

Under the collateral assignment method of a split-dollar plan:

1. The policy must be annually renewable term with no cash value component
2. A trustee holds title to the policy for the company's shareholders
3. The employee owns the policy and assigns it to the employer as security for premiums advanced ✓
4. The employer owns the policy and endorses a portion of the death benefit to the employee's named beneficiary

Why: In collateral assignment split-dollar the employee owns the policy and assigns it to the employer as collateral for the premiums it advances; the endorsement method has the employer own the policy.

Adjustable life insurance allows the policyowner to:

1. Change the premium, face amount, or coverage type as needs change ✓
2. Receive the death benefit in cash while the insured is still living
3. Invest the cash value directly in mutual funds they personally select
4. Skip underwriting entirely no matter how much coverage is added

Why: Adjustable life lets the owner modify the premium, face amount, and protection period (shifting between term and permanent) as circumstances change.

The four essential elements required to form a valid insurance contract are offer and acceptance, competent parties, legal purpose, and:

1. A guaranteed minimum interest rate
2. A medical examination of the applicant
3. Approval by the state insurance commissioner
4. Consideration ✓

Why: A valid contract requires agreement (offer/acceptance), consideration, competent parties, and a legal purpose.

A noncontributory group life plan (employer pays the entire premium) generally requires:

1. About 75% of eligible employees to enroll voluntarily
2. At least 50% of all eligible employees to participate
3. 100% participation, because the employer pays all premiums ✓
4. No minimum participation requirement of any kind at all

Why: Because the employer pays all premiums, noncontributory plans require 100% participation to avoid adverse selection.

Which permanent policy features flexible premiums and an adjustable death benefit?

1. Level term
2. Universal life ✓
3. Whole life
4. Single-premium whole life

Why: Universal life allows the owner to vary premium payments and adjust the death benefit (subject to underwriting); cash value earns a declared interest rate.

A life insurance policy's aviation exclusion typically denies the death benefit when the insured dies:

1. While traveling by automobile to a private airport hangar
2. While riding as a paying passenger on a scheduled commercial flight
3. As a non-fare-paying private pilot or crew member ✓
4. From any cause during the first two years of the policy

Why: Aviation exclusions usually apply to non-commercial flying (private pilots/crew); fare-paying passengers on scheduled flights remain covered.

A managed-care plan requires approval before a planned, non-emergency hospital admission. This is:

1. Preadmission certification ✓
2. Coordination of benefits
3. A capitation arrangement
4. A second surgical opinion

Why: Preadmission (precertification) requires the plan's prior approval of planned admissions to be covered.

An applicant placed in a 'substandard' risk class will:

1. Receive a premium discount
2. Pay a higher-than-standard premium ✓
3. Be automatically declined
4. Get a guaranteed-issue policy

Why: Substandard (rated) risks present higher mortality risk and pay an increased premium.

A plan has a $1,000 deductible and 60/40 coinsurance. On a $6,000 covered bill, the insured pays:

1. $3,000 ✓
2. $2,400
3. $1,000
4. $3,400

Why: Deductible $1,000 + 40% of the remaining $5,000 ($2,000) = $3,000.

A two-tier annuity is one in which the contract has:

1. Two named annuitants, both of whom must survive for the income payments to continue
2. Two declared interest rates, one for new deposits and one for older money, that the owner switches between each year
3. A higher value if annuitized and a lower value if surrendered for cash ✓
4. A death benefit equal to twice the account value if the owner dies during the accumulation period

Why: A two-tier annuity credits a higher value when the owner annuitizes and a lower value on cash surrender, incentivizing annuitization.

Single-premium whole life insurance is funded by:

1. Flexible deposits that the owner may raise or lower in any given year
2. A modest first-year premium followed by much larger renewal premiums for life
3. A single large premium that fully pays up the policy at issue ✓
4. Level annual premiums paid until the insured reaches sixty-five years of age

Why: One lump-sum premium creates a fully paid-up permanent policy with no further premiums due.

A client exchanges one deferred annuity directly for another deferred annuity with better features. Under Section 1035, this is:

1. Subject to a 10% penalty
2. Taxed only on the earnings
3. A tax-free exchange ✓
4. A fully taxable distribution

Why: Annuity-to-annuity exchanges qualify for tax-free treatment under Section 1035.

Most state replacement regulations require that, when replacing an existing life policy, the producer:

1. Obtain the existing insurer's written consent before taking the new application
2. Hold the new coverage's effective date until the old policy's contestable period ends
3. Absorb the surrender charge on the replaced policy out of the producer's own commission
4. Give the applicant a replacement notice and list the policies being replaced ✓

Why: Replacement rules require disclosure: the producer provides a replacement notice and gives the existing insurer an opportunity to conserve the policy.

An employee receives $250,000 of employer-paid group term life. The amount subject to imputed taxable income is:

1. $200,000 ✓
2. $250,000
3. $50,000
4. $100,000

Why: The first $50,000 is tax-free; the cost of the remaining $200,000 is imputed income.

A plan has a $2,000 deductible and 90/10 coinsurance. On a $12,000 covered bill, the insured pays:

1. $3,000 ✓
2. $2,000
3. $1,000
4. $1,200

Why: Deductible $2,000 + 10% of the remaining $10,000 ($1,000) = $3,000.

A 'Social Insurance Supplement' (SIS) rider stops paying once the insured:

1. Recovers fully from the disabling condition
2. Begins receiving the expected Social Security benefit ✓
3. Returns to any form of part-time employment
4. Reaches the policy's stated benefit maximum age

Why: An SIS rider supplements income while Social Security is not yet payable; it reduces or stops once Social Security benefits begin.

At death, the insurer learns the insured's age was understated on the application. Under the misstatement-of-age provision, the benefit is:

1. Denied in full, with every premium returned to the beneficiary with interest
2. Paid in full at the applied-for face amount, with no adjustment for the error
3. Adjusted to what the premium paid would have purchased at the true age ✓
4. Raised to the face amount the insured's true age would have required in premium

Why: Misstatement of age adjusts the benefit to the amount the premium would have bought at the correct age, rather than voiding the policy.

A graded-premium whole life policy charges premiums that:

1. Are invested in equity sub-accounts chosen by the policyowner each year
2. Decrease every year until the coverage is fully paid up
3. Start low and increase for a period, then level off ✓
4. Stay exactly the same for the entire life of the policy

Why: Graded-premium whole life begins with low premiums that rise over an initial period before leveling, easing early affordability.

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 producer who arranged the original mortgage loan
3. The lending bank as the named first-position beneficiary on the policy contract
4. The state insurance guaranty fund

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 surgeon can no longer operate but can still teach medicine. Under an 'own-occupation' definition, the insured:

1. Receives no benefits because they can still earn a living
2. Must accept the teaching job before any benefit is paid
3. Gets only half benefits for the first two years
4. Is considered totally disabled and collects benefits ✓

Why: Own-occupation pays if the insured cannot perform their own occupation, even if able to work in another; an any-occupation definition would deny the claim.

A producer offers to give a prospect part of the first-year commission if they buy the policy. This is:

1. Defamation
2. Twisting
3. Rebating ✓
4. Coercion

Why: Offering an inducement not stated in the policy (such as sharing commission) to persuade a purchase is rebating, illegal in most states.

Intentional deception by an applicant or insurer to gain an unfair or unlawful benefit is:

1. Insurance fraud ✓
2. A unilateral contract feature
3. An innocent misrepresentation
4. A permissible representation

Why: Fraud is intentional deception for unlawful gain and can void coverage and carry civil or criminal penalties.

The HIPAA Privacy Rule primarily protects:

1. Producers against errors-and-omissions lawsuits by clients
2. Individuals' protected health information from improper disclosure ✓
3. Employers from the cost of group health premiums
4. Insurers from paying claims they consider disputed or fraudulent

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

A structured settlement annuity is typically used to:

1. Provide an employer's executives with deferred bonuses
2. Fund a child's college education through a trust
3. Replace a key employee who has died
4. Pay periodic settlement amounts from a legal claim over time ✓

Why: A structured settlement funds court/insurance settlement payments as periodic income; amounts for physical-injury claims are generally tax-free.

Modified whole life insurance is characterized by:

1. A lower premium for an initial period, then a higher level premium for life ✓
2. A premium that is higher in the first years and then drops sharply
3. Premiums that fluctuate yearly based on the insurer's investment returns
4. Coverage that decreases steadily until it reaches zero at age 65

Why: Modified whole life charges a reduced premium for the first few years, then a higher level premium for the remainder of life.

An irrevocable life insurance trust (ILIT) is used primarily to:

1. Keep life insurance proceeds out of the insured's taxable estate ✓
2. Allow the insured to freely change the policy's terms at any time
3. Convert the death benefit into a currently deductible expense
4. Guarantee the policy's cash value against any market loss

Why: An ILIT owns the policy so the proceeds are excluded from the insured's gross estate; because it is irrevocable, the insured gives up control.

Which nonforfeiture option uses the cash value to continue the full face amount as term insurance for as long as the cash value will buy?

1. Automatic premium loan
2. Cash surrender
3. Reduced paid-up
4. Extended term ✓

Why: Extended term keeps the full face amount as term coverage for a limited period; it is often the automatic default.

Medicaid differs from Medicare in that Medicaid is:

1. Available only to honorably discharged veterans of the U.S. armed forces
2. A needs-based program jointly funded by federal and state governments ✓
3. Funded entirely by payroll taxes withheld from current workers' paychecks
4. An age-based program automatically available to everyone at age sixty-five

Why: Medicaid is a means-tested (needs-based) program jointly funded by the states and federal government; Medicare is primarily age/disability-based.

Which dividend option purchases small amounts of additional paid-up insurance?

1. Reduction of premium
2. Accumulate at interest
3. Paid-up additions ✓
4. Cash

Why: Paid-up additions use dividends to buy small single-premium amounts of permanent insurance, increasing both death benefit and cash value.

An insured can no longer perform bathing, dressing, and toileting without help. Under a typical LTC policy requiring loss of 2 of 6 ADLs, benefits:

1. Are triggered, because at least two ADLs cannot be performed ✓
2. Are denied unless the insured cannot perform all six of the listed ADLs
3. Begin only after the insured reaches age 80
4. Require a physician to certify severe cognitive impairment as well

Why: Inability to perform 2 of the 6 ADLs (or severe cognitive impairment) triggers LTC benefits; here three ADLs are affected.

A Medicare beneficiary delayed Part D for three years without other creditable drug coverage. The result is:

1. A one-time penalty collected at the first prescription fill
2. A permanent late-enrollment surcharge added to the Part D premium ✓
3. No consequence, because Part D enrollment is voluntary
4. A permanent bar from enrolling in any Part D drug plan

Why: Going without creditable coverage adds a permanent late-enrollment surcharge to the Part D premium.

An example of an unfair claims settlement practice is:

1. Failing to act promptly and in good faith to settle a clear claim ✓
2. Paying a valid claim immediately upon receiving acceptable proof
3. Investigating a suspicious claim before issuing any payment on it
4. Requesting a properly completed proof of loss before paying a claim

Why: Unfair claims practices include not acting promptly, failing to attempt good-faith settlement of clear claims, and compelling litigation by underpaying.

Joint life (first-to-die) insurance pays the death benefit:

1. In equal installments to each surviving insured person
2. Upon the first death among the insureds covered ✓
3. When both insureds covered by the policy have died
4. Only if the insureds die within thirty days of each other

Why: Joint (first-to-die) life pays at the first death of the covered insureds; survivorship (second-to-die) pays at the second death.

An insured dies in the third policy year and the insurer discovers a non-fraudulent misstatement on the application. The insurer must:

1. Void the policy back to its original issue date
2. Reduce the death benefit by one half as a penalty
3. Deny the claim and refund the premiums paid to date
4. Pay the claim, because the contestable period has passed ✓

Why: After the two-year contestable period, the insurer cannot contest the policy for non-fraudulent misstatements, so the claim is paid.

A policy loan taken against a life policy's cash value:

1. Is treated as taxable income in the year the loan is taken
2. Must be repaid in full within thirty days or it lapses
3. Requires the owner to submit new evidence of insurability
4. Reduces the death benefit by any unpaid loan and interest ✓

Why: Unpaid loan balance and interest are subtracted from the death benefit; loans are not taxable while the policy stays in force.

Business overhead expense (BOE) disability insurance reimburses a disabled owner for:

1. Covered business operating costs such as rent and staff salaries ✓
2. Medical and rehabilitation bills the owner incurs while being treated
3. The total fair-market value of the business at the moment of disability
4. The owner's own lost personal salary and ordinary household living expenses

Why: BOE covers ongoing business expenses (rent, utilities, employee salaries) — not the owner's personal income.

Under the Fair Credit Reporting Act (FCRA), if an insurer takes adverse action based on a consumer report, it must:

1. Destroy the consumer report and delete all records within thirty days
2. Notify the applicant and identify the reporting agency that supplied the report ✓
3. Pay the applicant a statutory penalty for the inconvenience caused
4. Automatically reverse its underwriting decision and issue the policy exactly as it was applied for

Why: FCRA requires that an applicant subject to adverse action be notified and told the source so they can request and dispute the information.

Under the 'accumulate at interest' dividend option, dividends:

1. Are applied to reduce the amount of the next premium
2. Are left on deposit to earn interest, which is taxable ✓
3. Are used to buy small amounts of paid-up additions
4. Are mailed to the policyowner as a cash check yearly

Why: Dividends are retained to earn interest; the dividend itself is a return of premium, but the interest earned is taxable.

A fraternal benefit society provides insurance:

1. To its members through a lodge or membership system, on a nonprofit basis ✓
2. To the general public for a profit, distributing earnings to its stockholders
3. Exclusively through group annuity contracts sold to employers
4. Only to federal, state, and municipal government employees

Why: Fraternal benefit societies are nonprofit membership organizations providing insurance to members under a lodge system.

Under capitation, a network physician is paid:

1. Only when a member files a claim for reimbursement
2. A fixed amount per member per month, regardless of services rendered ✓
3. A share of the plan's collected premiums, paid quarterly in proportion to enrollment
4. A negotiated fee for each individual service, billed after the visit occurs

Why: Capitation pays providers a set per-member-per-month amount regardless of utilization, shifting some risk to the provider.

A 'jumping juvenile' policy is characterized by a face amount that:

1. Increases automatically at a stated age without a premium increase ✓
2. Is invested in mutual fund subaccounts the child's parents select each year
3. Declines steadily each year until the insured child reaches the age of majority
4. Is payable only after the insured child has passed a paramedical exam at age 18

Why: A jumping juvenile policy's face amount jumps (e.g., fivefold) at the age of majority with no increase in premium and no new evidence of insurability.

In a variable annuity, accumulation units measure the contract's value:

1. During the pay-in phase before income payments begin ✓
2. Only after the contract has been fully annuitized into a stream of income
3. While the annuitant is receiving level, guaranteed monthly income payments
4. According to a fixed interest rate the insurer declares anew each year

Why: Accumulation units track value during the accumulation phase; annuity units are used during the payout phase.

A joint and survivor annuity continues payments:

1. To the couple's children after both annuitants die
2. As long as either annuitant is still living ✓
3. Only until the first of the two annuitants dies
4. For a fixed ten-year period regardless of survival

Why: A joint and survivor annuity pays as long as either annuitant lives (often reducing to a percentage for the survivor).

The portion of each annuity income payment that is a tax-free return of the owner's principal is determined by the:

1. Exclusion ratio ✓
2. Cost-of-living adjustment
3. Surrender charge
4. Participation rate

Why: The exclusion ratio sets how much of each payment is nontaxable return of basis versus taxable gain.

Under a group AD&D plan, the 'capital sum' is the amount paid for:

1. Voluntary surrender of the certificate for its accumulated cash value
2. A covered dismemberment, such as loss of a hand, foot, or sight ✓
3. Any illness-related hospital stay that lasts longer than one week
4. The accidental death of the insured employee while actively at work

Why: The capital sum is a stated percentage of the principal sum, paid for a covered dismemberment (e.g., loss of a limb or sight); the principal sum is paid for accidental death.

Under the uniform individual health provisions, the grace period for a policy with monthly premiums is:

1. 60 days after the calendar year ends
2. 10 days ✓
3. 24 hours from the due date
4. 6 months following any missed payment

Why: Health grace periods are 7 days for weekly premium, 10 days for monthly, and 31 days for all other modes.

Which type of care is generally NOT covered by Medicare?

1. Inpatient hospital care following an approved admission
2. Physician services and outpatient diagnostic testing
3. Long-term custodial care ✓
4. Hospice care for a terminally ill beneficiary

Why: Medicare generally does not pay for long-term custodial care (help with daily living); it covers hospital, physician, and hospice care.