New York Life & Health Insurance License, Practice Exams

Under § 3222, the issuance or delivery of a 'funding agreement' by an insurer in New York is treated how under the Insurance Law?

1. As a sale of securities exempt from insurance regulation
2. As an activity not constituting an insurance business
3. As doing an insurance business in this state ✓
4. As a banking activity outside the superintendent's authority

Why: Section 3222(a) provides that, notwithstanding the definition of 'insurance contract,' the issuance or delivery of a funding agreement by an insurer in New York constitutes doing an insurance business in this state.

A convertible term policyholder converts to whole life before the conversion deadline. They:

1. Need not provide new evidence of insurability ✓
2. Must pass a new medical exam
3. Forfeit all prior premiums paid
4. Can only convert to another term policy

Why: A conversion privilege lets the insured switch term to permanent coverage without new evidence of insurability.

Physician services and outpatient care are covered under Medicare Part:

1. A
2. B ✓
3. C
4. D

Why: Part B is medical insurance covering physician and outpatient services; Part D covers drugs; Part C is Medicare Advantage.

Under the disclosure requirements of Section 3209, what must a prospective purchaser of an individual life policy generally receive at or prior to the time the application is taken?

1. A copy of the most recent buyer's guide and the required preliminary information ✓
2. Only the completed policy summary
3. A signed copy of the insurer's underwriting guidelines
4. A certified illustration approved by the superintendent in that particular circumstance

Why: Section 3209(b)(1)(A) requires the buyer's guide and preliminary information at or prior to the time an application is taken (subject to the mail-order alternative).

Under Section 3212, an assignment or change of beneficiary is valid except in what circumstance?

1. Transfers made with actual intent to hinder, delay or defraud creditors under the debtor and creditor law ✓
2. Any transfer made within two years of the insured's death unless an exception clearly applies for the coverage that is in force
3. Transfers to a non-relative of the insured
4. Transfers of more than half of the policy proceeds

Why: Section 3212(e)(1) makes every assignment or change of beneficiary valid except transfers with actual intent to hinder, delay, or defraud creditors as defined by article ten of the debtor and creditor law.

A state insurance guaranty association exists to:

1. Pay covered claims of insurers that become insolvent, up to set limits ✓
2. Set the premium rates that all insurers in the state must charge
3. Guarantee that every applicant will be approved for coverage
4. Provide free legal representation to policyholders in disputes

Why: Guaranty associations protect policyholders by covering claims (within statutory limits) when a member insurer becomes insolvent; their existence may not be used in advertising or sales.

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

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

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

A Section 162 'double bonus' (zero-tax) arrangement is one in which the employer pays:

1. A second bonus to cover the income tax on the first bonus ✓
2. Twice the death benefit to the executive's chosen beneficiary
3. Half the premium, with the executive paying the remaining half
4. A bonus only in years the company reports a taxable profit

Why: In a double-bonus plan the employer grosses up the bonus with an extra amount so the executive's after-tax cost of the policy is effectively zero.

Group life insurance is most commonly written as:

1. A single-premium endowment that is paid up at issue
2. Annually renewable term that renews each year ✓
3. A paid-up whole life policy with no premiums
4. Decreasing term tied to a mortgage balance

Why: Employer group life is typically annually renewable term; individual evidence of insurability is usually not required up to a guaranteed-issue limit.

Under Section 3106, when does a breach of warranty avoid an insurance contract or defeat recovery?

1. Only when the breach materially increases the risk of loss, damage or injury within the coverage ✓
2. Whenever any warranty in the contract is breached
3. Only when the breach was intentional
4. Whenever the insurer can show the warranty was important to it unless an exception clearly applies

Why: Section 3106(b) provides that a breach of warranty does not avoid the contract or defeat recovery unless the breach materially increases the risk of loss, damage, or injury within the coverage.

Under § 3222(c), what is prohibited with respect to the contingencies on which payments under a funding agreement may be based?

1. Payments based on investment income
2. Payments based on mortality or morbidity contingencies ✓
3. Payments allocated to separate accounts
4. Payments to ERISA employee benefit plans

Why: Section 3222(c) provides that funding agreements shall not provide for payments to or by the insurer based on mortality or morbidity contingencies, and amounts may be guaranteed only on reasonable assumptions and an equitable basis.

A policy has an irrevocable beneficiary. To change that beneficiary, the owner must:

1. Obtain the irrevocable beneficiary's consent ✓
2. Simply submit a change form to the insurer
3. Wait until the next policy anniversary
4. Cancel and reissue the entire policy

Why: An irrevocable beneficiary's rights are vested; the owner cannot change it without that beneficiary's written consent.

Under a credit life policy, to whom are the policy benefits payable, and how is any excess over the actual indebtedness handled?

1. Entirely to the creditor, who keeps any surplus as an administrative fee unless an exception clearly applies for the coverage that is in force
2. To the policyholder; any amount over the actual indebtedness goes to a beneficiary named by the debtor or the debtor's estate ✓
3. To the debtor only, who must then repay the creditor separately
4. To the superintendent, who distributes the funds after review

Why: Benefits are payable to the policyholder; the amount not in excess of the actual indebtedness discharges the obligation, and any excess is payable to a beneficiary named by the debtor or the debtor's estate.

The uniform 'time of payment of claims' provision requires the insurer to pay claims:

1. Immediately (or promptly) upon receipt of written proof of loss ✓
2. Only after a mandatory 90-day internal review of every claim
3. Within five years of the date the loss originally occurred
4. At the end of the calendar year in which the loss happened

Why: Claims must be paid immediately upon receipt of proof; disability income benefits are paid at least monthly.

A '20-pay whole life' policy:

1. Provides level coverage for exactly twenty years, then terminates
2. Is paid up after twenty years of premiums but covers the insured for life ✓
3. Requires premium payments every year for the insured's entire lifetime
4. Builds no cash value at all because the premium period ends early

Why: Limited-pay whole life concentrates premiums into a set period (here 20 years) while coverage lasts for life.

A tax-sheltered annuity (TSA / 403(b)) is available to employees of:

1. Public schools and certain tax-exempt nonprofit organizations ✓
2. Only for-profit corporations listed on a stock exchange
3. Any employer, with no limits on annual contribution amounts
4. Federal agencies exclusively, in place of Social Security

Why: 403(b) tax-sheltered annuities are for employees of public schools and 501(c)(3) tax-exempt organizations; contributions are pre-tax and grow tax-deferred.

A 'warranty' differs from a 'representation' in that a warranty is:

1. Guaranteed to be true, and its breach can void the policy ✓
2. Merely believed to be true to the best of one's knowledge
3. Always made orally rather than in writing
4. Only relevant after a claim is filed

Why: A warranty is guaranteed absolutely true; a representation is believed true, and only a material misrepresentation affects the contract.

Section 2609 bars a person engaged in issuing performance or surety bonds from refusing to issue such a bond solely because of which set of characteristics?

1. Net worth, industry, or contract size in that particular circumstance
2. Race, creed, color, sex, national origin, age, or marital status ✓
3. Credit rating or bonding history
4. Citizenship or residency

Why: Section 2609 prohibits refusing to issue a performance or surety bond solely because of the race, creed, color, sex, national origin, age, or marital status of the applicant.

A reinsurance intermediary acts in New York without the required license. The Insurance Law authorizes a penalty not to exceed what amount per transaction?

1. Five hundred dollars
2. Two thousand five hundred dollars
3. Five thousand dollars ✓
4. Ten thousand dollars

Why: Section 2102(a)(2) provides that a person acting as a reinsurance intermediary in violation is subject to a penalty not to exceed five thousand dollars for each transaction.

A health policy with monthly premiums has a grace period of 10 days. A premium is 8 days late when the insured incurs a covered loss. The insurer:

1. Covers the loss, since the policy is still in force during the grace period ✓
2. Denies the loss because the premium was late according to the insurer's rules
3. Covers only half the loss as a penalty
4. Cancels the policy retroactively

Why: Coverage continues during the grace period; the claim is paid (the overdue premium may be deducted).

What is the maximum term for which an individual contract may be issued by an Article 43 corporation under Section 4304?

1. A period not in excess of twelve months ✓
2. A period not in excess of twenty-four months
3. A period not in excess of thirty-six months
4. A period not in excess of six months

Why: Section 4304(b)(1) provides any such contract shall be for a period not in excess of twelve months.

Under § 3223, every group annuity contract requiring payments to the insurer must, after the first payment, provide a grace period of how many days following the due date of any subsequent payment, during which the contract continues in full force?

1. Thirty days
2. Ten days
3. Thirty-one days ✓
4. Forty-five days

Why: Section 3223(a) requires a grace period of thirty-one days following the due date of any subsequent payment, during which the group annuity contract continues in full force.

An insurer delivers a policy to a broker at the broker's request. Under § 2121, the broker is deemed authorized to receive premium payment on the insurer's behalf if payment is received within what period?

1. Within thirty days after the due date of the premium or installment unless an exception clearly applies for the coverage that is in force
2. Within ninety days after the due date of the premium or installment (or delivery of an additional-premium statement) ✓
3. Within sixty days after the policy is delivered
4. Within one hundred twenty days after issuance

Why: Section 2121(a) deems the broker authorized to receive premium if received within ninety days after the due date or after delivery of an additional-premium statement.

Does § 2120 require an agent or broker to keep a separate bank deposit for each principal's funds?

1. Yes, a separate dedicated account is always required for each principal unless an exception clearly applies for the coverage that is in force
2. No, not if the funds held for each principal are reasonably ascertainable from the books of account and records ✓
3. Yes, unless the principal signs a waiver each calendar quarter
4. No, fiduciary obligations do not apply to commingled operating accounts

Why: Section 2120(c) provides that a separate bank deposit per principal is not required if the funds are reasonably ascertainable from the books and records.

A blanket A&H policy is issued to an association of persons having a common interest. The association must have not less than fifty members, and where members contribute premium and coverage is offered to all eligible members, the policy must cover not less than:

1. Fifty percent of any class of members
2. Seventy-five percent of any class or classes of members ✓
3. Sixty percent of members in good standing
4. Twenty-five members in total

Why: Section 4237(a)(3)(E) requires not less than fifty members, and, where members contribute and coverage is offered to all eligible members, coverage of not less than seventy-five percent of any class or classes of members.

Withdrawals of earnings from a nonqualified deferred annuity are taxed:

1. On a first-in, first-out basis, returning principal first
2. On a last-in, first-out basis, so gains are taxed first ✓
3. At favorable long-term capital-gains rates in every case
4. Only after the entire account value has been withdrawn

Why: Nonqualified annuity withdrawals are taxed LIFO — earnings (gains) are considered withdrawn first and taxed as ordinary income.

A 66-year-old just enrolled in Part B applies for a Medigap policy two months later. The insurer must:

1. Issue any offered plan on a guaranteed-issue basis ✓
2. Require full medical underwriting first
3. Decline due to the applicant's age
4. Offer only the most expensive plan

Why: Within the 6-month Medigap open enrollment period (age 65 + Part B), coverage is guaranteed issue regardless of health.