Washington Life & Health Insurance License, Practice Exams

All of the following are true of the physical examination and autopsy provision EXCEPT:

1. The insurer pays the expense of exams it requires
2. The insurer may examine the insured as reasonably needed
3. The insurer may make an autopsy where not forbidden
4. The insured must pay for any autopsy ordered ✓

Why: RCW 48.20.132 (Physical examinations and autopsy) gives the insurer the right at its own expense to examine and to make an autopsy; the insured does not pay for it.

A producer licensed in Idaho establishes legal residence in Washington. Under RCW 48.17.175, she must apply to become a resident licensee within:

1. 30 days of establishing residence
2. 60 days of establishing residence
3. 90 days of establishing residence ✓
4. 180 days of establishing residence

Why: RCW 48.17.175 requires a producer licensed in another state who moves to Washington to apply within ninety days of establishing legal residence to become a resident licensee.

Under RCW 48.24.080, a group life policy covering a principal's insurance producers must cover, when issued, not less than:

1. Fifty insurance producers
2. Twenty-five insurance producers ✓
3. Ten insurance producers
4. One hundred producers

Why: RCW 48.24.080 permits a policy covering, when issued, not less than twenty-five insurance producers of the principal.

Under RCW 48.05.030, before transacting insurance in this state an insurer generally must hold:

1. A surplus line broker license from the commissioner
2. A certificate of authority issued by the commissioner ✓
3. A National Association of Insurance Commissioners permit
4. A resident producer appointment from its home state

Why: RCW 48.05.030 provides that no insurer shall transact insurance in this state other than as authorized by a certificate of authority issued by the commissioner and then in force.

Part 2 of a life insurance application generally collects:

1. The premium payment and the policy's effective date information
2. The proposed insured's medical history ✓
3. The agent's personal observations about the applicant's apparent lifestyle
4. The names and addresses of the applicant's professional references

Why: Part 1 covers general information (name, age, occupation, beneficiary); Part 2 covers medical history. The agent's report is separate and not part of the contract.

A cost-of-living adjustment (COLA) rider on a disability income policy:

1. Refunds part of the premium if the insured is never disabled at all
2. Lowers the policy's premium automatically each and every year that the coverage stays in force
3. Increases the monthly benefit during a long claim to keep pace with inflation ✓
4. Shortens the elimination period after the first year of coverage

Why: A COLA rider raises the benefit being paid during an extended disability to offset inflation.

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.

The annuity best-interest obligation in Washington:

1. Makes the producer a fiduciary of the consumer for all purposes under the agency contract
2. Applies only to variable annuities registered with the SEC and sold through a broker-dealer
3. Creates a regulatory obligation, not a fiduciary obligation or relationship ✓
4. Supersedes the producer's licensing and appointment requirements

Why: RCW 48.23.015(3)(a)(iv) states that the best-interest requirements do not create a fiduciary obligation or relationship and only create a regulatory obligation as established in that section.

The minimum loss ratio required for group medicare supplement policies is:

1. 60 percent
2. 65 percent
3. 70 percent
4. 75 percent ✓

Why: RCW 48.66.100 (Loss ratio requirements) sets a minimum loss ratio of 75 percent for group medicare supplement policies.

A fraternal society operates on the lodge system when it has a supreme governing body and subordinate lodges required to hold regular meetings at least:

1. Once each week
2. Once each quarter
3. Once each month ✓
4. Once each year

Why: RCW 48.36A.020 requires subordinate lodges to hold regular meetings at least once each month in furtherance of the society's purposes.

Under RCW 48.43.035, a carrier may cancel or nonrenew a group health plan for all of the following EXCEPT:

1. A covered person materially breaching the health plan
2. The enrollee developing a costly medical condition ✓
3. Fraud committed by covered persons against the carrier
4. Nonpayment of premium by the group

Why: RCW 48.43.035(3) permits cancellation or nonrenewal only for specified reasons such as nonpayment, fraud, or material breach; a member's development of a costly health condition is not a permitted ground.

The standard notice of claim provision requires written notice of claim to be given to the insurer within how many days after the occurrence or commencement of a covered loss (or as soon as reasonably possible thereafter)?

1. 10 days
2. 20 days ✓
3. 30 days
4. 60 days

Why: RCW 48.20.082 (Notice of claim) requires written notice within twenty days after the occurrence or commencement of loss, or as soon thereafter as reasonably possible.

A client exchanges an existing cash-value life insurance policy directly for an annuity contract. Under IRC Section 1035, this is:

1. Taxed only on the cash value
2. A tax-free exchange ✓
3. An illegal transaction
4. A fully taxable surrender

Why: A life-to-annuity exchange qualifies for tax-free treatment under Section 1035 (an annuity-to-life exchange would not).

A family maintenance policy combines whole life with level term to:

1. Provide temporary coverage only, expiring with no cash value at the end of a stated 10- or 20-year term
2. Invest part of each premium in the mutual fund subaccounts the policyowner selects and may switch at will
3. Decrease the death benefit gradually as the children grow up and the family's income need falls away
4. Pay an income for a set period beginning at the insured's death, then the face amount ✓

Why: Family maintenance adds level term to whole life; if the insured dies during the term, it pays income for a stated period from the date of death, then the face amount.

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. Decreasing term tied to a mortgage balance
4. A paid-up whole life policy with no premiums

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

Under RCW 48.24.045, an association eligible to be a group life policyholder must have been in active existence for at least:

1. Five years
2. Two years
3. One year ✓
4. Six months

Why: RCW 48.24.045 requires the association to have been in active existence for at least one year, with a constitution and bylaws, organized for purposes other than obtaining insurance.

Under RCW 48.83.150, a person engaged in the issuance or solicitation of long-term care coverage is prohibited from:

1. Recommending an inflation protection rider to the buyer
2. Explaining the policy's elimination period to the buyer
3. Delivering the outline of coverage to the applicant
4. Engaging in unfair or deceptive acts or practices ✓

Why: RCW 48.83.150 provides that a person engaged in the issuance or solicitation of long-term care coverage shall not engage in unfair methods of competition or unfair or deceptive acts or practices, as defined in chapter 48.30 RCW or by the commissioner. The other options are ordinary sales conduct.

Kevin is injured on March 3 under his individual disability policy. Setting aside the 'as soon as reasonably possible' allowance, by what date does the standard provision call for written notice of claim?

1. March 13
2. April 2
3. March 23 ✓
4. June 1

Why: RCW 48.20.082 (Notice of claim) sets a 20-day period; 20 days after March 3 is March 23.

Under RCW 48.44.370, a contractor need NOT offer a conversion contract to any of the following EXCEPT one who:

1. Is covered under another group hospital or medical plan
2. Is eligible for federal medicare coverage
3. Simply retired from the employer group voluntarily ✓
4. Was terminated from employment for misconduct

Why: RCW 48.44.370(2) lets a contractor decline to offer conversion to a person eligible for medicare, covered under another group plan, or terminated for misconduct; voluntary retirement is not an enumerated exception.

After Nadia's individual disability policy is reinstated, she develops an illness. Under the reinstatement provision, the reinstated policy covers loss from sickness only if the sickness begins:

1. More than 10 days after reinstatement ✓
2. On or after the reinstatement date itself
3. More than 30 days after reinstatement
4. More than 45 days after reinstatement

Why: RCW 48.20.072 (Reinstatement) covers sickness only if it begins more than ten days after the date of reinstatement.

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 person automatically receives Medicare Part A and Part B at 65 (no separate sign-up) if they:

1. Are already receiving Social Security benefits ✓
2. Have earned the 40 quarters of Medicare-covered work credit
3. Delay their Social Security claim past age 65
4. Are covered only by a state Medicaid program

Why: Those already drawing Social Security are enrolled automatically in Parts A and B at 65; others must actively enroll.

Survivorship (second-to-die) life insurance is most commonly used to:

1. Fund a child's future college costs through the policy's accumulated cash value
2. Provide estate liquidity after the second insured dies ✓
3. Replace the income of a sole wage earner who has several young children at home
4. Cover a short-term business loan that must be fully repaid within five years

Why: It pays at the second death and is widely used to fund estate taxes and costs.

An 'open enrollment' period in health insurance is a time when individuals can:

1. File claims that were missed earlier in the year
2. Only switch from one network doctor to another
3. Enroll without medical underwriting ✓
4. Cancel coverage and receive a full premium refund

Why: During open enrollment, eligible individuals may enroll or change plans without health underwriting; a special enrollment period follows qualifying life events.

Under RCW 48.30.170, an insured who unlawfully accepts a rebate of premium not provided for in the policy is, apart from any reduction of insurance, subject to a fine of not more than:

1. $50
2. $100
3. $150
4. $200 ✓

Why: RCW 48.30.170(2) provides that such an insured shall be liable to a fine of not more than two hundred dollars, in addition to any reduction of insurance.

In a cross-purchase buy-sell agreement among four business owners, the number of life insurance policies required is:

1. 12 ✓
2. 4
3. 8
4. 16

Why: Cross-purchase requires each owner to insure every other owner: n(n−1) = 4 × 3 = 12 policies; an entity plan would need only 4.

Under RCW 48.17.530, which is a ground for disciplining an insurance producer?

1. Accepting a referral fee from another appointed producer
2. Maintaining two licensed places of business in the state
3. Renewing a client's policy at the standard filed rate
4. Obtaining a loan from a non-institution insurance client ✓

Why: RCW 48.17.530(1)(m) makes obtaining a loan from an insurance client who is not a financial institution and not related by birth, marriage, or adoption a ground for discipline (subject to reasonable arrangements the commissioner may permit by rule).

A distinguishing feature of adjustable life insurance is that the owner can:

1. Only ever convert it into a fixed single-premium immediate annuity
2. Invest the cash value directly in stocks and bonds of their choosing
3. Receive guaranteed dividends regardless of the insurer's experience
4. Change the premium, face amount, or coverage period as needs change ✓

Why: Adjustable life lets the owner modify premium, face amount, and protection period, effectively shifting between term and permanent coverage.

A producer convinces a client to drop a policy at Company A and buy one at Company B using misleading comparisons. This is:

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

Why: Inducing a replacement between different insurers through misrepresentation is twisting; doing it within the same insurer is churning.

Under RCW 48.84.040, an LTC policy may NOT do each of the following EXCEPT:

1. use a rider to reduce the covered benefits
2. cancel solely because the insured's health deteriorated
3. apply a six-month preexisting-condition waiting period ✓
4. impose a new waiting period when the policy is converted

Why: RCW 48.84.040(4) prohibits excluding preexisting conditions more than six months after the effective date, so a six-month waiting period is permissible; the other listed acts are prohibited.

An insured dies during the grace period with a premium still unpaid. Under RCW 48.23.030, the insurer:

1. Denies the claim outright for nonpayment
2. Voids the policy back to its issue date
3. Deducts the unpaid premium from the proceeds ✓
4. Must waive the unpaid premium in full

Why: RCW 48.23.030 keeps the policy in force during grace; if it becomes a claim, the overdue premium with interest may be deducted from the settlement.

A "health maintenance agreement" under RCW 48.46.020 is an agreement between a registered HMO and:

1. enrolled participants to provide comprehensive health services ✓
2. participating providers to reimburse them at contracted rates
3. the commissioner to guarantee the HMO's solvency reserves
4. an insurer to underwrite the HMO's uncovered expenditures

Why: RCW 48.46.020(12) defines a health maintenance agreement as an agreement between a registered HMO and its enrolled participants providing comprehensive health services.

An insured becomes totally disabled and, after the waiting period, the life policy's waiver of premium applies. The insured:

1. Owes no premiums while disabled, and coverage stays in force ✓
2. Receives an accelerated payout of the death benefit in cash
3. Must keep paying premiums, but the insurer refunds half each year
4. Loses coverage until premium payments resume after recovery

Why: Waiver of premium keeps the policy in force without premium payments during the insured's continued total disability.

To enroll in a Medicare Advantage (Part C) plan, a beneficiary must first have:

1. Only a Medicare Part D drug plan
2. Both Medicare Part A and Part B ✓
3. Full Medicaid eligibility in their state
4. An existing Medicare Supplement policy

Why: Medicare Advantage requires the beneficiary to be enrolled in both Part A and Part B; the MA plan then delivers those benefits (usually with Part D).

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.

Under RCW 48.43.005, a "small employer" is one that employed, on average during the preceding calendar year:

1. at least 2 but no more than 25 employees
2. at least 1 but no more than 100 employees
3. at least 1 but no more than 50 employees ✓
4. at least 5 but no more than 75 employees

Why: RCW 48.43.005(47) defines a small employer as one employing an average of at least one but no more than fifty employees during the previous calendar year.

Under RCW 48.30.090, making or circulating any misrepresentation of the terms of a policy, the benefits it promises, or the dividends to be received is prohibited as:

1. misrepresentation of policies ✓
2. unfair discrimination
3. rebating
4. twisting

Why: RCW 48.30.090 prohibits making, issuing, or circulating any misrepresentation of the terms of a policy, the benefits or advantages promised, or the dividends or share of surplus to be received.

A policy owner applies for a cash policy loan that is not being used to pay premiums. Under RCW 48.23.080, the insurer may defer funding the loan for a period not exceeding:

1. Thirty days after application
2. Ninety days after application
3. Twelve months after application
4. Six months after application ✓

Why: RCW 48.23.080 permits an insurer to defer making a loan, other than a loan to pay premiums, for up to six months after the application.

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.

If the named beneficiary of a life policy is a minor child, the death proceeds:

1. Are forfeited entirely until the child reaches the age of majority
2. Must by law be split equally among all of the insured's relatives
3. Are usually paid to a guardian or trust, not directly to the minor ✓
4. Revert to the insurance company until a court orders otherwise

Why: Insurers generally will not pay proceeds directly to a minor; a guardian, custodian, or trust receives and manages the funds.

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.

A newly formed prepaid group practice wants to market itself using the initials "HMO." Under RCW 48.46.040 it may lawfully do so only if it:

1. operates on a per capita prepayment basis in this state
2. files its solicitation documents and rate schedules first
3. holds a certificate of registration or is federally certified ✓
4. contracts with enough providers to serve all its enrollees

Why: RCW 48.46.040 bars use of "health maintenance organization" or "HMO" by any entity not issued a certificate of registration, except an HMO federally certified under Public Law 93-222.

A producer satisfies the Washington best-interest standard for an annuity recommendation by meeting four obligations. They are:

1. Care, loyalty, prudence, and impartiality
2. Care, disclosure, conflict of interest, and documentation ✓
3. Suitability, replacement, disclosure, and free look
4. Licensing, appointment, training, and continuing education

Why: RCW 48.23.015(3) provides that a producer has acted in the best interest of the consumer if the producer has satisfied the obligations regarding care, disclosure, conflict of interest, and documentation.

A Washington life policy lapsed two years ago for nonpayment and was never surrendered for cash value. Under RCW 48.23.120, the owner may still seek reinstatement because the deadline is:

1. Two years after the default date
2. Three years after the default date ✓
3. Five years after the default date
4. One year after the default date

Why: RCW 48.23.120 allows reinstatement within three years after default, on evidence of insurability and payment of overdue premiums, unless the policy was surrendered or extended insurance expired.

Errors and omissions (E&O) insurance protects a producer against:

1. Losses caused by the producer's own intentional fraud, theft, or conversion of client premium funds
2. Claims arising from negligent acts or mistakes in their professional work ✓
3. The cost of premiums owed by clients who fail to pay before the grace period expires
4. Penalties for selling without a valid state license

Why: E&O is professional liability coverage for negligent errors or omissions; it excludes intentional or fraudulent conduct.

A dependent loses qualified-family-member status when the principal enrollee dies. Under RCW 48.44.400, the health care service contract must allow that dependent to:

1. Enroll only during the next open enrollment
2. Continue the agreement without proof of insurability ✓
3. Receive a refund of prior premiums paid in
4. Convert only after completing a new medical examination and questionnaire

Why: RCW 48.44.400 requires continuance provisions letting a former family member (by termination of marriage or death of the principal enrollee) continue the agreement without a physical exam, statement of health, or other proof of insurability.

In a health plan, the difference between a deductible and coinsurance is that the deductible is:

1. A fixed amount the insured pays before the plan starts paying ✓
2. The maximum the insured can ever pay in a single policy year
3. A percentage of each covered charge shared after the plan pays
4. A flat fee charged at the time of each individual office visit

Why: A deductible is a set amount paid before benefits begin; coinsurance is the percentage of costs shared after the deductible is met.

Under RCW 48.30A.020, all of the following are recognized defenses to a charge under the insurance fraud chapter EXCEPT:

1. the payment was an incidental, purely social gratuity
2. the conduct was a lawful group-buying arrangement
3. a legal provider paid an expert witness for a report
4. the provider was unaware the referral was unlawful ✓

Why: RCW 48.30A.020 lists defenses such as incidental social gifts, group-buying arrangements, and paying an expert witness; mere lack of awareness that a referral was unlawful is not among the enumerated defenses.

Under RCW 48.05.160, the commissioner may not suspend an insurer's certificate of authority for a period longer than:

1. Thirty days
2. Six months
3. One year ✓
4. Two years

Why: RCW 48.05.160 forbids the commissioner from suspending a certificate of authority for a period in excess of one year, and requires the order to state the suspension period.

RCW 48.23.130 requires that settlement of a death claim be made upon:

1. Completion of a 60-day investigation
2. Approval by the insurance commissioner
3. Due proof of death and policy surrender ✓
4. The next policy anniversary date

Why: RCW 48.23.130 (Settlement on proof of death) requires settlement upon receipt of due proof of death and surrender of the policy.

An applicant classified as a 'preferred' risk:

1. Is declined for individual coverage and steered to a guaranteed-issue plan
2. Must buy through an employer group plan, because individual underwriting is closed
3. Pays the lowest premium because of better-than-average risk factors ✓
4. Pays a rated premium reflecting poor health or hazardous habits

Why: Preferred risks (e.g., ideal build, nonsmoker) present lower-than-average mortality and qualify for the lowest premiums; standard and substandard pay more.

Under RCW 48.43.005, "preexisting condition" means any medical condition, illness, or injury that:

1. existed any time prior to the effective date of coverage ✓
2. was treated within six months before the enrollment date
3. the applicant knew about when applying for the coverage
4. requires ongoing treatment after the coverage takes effect

Why: RCW 48.43.005(42) defines preexisting condition as any medical condition, illness, or injury that existed any time prior to the effective date of coverage.

When recommending an annuity in Washington, the producer must act in the best interest of the consumer. This means the producer may not:

1. Place the producer's or the insurer's financial interest ahead of the consumer's interest ✓
2. Recommend an annuity whose surrender charge schedule runs seven years, when that annuity is in the consumer's interest
3. Receive cash compensation from the issuing insurer
4. Recommend an annuity issued by an insurer the producer is appointed to represent, after disclosing the products offered

Why: RCW 48.23.015(3) requires a producer making an annuity recommendation to act in the best interest of the consumer under the circumstances known at the time, without placing the producer's or the insurer's financial interest ahead of the consumer's interest. Cash compensation is expressly excluded from a material conflict of interest, and representing a particular insurer after disclosure is not prohibited.

A worker whose group life ends on leaving her job applies to convert within the required period. What may the insurer require regarding her insurability?

1. No evidence of insurability may be required ✓
2. A completed paramedical examination report
3. Written evidence of the worker's good health
4. A statement of insurability from a physician

Why: RCW 48.24.180 grants the conversion right without evidence of insurability, so the insurer may not condition the individual policy on any health showing.

An insurer sells medicare supplement coverage solicited through mass media advertising. For loss ratio purposes, these policies are treated as:

1. Individual policies ✓
2. Group policies
3. Blanket policies
4. Exempt from loss ratio rules

Why: RCW 48.66.100 treats policies solicited through the mail or mass media advertising as individual policies for loss ratio purposes.

Current assumption (interest-sensitive) whole life differs from traditional whole life because its premiums and cash values:

1. Adjust with current interest and mortality experience ✓
2. Are fixed by contract and can never be changed for the life of the policy
3. Decrease automatically each year until the policy becomes paid up
4. Are invested entirely in equity sub-accounts selected by the policyowner

Why: Current assumption whole life uses current interest and mortality assumptions, so premiums and cash values can be redetermined periodically.

Preauthorization (precertification) is a managed-care cost control that requires:

1. The insured to pay double coinsurance on all elective surgeries
2. An automatic second opinion from a state-appointed physician
3. Providers to accept a fixed monthly payment per enrolled member
4. Approval before certain services or hospitalizations ✓

Why: Preauthorization requires the plan's approval before specified non-emergency procedures or admissions for them to be covered.

The 'actively-at-work' provision in a group plan requires that, for coverage to take effect, the employee must:

1. Be performing their normal job duties on the effective date ✓
2. Pass an individual paramedical examination before enrollment
3. Have completed at least ten years of continuous service first
4. Waive all rights to convert the coverage in the future

Why: The actively-at-work provision conditions coverage on the employee being at work (not home ill) on the date it would otherwise begin.

Tomas pays his individual disability premiums quarterly and misses a due date. Under the minimum grace period required by Washington law, his coverage stays in force for at least how long?

1. 7 days
2. 10 days
3. 21 days
4. 31 days ✓

Why: RCW 48.20.062 (Grace period) requires not less than 31 days for policies other than weekly or monthly, which includes quarterly modes.

Medicare supplement individual policies must return to policyholders aggregate benefits amounting to a loss ratio of at least:

1. 55 percent
2. 60 percent
3. 65 percent ✓
4. 75 percent

Why: RCW 48.66.100 (Loss ratio requirements) sets a minimum loss ratio of 65 percent for individual medicare supplement policies.

Under RCW 48.43.038, a carrier that discontinues all individual health coverage in the state generally may not issue new individual coverage for:

1. Ten years
2. Two years
3. Five years ✓
4. Three years

Why: RCW 48.43.038(3)(d) bars a carrier that discontinues all individual coverage from issuing any individual health coverage in the state for a five-year period beginning on the discontinuation of the last plan not renewed.

Under the time of payment of claims provision, accrued indemnities for a loss for which the policy provides periodic payment must be paid at intervals no less frequently than:

1. Weekly
2. Quarterly
3. Annually
4. Monthly ✓

Why: RCW 48.20.112 (Time of payment of claims) requires periodic indemnities to be paid not less frequently than monthly.

Under the 'three-year rule,' if an insured gives away a life insurance policy but dies within three years, the proceeds are:

1. Treated as fully tax-free regardless of the timing of the gift
2. Pulled back into the insured's taxable estate ✓
3. Forfeited entirely back to the issuing insurance company
4. Taxed as ordinary income to the person who received the gift

Why: If an insured transfers a policy and dies within three years, the death proceeds are included in the gross estate for federal estate-tax purposes.

'Churning' as an unfair practice refers to:

1. Mixing a client's premium funds with the producer's own money
2. Replacing a policy within the same insurer through misrepresentation ✓
3. Refusing to renew a policy after the insured files a large claim
4. Charging higher premiums to applicants with poor health histories

Why: Churning is using misrepresentation to replace a policy with another from the same insurer to generate new commissions; twisting involves different insurers.

In determining the amount of coverage by the 'human life value' approach, a producer calculates the:

1. Total of the family's debts, final expenses, and education goals
2. Largest annual premium the client's budget allows
3. Cash value the policy will build by age 65
4. Present value of the insured's expected future earnings ✓

Why: Human life value bases coverage on the present value of future income; the needs approach totals specific obligations instead.

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.

A producer asks whether a hospital cooperative that self-insures its liability risks is an "insurer" under the code. Under RCW 48.01.050, two or more hospitals organized as a mutual corporation to self-insure liability through a contributing trust fund are:

1. not an "insurer" under the code ✓
2. insurers that must obtain a certificate of authority
3. surplus line insurers subject to broker placement rules
4. foreign insurers regardless of where they are organized

Why: RCW 48.01.050 expressly provides that two or more hospitals that join and organize as a mutual corporation to insure or self-insure against liability claims through a contributing trust fund are not an insurer under the code.

A producer wants to sponsor a local youth sports league. Under RCW 48.30.135, a producer may make a contribution to a bona fide charitable or nonprofit organization if:

1. the commissioner grants prior written approval unless the commissioner directs otherwise
2. the organization receiving the producer's contribution has fewer than one hundred members unless a specific exemption plainly applies
3. the sponsorship or contribution is not conditioned upon the organization obtaining insurance through the producer ✓
4. the contribution does not exceed $100 in total according to the schedule adopted by rule as part of the applicable filing then in effect

Why: RCW 48.30.135(1) permits a producer to sponsor events for or contribute to a bona fide charitable or nonprofit organization if the sponsorship or contribution is not conditioned upon the organization applying for or obtaining insurance through the producer.

Under RCW 48.24.060, a public employee association group life policy requires the association to have, when placed in force, a membership in eligible classes of not less than:

1. Ninety percent of eligible employees
2. Seventy-five percent of eligible employees ✓
3. Fifty percent of eligible employees
4. Twenty-five percent of eligible employees

Why: RCW 48.24.060 requires the association to have, when the policy is placed in force, membership in the eligible classes of not less than seventy-five percent of the employees eligible for membership.

Under the time limit on certain defenses provision, after how many years from the date of issue can no misstatements (other than fraudulent ones) in the application be used to void the policy?

1. One year
2. Three years
3. Two years ✓
4. Five years

Why: RCW 48.20.052 (Time limit on certain defenses) provides that after two years no non-fraudulent misstatement in the application may be used to void the policy.

Medicare Savings Programs (such as QMB) help low-income beneficiaries by:

1. Adding dental and vision to Medicare
2. Eliminating the need to enroll in Part A
3. Providing tax-free life insurance
4. Paying Medicare premiums and cost-sharing ✓

Why: Medicaid-administered Medicare Savings Programs (QMB, SLMB, QI) help pay Medicare premiums, deductibles, and coinsurance for those with limited means.

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.

Case management in a managed-care plan involves:

1. Setting the renewal premium charged to an employer group
2. Deciding which providers meet credentialing standards for the network
3. Coordinating cost-effective care for high-cost or complex cases ✓
4. Auditing producer commissions and enrollment records each quarter

Why: Case management coordinates appropriate, cost-effective treatment for seriously ill or injured members, often using alternative care settings.

A settlement option that continues income to two people until the second one dies is the:

1. Life income option
2. Interest-only option
3. Joint and survivor option ✓
4. Fixed-period option

Why: The joint and survivor option pays as long as either of two people is alive.

In an equity-indexed annuity using the 'annual point-to-point' crediting method, interest is based on the index value:

1. Averaged across all twelve monthly closing values of the year
2. Measured continuously on every single trading day of the year
3. At the start of the year compared to the end of the year ✓
4. At the single highest point the index reached during the term

Why: Annual point-to-point compares the index at the beginning and end of the year; high-water mark and monthly averaging are alternative methods.

Under RCW 48.44.035, a limited health care service contractor must have and maintain a minimum net worth of:

1. $300,000 ✓
2. $150,000
3. $500,000
4. $1,000,000

Why: RCW 48.44.035(3) requires every limited health care service contractor to have and maintain a minimum net worth of three hundred thousand dollars.

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.