RM

1. Which of the following statements concerning the usual coordination-of-benefits (COB)

provision in group medical expense plans is (are) correct?

I. Coverage as a retired employee is primary to coverage as an active employee.

II. Coverage as an active employee is primary to coverage as a dependent.

A I only

B. II only

C. Both I and II

D. Neither I nor II

2. Which of the following statements concerning sick-leave plans is (are) correct?

I. Most plans provide benefits equal to 100 percent of an employee's regular pay.

II. Most plans contain a waiting period of 3 to 6 weeks before benefits start.

A I only

B. II only

C. Both I and II

D. Neither I nor II

3. Which of the following statements concerning business overhead insurance is (are)

correct?

I. These policies provide funds that can be used to cover many of the ongoing

costs of operating a business while the owner is totally disabled.

II. These policies tend to have benefit durations of 5 years or more and have fairly

long waiting periods. A. I only

B. II only

C. Both I and II

D. Neither I nor II

4. Which of the following statements concerning a deferred annuity is (are) correct?

I. Deferred annuities must be purchased with periodic premiums paid over a period of

time.

II. Because of the delay feature, a deferred annuity is unsuitable as a vehicle to

accumulate a sum for old age. A. I only

B. II only

C. Both I and II

D. Neither I nor II

55. Which of the following statements concerning a joint-and-last survivor annuity is (are)

correct?

I. It must be sold as an immediate annuity.

II. Annuity payments cease upon the first death of an annuitant.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

6. Which of the following statements concerning a term life insurance policy's convertibility

feature is (are) correct?

I. When the attained age method is used, the insured's age on the date of the

conversion determines the premium rate for the new coverage.

II. When the retroactive (original age) method is used, the new coverage uses the

insurer's contract that is effective on the date of the conversion.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

57. Which of the following statements concerning insurers' use of probability concepts is (are)

correct?

I. Using probability concepts enables an insurer to predict losses for its entire

group of insured persons with complete accuracy.

II. Using probability concepts enables an insurer to eliminate the possibility that its

losses and expenses will exceed its revenues.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

8. Which of the following statements concerning the settlement options in a whole life

insurance policy is (are) correct?

I. The policyowner must select a settlement option when applying for insurance.

II. Settlement options provide alternative methods for distributing the policy's death

benefit.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

59. In addition to most persons over age 65, which of the following persons is (are) eligible for

9. In addition to most persons over age 65, which of the following persons is (are) eligible for Medicare Part A benefits?

I. Persons under age 65 who have been entitled to Social Security disability

benefits for at least 24 months

II. Persons under age 65 who need long-term kidney dialysis treatment or a kidney

transplant A. I only

B. II only

c. Both I and II

D. Neither I nor II

10. Which of the following statements concerning optional life insurance policy provisions is

(are) correct?

I. The accelerated benefits provision allows for withdrawal of a portion of a policy's

death benefit if the insured is terminally ill.

II. The assignment provision describes the conditions under which the policyowner

may have the right to transfer some or all ownership rights to another person.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

11. Beth faces the risk that her car could run into someone else's car as a result of her

negligence. If that happens, Beth would have to pay the costs of repairing the other car.

This risk can be categorized as which of the following?

I. A liability risk

II. A speculative risk

A. I only

B. II only

C. Both I and II

D. Neither I nor II

12. Which of the following statements concerning annuities utilized in structured settlements

is (are) correct?

I. If the claimant is expected to have a shorter life expectancy due to the injuries,

the cost of a life annuity will be at rates higher than standard.

II. If the claimant is expected to have no reduction in life expectancy due to the

injuries, the cost of a life annuity will be at standard rates.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

13. The key employees of a sole proprietorship are logical choices to be purchasers of the

business at the sole proprietor's death for which of the following reasons?

I. They are familiar with the business.

II. They want to protect their own future employment.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

14. Which of the following statements concerning the use of Medicaid to meet long-term care

needs is (are) correct?

I. It is available only if a person is poor or has a low income and has exhausted

most other assets.

II. It eliminates the social stigma of accepting welfare.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

15. Which of the following statements concerning the trust endorsement to a personal auto

policy (PAP) is (are) correct?

I. The endorsement modifies the PAP to handle situations in which the vehicle is

titled solely in the name of a trust.

II. A client who establishes a revocable living trust for estate planning reasons may

need to add this endorsement to his or her PAP.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

16. A client who goes on a whitewater rafting trip is asked to sign a hold-harmless agreement.

Which of the following statements about hold-harmless agreements is (are) correct?

I. A hold-harmless agreement is a type of noninsurance transfer.

II. A person signing a hold-harmless agreement promises to assume responsibility

for losses that might otherwise be somebody else's responsibility.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

17. Which of the following statements concerning the damages involved in liability claims is

(are) correct?

Compensatory damages are designed to financially compensate a claimant who

has suffered a loss.

II. Punitive damages are designed to indemnify a claimant for pain and suffering.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

18. Which of the following statements concerning state high-risk pools for individual medical

expense coverage is (are) correct?

I. As a result of state subsidies, premiums tend to be much lower than in the

regular market place.

II. Benefits for preexisting conditions are often subject to a waiting period.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

19. Which of the following statements concerning coinsurance under group major medical

plans is (are) correct?

I. Different coinsurance percentages may apply to different categories of medical

expenses.

II. The coinsurance percentage typically is applied to a person's covered expenses

prior to subtracting the deductible amount. A. I only

B. II only

C. Both I and II

D. Neither I nor II

20. All the following statements concerning the financing of Social Security and Medicare are

correct EXCEPT:

A. Payroll taxes are deposited into trust funds from which benefits and administrative

costs are paid.

B. The tax rate for self-employed persons is one-half of the combined tax rate for

employees and employers.

C. The earnings base on which taxes are paid increases annually based on changes in

the national level of wages.

D. The program uses a system of partial advance funding.

21. All the following statements concerning the federal income tax treatment of insured group

medical expense plans are correct EXCEPT:

A. Contributions by the employer for an employee's coverage are generally tax

deductible to the employer. B. Contributions by the employer for an employee's coverage create an income tax

liability for the employee. C. A portion of employee contributions under a contributory plan may be deductible to the

employee as a medical expense.

D. Benefits are taxable to an employee to the extent they exceed any medical expenses

incurred. 22. Financial advisors often recommend a life insurance policy gifting program to their clients

for all the following reasons EXCEPT:

A. A gift of life insurance usually has little effect on the donor-insured's financial position. B. A gift of life insurance immediately removes the policy's proceeds from the

donor-insured's federal taxable estate.

C. Potential federal estate tax savings are significant. D. The recipient is less likely to dispose of the policy foolishly than he or she would if

receiving a gift of cash. 23. All the following statements concerning the findings of behavioral psychologists on the

subject of risk tolerance are correct EXCEPT:

A. People are more likely to be risk averse if the major impact of a loss would fall on

them rather than on strangers. B. People tend to overestimate low-probability risks and underestimate higher probability

risks.

C. Most people have a greater fear of unfamiliar risks than familiar risks. D. Most people are more risk tolerant than they are risk averse.

24. While Ruth was on a winter vacation, somebody stole the large outdoor propane tank that

fuels her furnace. She returned home to find severe plumbing damage because many

frozen pipes burst when her furnace stopped operating. The fish in her aquarium also

died because of the lack of heat. She rented a hotel room, because her house cannot be

occupied without heat or plumbing. Ruth has an H0-3 policy with adequate limits. All the

following statements concerning her homeowners insurance coverage for this incident are

correct EXCEPT: A. It will pay the additional cost of living in a hotel while her house is being repaired.

B. It will pay the cost of repairing her plumbing.

C. It will pay to replace her fish.

D. It will pay to replace the stolen tank and its contents.

25. Every insurance contract has a set of declarations. The declarations of a typical

insurance policy include all the following information EXCEPT A. exclusions

B. name of the insured

C. name of the insurer

D. effective date