Question 1

What happens if an insurer violates the Medical Loss Ratio rule and spends too much money on administrative costs?

Options :

A :

Insurers that do not meet the Medical Loss Ratio standard will be required to provide rebates to their customers and reduce spending on their administrative costs.

B :

Insurers that do not meet the Medical Loss Ratio standard will pay a tax penalty to the Federal government, n

C :

Insurers that do not meet the Medical Loss Ratio standard will pay a tax penalty to the Health Benefits Exchange.

D :

Insurers that do not meet the Medical Loss Ratio standard will only be required to reduce their spending on administrative costs.

Answer: A

Question 2

To help keep premiums more affordable, which provision is included in a disability income policy?

Options :

A : Residual benefits.

B : Elimination period.

C : Cost of living rider.

D : Automatic increase provision.

Answer: B

Question 3

According to the California Insurance Code, an illustration used to sell life insurance must include all of the following information EXCEPT

Options :

A : the probability that illustrated nonguaranteed scenarios will occur.

B : a label that identifies it as an illustration.

C : insurer-s policy name and form number.

D : name and address of the producer.

Answer: A

Question 4

Which of the following statements regarding risk is TRUE?

Options :

A : Only pure risks are insurable.

B : Only speculative risks are insurable.

C : Both pure and speculative risks are insurable.

D : Neither pure nor speculative risks are insurable.

Answer: A

Question 5

Your client has just bought a new home which he has financed with a $150,000, 7.5% interest, 30-year bank loan. He would like to be sure that if he dies prematurely, the unpaid balance of the mortgage would be paid. He wants a policy that will cover the mortgage balance - no more, no less - anytime during the life of the mortgage. Which policy is designed to meet this need?

Options :

A : Level term policy.

B : Home service policy.

C : Increasing term policy.

D : Decreasing term policy.

Answer: D

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