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COMPREHENSIVE HEALTH INSURANCE FLORIDA 2-
PRACTICE EXAM QUESTIONS RATED A+ 100% ACCURATE
"The benefits of an individual Disability Income Policy will be taxed in the following manner? A) Income tax B) FICA tax C) State income tax
D) None of the benefits are taxed - CORRECT ANSWER=> None of the benefits are taxed
(Benefits received from an individual Disability Income Policy are not subject to taxation.)" "Pete is a valuable veteran of 21 years at Joe's Garage working with 24 people and filling in for Joe when he is not in. Joe wants to insure Pete to offset any losses and the costs of trying to find, recruit and train a replacement, should Pete become disabled. What type of policy should Joe purchase? A) Business Overhead Insurance B) Key Employee Insurance C) Special Insurance Supplement
D) Employee Impairment Insurance - CORRECT ANSWER=> Key Employee Insurance
(Joe is after a policy that will pay a benefit to the business when a key employee (Pete) becomes disabled by helping pay for a replacement, training, loss of revenue, etc.)" "Two business partners wanting to be assured the business will not be lost should one of them become disabled, should purchase a Disability Policy to fund which of the following? A) A Buy-Sell Agreement B) A Business Continuation Plan C) A Business Overhead Expense Contract
D) A Guaranteed Purchase Option - CORRECT ANSWER=> A Buy-Sell Agreement
(The partners should purchase a Disability Policy to fund a Buy-Sell Agreement that then would pay a lump sum enabling them to buy out the interests of the other partner should the other partner become totally disabled.)" "There are many business uses of Disability Income Insurance. All of the following are possible business uses, EXCEPT? A) Buy-Sell B) Key Employee Insurance C) Business Employer Expense
D) Business Overhead Expense - CORRECT ANSWER=> Business Employer Expense"
"What does each member pay in a typical HMO plan?
-Fixed premium based on a deductible and copay -Fixed premium whether or not plan is used
-Premium based on how often plan is used - CORRECT ANSWER=> Fixed premium whether or not plan
is used" "Which of the following is correct about those who are eligible for Medicare and wish to join an HMO? -They must have a current Medicare supplement policy -They must be told that'll be getting all the benefits from the Medicare Advantage plan -They must be age 70 and above
-They must have been enrolled previously in an HMO - CORRECT ANSWER=> They must be told that'll
be getting all the benefits from the Medicare Advantage plan" "Joyce is totally disabled. Her HMO policy just terminated. All of the following are correct regarding "extension of benefits" for Joyce, EXCEPT? -Coverage ends once maximum benefits have been exhausted -Coverage ends once another carrier assumes coverage -Coverage ends if no longer totally disabled
-Coverage ends after 18 months - CORRECT ANSWER=> Coverage ends after 18 months"
"All of the following are correct regarding Florida regulation of HMOs, EXCEPT? -Must obtain a Certificate of Authority -Must file a report of its activities within 3 months of the end of each fiscal year -Must deposit $100,000 with the Rehabilitation Administration Expense Fund
-Must be sold by agents licensed and appointed as health insurance agents - CORRECT ANSWER=>
Must deposit $100,000 with the Rehabilitation Administration Expense Fund (Explanation: They must deposit $10,000 with the Rehabilitation Administration Expense Fund.)" "What is "capitation" as it relates to an HMO? -Amount to be collected by the HMO from participating health care providers -Fixed amount paid by an HMO during a policy period -Fixed amount paid by an HMO to a physician for medical services
-Amount required to be deposited with the State of Florida - CORRECT ANSWER=> Fixed amount paid
by an HMO to a physician for medical services" "When a person is covered by an HMO, the contract certificate or member's handbook must be delivered within how many days after approval of the enrollment by the HMO? -20 days -10 days -5 days
-14 days - CORRECT ANSWER=> 10 days"
"Which of the following statements about health service organizations is true? -They reimburse Policyowners directly for physicians' fees -They provide loss of income benefits to Policyowners
-Multiple Employer Trusts -Multiple Employer Welfare Arrangements -Self-insurance
-Commercial insurers - CORRECT ANSWER=> Commercial insurers"
"All of the following are true about a multiple employer welfare arrangement (MEWA), EXCEPT? -Required by law to have an employment-related common bond -Often provide insurance on a self-insured basis -Tax-exempt entities
-Large employers who have joined together to provide health insurance benefits - CORRECT
ANSWER=> Large employers who have joined together to provide health insurance benefits
(Explanation: MEWAs consist of small employers who join together to provide health insurance benefits for their employees)" "Grouping small businesses together to obtain health insurance as one large group is a characteristic of what type of group? -Multiple Employer Trust (MET) -Franchise Health plan -Health Maintenance Organization (HMO)
-Blue Cross/Blue Shield - CORRECT ANSWER=> Multiple Employer Trust (MET)"
"Casey has a medical expense policy that provides a fixed rate of $150 per day for hospitalization. Casey is hospitalized for 10 days and incurred covered medical expenses of $20,000. What will her medical expense policy pay? -$1, -$20, -$15,
-$3,000 - CORRECT ANSWER=> $1,500 (Explanation:
Casey's policy will only cover a fixed rate per day for hospitalization of $150. If she is hospitalized for 10 days, then her policy will pay $1,500 ($150 x 10) of the total $20,000 in expenses.)" "Jamie has a reimbursement type medical expense policy with a maximum benefit of $500,000. She is hospitalized and incurs $25,000 in covered medical expenses. What will her policy provide in coverage? -$20, -$25, -$10,
-$12,500 - CORRECT ANSWER=> $25,000 (Explanation:
A reimbursement type policy will provide coverage for expenses incurred. In this case that would be the total $25,000.)" "Which of the following will not be covered under "Miscellaneous Expenses" of a hospital expense policy? -Drugs
-Lab fees -Daily room and board
-Use of operating room - CORRECT ANSWER=> Daily room and board"
"There are three different approaches used by insurers in providing basic surgical expense coverage and determining the benefits payable. Which of the following is NOT one of these approaches? -Reasonable and customary approach -Physician schedule approach -Relative value scale approach
-Surgical schedule approach - CORRECT ANSWER=> Physician schedule approach"
"Charlie has a hospital expense policy and a surgical expense policy. The hospital pays $100 a day for room and board and a maximum of $1,000 for miscellaneous hospital charges. The surgical policy pays a maximum of $500 for any one operation. If Charlie was hospitalized for 10 days and had charges of $ per day for room and board, $1,500 for miscellaneous expenses, and $2,000 for surgical expenses. What will his policies pay of these expenses? -$3, -$1, -$5,
-$2,500 - CORRECT ANSWER=> $2,500 (Explanation:
Hospital will pay - $1,000 for room and board ($100 per day for 10 days) and $1,000 (maximum allowed) for miscellaneous expenses. Surgical will pay - $500 (maximum allowed) for surgery)" "Once the insured has paid a specified amount of his expenses, under the stop-loss feature of a health insurance policy, how much will the company then pay? -75% -20% -80%
-100% - CORRECT ANSWER=> 100%"
"How will the "miscellaneous expenses" benefit be expressed in a basic health insurance policy? -Reasonable, usual and customary rates -Multiple of daily room and board rate -Approved charge per day rate
-Percentage of daily room and board rate - CORRECT ANSWER=> Multiple of daily room and board
rate" "Roberta has a basic hospital expense policy with a $10,000 limit for benefits, coordinated with a major medical policy with a $500 corridor deductible and 80/20 coinsurance provision. If she incurs a loss of $20,000, how much will the insurer pay? -$17, -$18, -$11,
-$2,400 - CORRECT ANSWER=> $17,600 (Explanation:
-Significantly less premium
-More premium - CORRECT ANSWER=> More premium (Explanation:
Because the insured will be responsible for less of the cost for medical expenses (20% verses 25%), he will pay more in premium costs.)" "Jason has a Major Medical policy with a flat deductible of $500, coinsurance of 80%/20% and a stop- loss of $5,000. If he has a covered claim of $5,500, what will the insurance company pay? -$ -$4, -$1,
-$4,000 - CORRECT ANSWER=> $4,000 (Explanation:
Jason will pay the first $500 (his deductible amount) of the total medical bills. After this Jason will pay 20% of the remainder ($5,000) and the insurance company will pay 80%. $5,000 (amount remaining) x .80 = $4,000 paid by insurance company.)" "All of the following are types of major medical policy deductibles, EXCEPT? -Franchise -Integrated -Corridor
-Flat - CORRECT ANSWER=> Franchise"
"What type of medical expense policy simply provides a daily, weekly, or monthly payment of a specified amount based on the number of days the insured is hospitalized? -Daily room and board expense policy -Surgical expense policy -Hospital Fixed-rate policy
-Hospital expense policy - CORRECT ANSWER=> Hospital Fixed-rate policy"
"What type of medical expense policy would be available to cover the high costs associated with a specific kind of illness such as cancer or heart disease? -Hospital expense -Surgical expense -Major medical
-Limited risk - CORRECT ANSWER=> Limited risk (Explanation:
Limited risk or dread disease policies are designed specifically to cover the high costs associated with a specific illness.)" "William was involved in a 2-car accident in which he is disabled and his passenger and the driver of the other car are injured. Which of the following would most likely be covered by William's disability income policy? -Disability of the other driver -His lost income -William's medical expenses
-Dismemberment of the passenger's leg - CORRECT ANSWER=> His lost income"
"Cathy is a dentist and decides to purchase insurance that would cover a large portion of her income should she become disabled. What type of coverage will she purchase? -Disability income insurance -Business overhead expense insurance -Medical expense insurance
-Lump sum disability - CORRECT ANSWER=> Disability income insurance"
"All of the following are true regarding a disability income policy defining total disability as "own occupation", EXCEPT? -Insured is unable to work at their own occupation as a result of an accident or sickness -Difficult to qualify for -More advantageous to the insurer
-More expensive than a policy providing "any occupation" - CORRECT ANSWER=> More advantageous
to the insurer" "Which of the following terms relates to payments made for partial disabilities? -Residual amount -Gross amount -Net amount
-Recurrent amount - CORRECT ANSWER=> Residual amount (Explanation:
The amount of benefit payable when a policy covers partial disabilities depends on whether the policy stipulates a flat amount or a residual amount)" "Daniel's disability income policy defines total disability as "the insured's inability to perform the duties of any occupation for which he or she is reasonably qualified by education, training or experience". This definition is known as? -Own occupation and is less restrictive than other definitions -Any occupation and is more restrictive than other definitions -Any occupation and is less restrictive than other definitions
-Own occupation and is more restrictive than other definitions - CORRECT ANSWER=> Any occupation
and is more restrictive than other definitions" "Which of the following is NOT correct about partial disability? -Benefit period is usually 3 to 6 months -Flat amount benefit is usually 50% of the total disability benefit -Proof of disability is not required for partial disabilities
-Follows period of total disability - CORRECT ANSWER=> Proof of disability is not required for partial
disabilities" "For individual disability income policies there are basically two types of benefit periods, which are? -Short-term and long-term -Short term and interim term -Basic term and broad term
"George was in an accident. His Accident, Death and Dismemberment policy will cover all of the following, EXCEPT? -Loss of sight -Loss of use of a limb -Broken arm
-Death - CORRECT ANSWER=> Broken arm (Explanation:
AD&D is the primary form of pure accident coverage. It provides a stated lump-sum benefit in the event of accidental death or in the event of loss of bodily members due to an accidental injury.)" "What does the principal sum represent in an AD&D policy? -Amount payable for accidental loss of sight -Amount payable as a death benefit -Amount payable for dismemberment
-Amount payable for accidental loss of sight or dismemberment - CORRECT ANSWER=> Amount
payable as a death benefit" "An individual accidental death and dismemberment policy (AD&D) will pay benefits if an insured dies from... -Heart attack -Catastrophic illness -Head injury resulting from an auto accident
-Occupational disease - CORRECT ANSWER=> Head injury resulting from an auto accident"
"Michael has an AD&D policy. Which of the following statements is CORRECT? -The benefit for the loss of both eyes is 75% of the principal sum -Michael's beneficiary will receive the capital sum of $100,000 as a death benefit -Principal sum is the amount paid for the accidental loss of sight or dismemberment
-The benefit amount for the loss of one foot or one hand is 50% of the principal sum - CORRECT
ANSWER=> The benefit amount for the loss of one foot or one hand is 50% of the principal sum"
"Which of the following is an example of a limited risk policy? -Surgical policy -Medical expense policy -Hospital policy
-Aviation policy - CORRECT ANSWER=> Aviation policy"
"A famous dancer decides to take out a special policy covering her legs for $1 million. What type of accident policy is this? -Disability income policy -Limited risk policy -Major Medical policy
-Special risk policy - CORRECT ANSWER=> Special risk policy"
"Margaret has a special risk policy. It will pay a benefit for...
-Unusual hazards normally not covered by other policies -Death or dismemberment resulting from an aviation accident during a specified trip -Dreaded diseases
-Special risks such as Lou Gehrig's disease or Parkinson's disease - CORRECT ANSWER=> Unusual
hazards normally not covered by other policies" "What is the free-look period for a Medicare Supplement policy? -7-days -10-days -14-days
-30-days - CORRECT ANSWER=> 30-days"
"Which of the following statements is true about a Medicare Supplement policy? -These policies are designed to cover deductibles and co-insurance -Only insurance companies affiliated with Medicare can provide Medicare Supplement policies -These policies may be issued to anyone 59 1/2 or older without evidence of insurability
-Anyone who qualifies for Medicaid benefits may be issued these policies - CORRECT ANSWER=> These
policies are designed to cover deductibles and co-insurance" "All of the following are correct regarding Medicare Supplement policies, EXCEPT -Must cover pre-existing conditions from the date the policy goes into effect -Must automatically adjust its benefits to reflect statutory changes in Medicare -Must cover all expenses not covered by Part A from the 61st to the 90th day
-Must supplement both Part A and Part B of Medicare - CORRECT ANSWER=> Must cover pre-existing
conditions from the date the policy goes into effect" "Which of the following is NOT a requirement for an agent soliciting Medicare supplements? -Explain to prospect where there will be overlapping coverage -Send a signed form to the company explaining why coverage could not be placed -Inquire from each prospect if they already have coverage
-Have prospect sign a form acknowledging information has been provided - CORRECT ANSWER=> Send
a signed form to the company explaining why coverage could not be placed" "Which of the following is NOT a category level of long-term care? -Custodial care -Intermediate nursing care -Hospitalization care
-Skilled nursing care - CORRECT ANSWER=> Hospitalization care"
"Long-term care insurance also provides for a short rest period for a family caregiver. What is the known as? -Home care -Custodial care -Continuing care
-Individual plans have better maternity benefits than group plans -Once issued, group insurance may only be cancelled by the insurer -Dependent survivors of a deceased worker, eligible for COBRA, may be covered by COBRA for 36 months
- CORRECT ANSWER=> Dependent survivors of a deceased worker, eligible for COBRA, may be covered by COBRA for 36 months" "To qualify for group health coverage, a group of persons must be considered a "natural group". What is meant by "natural group"? -Group must be made up of people in good health -Group must have been formed for some reason other than to obtain insurance -Group must be consist of natural born citizens
-Group must have ten (10) or more members - CORRECT ANSWER=> Group must have been formed for
some reason other than to obtain insurance" "All of the following are correct regarding group health insurance, EXCEPT? -Major medical coverage may be written on a group basis -Employees receive separate policies -Debtor groups are eligible for group plans
-Employer is issued a master policy - CORRECT ANSWER=> Employees receive separate policies"
"Which of the following is CORRECT regarding group health insurance? -Insurer must ask health questions of each individual in the group -Labor unions are not eligible -A group may be eligible that is formed just for the purpose of purchasing insurance
-Lodges are eligible - CORRECT ANSWER=> Lodges are eligible"
"Florida requires what percentage of participation by employees in a contributory group health plan? -100% -50% -No minimum percentage
-75% - CORRECT ANSWER=> No minimum percentage (Explanation:
Most noncontributory group health plans require 100% participation by eligible members, whereas contributory group health plans often require participation by 75% of eligible members. Under Florida law there is no specific minimum percentage participation for employees covered by group health insurance.)" "Which of the following is CORRECT about a group health insurance plan? -Non-contributory plans are paid for by the employer and employee -Non-contributory plans require 100% participation -Contributory plans are paid for by the employer only
-Contributory plans require 100% participation - CORRECT ANSWER=> Non-contributory plans require
100% participation" "All of the following are characteristics of group health insurance, EXCEPT?
-Group plans may be contributory or noncontributory -More Americans are covered by individual health plans than by group health plans -Benefits are predetermined by the employer -Cost for insuring an individual under a group plan is less than the cost under an individual plan -
CORRECT ANSWER=> More Americans are covered by individual health plans than by group health
plans" "Generally when would an insurer engage in "individual underwriting" under a group health plan? -Never, this is prohibited by law -When the insurer is underwriting and evaluating the group -When an eligible employee tries to join the plan after initially electing not to participate
-On an annual review - CORRECT ANSWER=> When an eligible employee tries to join the plan after
initially electing not to participate" "What is the plan called if the employer pays the whole premium on a group policy? -Qualified -Non-qualified -Contributory
-Non-contributory - CORRECT ANSWER=> Non-contributory"
"Which of the following is NOT true about "coordination of benefits"? -Establishes which health plan is primary -Found in group and individual health plans -Limits total amount of claims paid from all involved insurers
-Purpose is to avoid duplication of benefits and overinsurance - CORRECT ANSWER=> Found in group
and individual health plans" "What is the purpose of COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)? -Allow terminated employees to continue their group medical expense coverage for up to 18 months -Gives terminated employees 31 days to convert their medical expense coverage to another plan -Allows terminated employees to keep their group medical coverage at the same premium rates -Automatically convert terminated employee's group medical expense coverage into an individual policy
- CORRECT ANSWER=> Allow terminated employees to continue their group medical expense coverage for up to 18 months" "After COBRA continuation of benefits has expired, how long does the terminated employee have to convert their group certificate to an individual policy? -90 days -31 days -45 days
-180 days - CORRECT ANSWER=> 31 days"
"Jake purchased group "credit disability" insurance to cover a loan. He was injured and disabled for 7 months. What benefits were paid under this policy?
"For an individual to be able to take a tax deduction for individual contributions to a group medical plan, his medical expenses must exceed what percentage of his adjusted gross income? -7.0% -6.5% -7.5%
-5.5% - CORRECT ANSWER=> 7.5%"
"Which of the following would NOT be considered important when choosing the proper health insurance program? -Will I be able to deduct the premium payments from my taxes? -Is coverage available from a group plan or social insurance program? -Is the coverage for a family, individual, or business?
-What are the deductibles and coinsurance? - CORRECT ANSWER=> Will I be able to deduct the
premium payments from my taxes?" "Cafeteria plans are also known as? -Section 125 plans -Flexible plans -Menu plans
-Section 1040 plans - CORRECT ANSWER=> Section 125 plans"
"Which of the following is a TRUE statement regarding premiums and benefits for business overhead insurance? -Both premiums and benefits are tax-deductible -Both premiums and benefits are taxable -Premiums-tax-deductible, Benefits-taxable
-Premiums-taxable, Benefits-tax-deductible - CORRECT ANSWER=> Premiums-tax-deductible, Benefits-
taxable" "All of the following are examples of how disability insurance is used for business continuation, EXCEPT? -Business overhead expense -Key person disability -Employee disability
-Disability buy-out - CORRECT ANSWER=> Employee disability"
"Why were Cafeteria Plans designed? -Provide insurer greater control over benefits selected for employees -Allow employees to pick and choose from a menu of benefits to tailor their own benefit package -Allow employers to pick and choose benefits from a menu that best suits their company needs
-Provide diversity of insurance company and HMO - CORRECT ANSWER=> Allow employees to pick and
choose from a menu of benefits to tailor their own benefit package" "Which of the following will NOT be covered under Business Overhead Expense Insurance? -Leased equipment
-Mortgage payments -Owner's salary
-Employees' salaries - CORRECT ANSWER=> Owner's salary (Explanation:
Business Overhead Expense insurance is designed to reimburse a business for overhead expenses in the event a businessowner becomes disabled.)" "As compared to individual disability income policies, group disability income policies are generally? -More costly and have less liberal provisions -Tied more closely to Social Security disability benefits -Less costly and have more liberal provisions
-More restrictive in terms of covered medical expenses - CORRECT ANSWER=> Less costly and have
more liberal provisions" "What is the typical maximum coverage provided to an individual by a group disability income insurance policy? -100% of pre-disability gross earnings -60% of pre-disability gross earnings -75% of pre-disability gross earnings
-50% of pre-disability gross earnings - CORRECT ANSWER=> 60% of pre-disability gross earnings"
"Which of the following is NOT a reform provided by the new Health Care Reform Act? -Companies cannot deny pre-existing conditions -Children can stay on parent's insurance plans until age 26 -There will be a fine for those who do not purchase health insurance
-Illegal immigrants now eligible for Medicaid - CORRECT ANSWER=> Illegal immigrants now eligible for
Medicaid" "All of the following are considered "rights of ownership" for a life insurance policy, EXCEPT? -Right to change irrevocable beneficiary -Right to assign ownership of the policy to someone else -Right to cancel the policy and select a nonforfeiture option
-Right to select how the death proceeds will be paid - CORRECT ANSWER=> Right to change
irrevocable beneficiary" "When someone other than the insured is the owner of a life insurance policy, the owner may do all of the following without consent of the insured, EXCEPT? -Change the beneficiary -Take out a policy loan -Increase the amount of insurance
-Surrender the policy for its cash value - CORRECT ANSWER=> Increase the amount of insurance"
"Group health insurance is generally written on a basis that provides for dividends or experience rating. What is the basis called? -Participating
-Both at the time of application and time of claim -At the time of a claim
-At the time of application - CORRECT ANSWER=> At the time of application (Explanation:
Insurable interest for health insurance is the same as for life insurance. Insurable interest must exist at the time of application.)" "All of the following are used in underwriting an applicant's health application, EXCEPT? -Parents ages -Weight -Age
-Sex - CORRECT ANSWER=> Parents ages"
"Who is the one that determines the classification of an applicant for health insurance? -Underwriter -Agent -Risk manager
-Actuary - CORRECT ANSWER=> Underwriter"
"All of the following are techniques commonly used by insurers in issuing health insurance policies to substandard risks, EXCEPT? -Add a waiting period of 6 months -Charge extra premium -Attach exclusion or impairment rider or waiver
-Limit the type of policy - CORRECT ANSWER=> Add a waiting period of 6 months"
"All of the following are classifications of applicants for health insurance, EXCEPT? -Standard risk -Preferred risk -Special risk
-Substandard risk - CORRECT ANSWER=> Special risk (Explanation:
The classifications of applicants for health insurance are: preferred risk, standard risk, substandard risk and uninsurable risk.)" "When an insured holds more than one occupation, and occupation is used to classify the risk, what occupation will the insurer generally use to classify the insured? -Occupation that would produce the lowest premium -Occupation where insured spends the majority of hours -Occupation insured has been employed the longest
-Occupation that is most hazardous - CORRECT ANSWER=> Occupation that is most hazardous"
"Which of the following is NOT a factor affecting health insurance premiums? -Marital status -Sex -Age
-Hobbies - CORRECT ANSWER=> Marital status"
"With all other factors being equal, who of the following would have the highest premiums for a health insurance policy? -25 year old female -45 year old male -25 year old male
-45 year old female - CORRECT ANSWER=> 45 year old female (Explanation:
Health insurance costs tend to increase as the age of the insured increases. The older the insured, the higher the applicable premium rate. Disabilities among women under the age of 55, on the average, have a greater frequency and longer duration than among men, so female premium rates for certain coverages are higher than premium rates for males.)" "Both life and health insurance use all of the following factors in determine premiums, EXCEPT? -Interest factor -Expense factor -Morbidity
-Age - CORRECT ANSWER=> Morbidity"
"An insurer authorized to do business within this state is considered what type of insurer? A) Foreign B) Domestic C) Admitted
D) Certified - CORRECT ANSWER=> Admitted
(An insurer authorized to do business in this state is referred to as admitted, and could be either domestic, foreign, or alien domiciled.)" "Charging different rates or providing different benefits to insureds of the same actuarial class or hazard category is which of the following? A) Sliding B) Unfair discrimination C) Fictitious grouping
D) Defamation - CORRECT ANSWER=> Unfair discrimination
(Unfair discrimination is knowingly making or permitting individuals of the same actuarially supportable class and equal expectation of life to be charged different rates, paid different dividends or have different terms/conditions regarding any life insurance contract.)" "A bank or credit union will not give a loan unless the borrower buys insurance from a specific company. This is known as? A) Misrepresentation B) Rebating C) Churning
