FInal Exam: California Life, Accident, and Health Insurance Correct and Verified Answers Graded A

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FInal Exam: California Life, Accident,

and Health Insurance Correct and Verified Answers Graded A

• What is reinsurance?

Correct Answer: An arrangement by which an insurance company transfers a portion of a risk it has assumed to another insurer.

• An insurer enters into a contract with a third party to insure itself against losses

from insurance policies it issues. What is the agreement called?

• Co-insurance
• Reinsurance
• Indemnity contract
• Dual coverage

Correct Answer: B) Reinsurance

3. An insured owned by its policyholders is called a:

• Stock insurer
• Mutual insurer
• Fraternal benefit society
• Reciprocal insurer

Correct Answer: B) Mutual insurer

• Which of the following statements regarding a life insurance policy dividend is

TRUE?

• It is guaranteed every year.
• It is taxable as ordinary income.

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• It is the distribution of excess of funds accumulated by the insurer on participating

policies.

• It is only paid out upon the death of the insured.

Correct Answer: C) It is the distribution of excess of funds accumulated by the insurer on participating policies.

• Victoria owns a life annuity and elects to receive annuity payments monthly for the

remainder of her life with "ten years certain". Her annuity will make payments:

• for exactly 120 months.
• for a minimum of 120 months and a maximum of the remainder of her life.
• until her death, at which point all payments stop regardless of time.
• for 10 years, and then strictly out of her premium deposits.

Correct Answer: B) for a minimum of 120 months and a maximum of the remainder of her life.

• What is a joint and survivor annuity?

Correct Answer: Provides payments the annuity to two people. If either person dies, the same income payments continue to the survivor for life. When the surviving annuitant dies, no further payments are made to anyone.

• What kind of annuity pays income to two annuitants until their deaths?
• Period certain annuity
• Fixed life annuity
• Joint and survivor annuity
• Deferred annuity

Correct Answer: C) Joint and survivor annuity

• What is a common reason people purchase an annuity?
• To maximize short-term capital gains
• To protect against the risk of outliving their financial resources
• To secure a tax-free death benefit for heirs
• To cover immediate medical expenses

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Correct Answer: B) To protect against the risk of outliving their financial resources

• Cindy buys a 10-year certain annuity with an installment refund. After receiving

monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary?

• 0 payments
• 60 payments
• 120 payments
• It depends on the cash value

Correct Answer: B) 60 payments

• What distinguishes a deferred annuity from an immediate annuity?
• The interest rate applied to the principal
• The tax treatment of the withdrawals
• The time at which benefit payments start
• The number of annuitants on the policy

Correct Answer: C) The time at which benefit payments start

• Which of the following is NOT a characteristic of reinsurance?
• It helps spread the risk.
• It protects against catastrophic losses.
• Increases the unearned premium reserve.
• It enables insurers to underwrite larger policies.

Correct Answer: C) Increases the unearned premium reserve.

• Which of the following is a contract that involves one party which indemnifies

another when a loss arises from an unknown event?

• Warranty
• Insurance policy
• Investment vehicle
• Guaranty bond

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Correct Answer: B) Insurance policy

• What is an insurance policy?

Correct Answer: A contract where one party promises to indemnify another against loss that arises from an unknown event.

• What is residual disability income insurance payments based on?
• A flat monthly fee defined in the policy
• The amount of the insured's income is reduced by the disability
• The total medical expenses incurred
• The length of the elimination period

Correct Answer: B) The amount of the insured's income is reduced by the disability

• Manuel is considered to be a disabled person as defined by the Americans with

Disabilities Act (ADA). As such, he is unable to perform any of the following life

activities EXCEPT:

• Walking
• Breathing
• Driving
• Learning

Correct Answer: C) Driving

• Which of the following is NOT a provision in a disability income policy?
• Elimination period
• Waiver of premium
• Deductible and coinsurance provision
• Benefit period

Correct Answer: C) Deductible and coinsurance provision

• Which of these statements is NOT true concerning recurrent disabilities?
• They are considered a continuation of a prior disability.
• The insurer continues coverage after a new elimination period.