Free New York Life & Health Insurance License Practice Test

Correct answer: She is totally disabled and receives the full monthly benefit

Under an own-occupation definition, inability to perform the material and substantial duties of one's own occupation is total disability, regardless of earnings from a different occupation. The dentist cannot practice dentistry, so she is totally disabled.

From the free practice set Disability classifications: total, partial, recurrent, and residual

Correct answer: The employer's payroll and the job classification of the work

Workers' compensation premium is computed on the employer's payroll and the classification of the work performed, then adjusted for the employer's own loss record through experience rating.

From the free practice set Workers' compensation

Correct answer: It provides protection for a specified period and pays only if the insured dies during that period.

Term insurance is temporary protection for a specified period, such as one year, a set number of years, or to a stated age. The insurer pays the face amount only if the insured dies within that period; if the insured outlives it, no benefit is payable.

From the free practice set Term life insurance types

Correct answer: Lowering the premium stated in the consideration clause by written notice

The owner controls the contract through the rights it grants: changing a revocable beneficiary, assigning, borrowing, surrendering, and choosing nonforfeiture, dividend and settlement options. The owner cannot rewrite the contract's terms; any modification requires a writing signed by a person the insurer specifies.

From the free practice set Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Correct answer: 60 days

The election period is at least 60 days, measured from the later of the date coverage would be lost or the date the election notice is provided.

From the free practice set Group health insurance and COBRA

Correct answer: The employer stops maintaining any group health plan for its employees

COBRA may end early if the employer ceases to maintain any group health plan, if premiums are not paid on time, or if the beneficiary later becomes covered under another group plan or entitled to Medicare. Moving within a nationwide plan's network, a change of insurers, or mere eligibility for another group plan does not end it.

From the free practice set Group health insurance and COBRA

Correct answer: As if the portion providing long-term care coverage were a separate contract

For long-term care coverage provided by a rider on, or as part of, a life insurance or annuity contract, the tax rules apply as if the portion providing that coverage were a separate contract.

From the free practice set Individual and group long-term care insurance

Correct answer: It must sell her any Medigap plan it offers and cannot charge more because of her health

August is within the six-month open enrollment period that began in May, so the insurer cannot refuse her or charge more for health. At most, a limited pre-existing waiting period could apply if she lacks creditable coverage.

From the free practice set Medicare supplement policies

Correct answer: Private and group

Private plans are sold by insurers, HMOs and similar carriers. Coverage bought by an employer for its employees under one contract is group coverage.

From the free practice set Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Correct answer: To pay for extended care caused by chronic illness, disability, or cognitive impairment, and to protect savings

Long-term care insurance pays for help with daily living needed over a long period because of chronic illness, disability, or cognitive impairment, filling the gap left by health insurance and Medicare and protecting savings.

From the free practice set Individual and group long-term care insurance

Correct answer: $6,000

His loss is ($12,000 - $3,000) / $12,000 = 75%. Because the rider treats a loss of 75% or more as total disability, he receives the full $6,000 benefit rather than a proportional $4,500.

From the free practice set Disability classifications: total, partial, recurrent, and residual

Correct answer: 18, measured at the time the license is issued

Section 2103(d) requires every individual applicant and every proposed sub-licensee to be eighteen years of age or over at the time the license is issued.

From the free practice set New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

Correct answer: Yes, because he has not reached age 30 before the start of the plan year

A catastrophic plan may be offered only to individuals who have not attained age 30 before the beginning of the plan year, or who hold a certified exemption for unaffordable coverage or hardship. Catastrophic plans may only be offered in the individual market. Marcus is 28 and buying individually, so he qualifies.

From the free practice set ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Correct answer: cannot perform activities of daily living or has a cognitive impairment

Long-term care coverage pays for extended custodial, intermediate or skilled care when the insured cannot perform activities of daily living or has a cognitive impairment.

From the free practice set Accident and health basics: perils, types of losses and benefits, classes of coverage, and common exclusions

Correct answer: The six months beginning with the first month the person is both 65 or older and enrolled in Part B

The federal Medigap open enrollment period is six months long and begins with the first month the person is both at least 65 and enrolled in Part B. During it, insurers cannot refuse or rate up for health.

From the free practice set Medicare supplement policies

Correct answer: A large, financially qualified employer approved by the state

Self-insurance is available to a large, financially qualified employer that the state approves; it then pays claims from its own funds instead of buying a policy.

From the free practice set Workers' compensation

Correct answer: Residual: reduced earnings after returning to work

Residual disability is triggered by a loss of income after a return to work. The other pairings mismatch partial, recurrent and total disability with each other's triggers.

From the free practice set Disability classifications: total, partial, recurrent, and residual

Correct answer: Last in, first out, with gain coming out first

Living distributions from a MEC, including policy loans, are taxed last in, first out: gain comes out first as ordinary income before any tax-free return of basis.

From the free practice set Tax treatment of life insurance premiums, proceeds, and MECs

Correct answer: Basic plans give first-dollar coverage with low limits, while major medical gives broad, high-limit coverage with cost sharing

The defining contrast: basic plans pay early with little cost sharing but cap out at low limits; major medical asks the insured to share costs but provides broad, high-limit protection.

From the free practice set Basic and major medical expense insurance

Correct answer: The policy is not voided automatically for an inaccuracy; only a material misrepresentation could affect it

Section 3204(c) deems applicant statements representations, not warranties. A warranty would have to be exactly true, so any error could void the contract. Under the standard treatment of representations, only a misrepresentation that is material, meaning it would have changed the insurer's decision, can affect the policy.

From the free practice set Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Correct answer: It is not covered, because the 10-day grace period had ended and the policy had lapsed

This monthly-premium policy grants only the 10-day minimum grace period; by the 20th that period had ended with the premium unpaid, so the policy had lapsed.

From the free practice set Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

Correct answer: 36 months

Divorce or legal separation from the covered employee is a qualifying event for the spouse, carrying up to 36 months of continuation coverage.

From the free practice set Group health insurance and COBRA

Correct answer: Pays the outstanding loan balance, up to the policy maximum, to retire the debt

Credit life is term coverage, usually written on a group basis to the creditor, that pays the outstanding balance of the debt at the borrower's death, subject to policy maximums. Because the loan is being paid down, the coverage follows a decreasing balance.

From the free practice set Term life insurance types

Correct answer: Seven days is shorter than the required minimum of ten days from delivery

Section 3203(a)(11) requires a free look period of not less than ten days nor more than thirty days from delivery, and the provision must appear in the policy or an attached notice. Seven days falls short of the minimum.

From the free practice set Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Correct answer: $600

The benefit is capped at $60 per visit and 10 visits. $60 times 10 equals $600; the insured pays the rest.

From the free practice set Basic and major medical expense insurance

Correct answer: Coverage must be provided without any prior authorization requirement

A qualified health plan must cover emergency department services without imposing any prior authorization requirement, and may not limit out-of-network emergency coverage more restrictively than in-network coverage.

From the free practice set ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Correct answer: Lightning and the fire it caused

The peril is the cause of loss. Here lightning, and the fire it started, caused the destruction. The dry hay is a hazard that increased severity, and the destroyed barn is the loss.

From the free practice set Risk, exposure, hazard, peril, and loss, and the methods of handling risk

Correct answer: Part A hospice care coinsurance or copayments

In 2010 the at-home recovery benefit was eliminated and a new hospice care benefit was added as a basic benefit in every Medigap plan. The preventive care benefit was also eliminated.

From the free practice set Medicare supplement policies

Correct answer: She is barred for the same one-year period unless the Superintendent finds, after notice and a hearing, that she was not personally at fault

Section 2110(e)(2) provides that when a firm's, association's or corporation's license is revoked, no member, officer or director may obtain any license, or be named as a sub-licensee, for the same one-year period, unless the Superintendent determines after notice and hearing that the person was not personally at fault.

From the free practice set New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

Correct answer: The process an insurer uses to decide whether it can accept an application and, if so, on what basis, so the proper premium is charged

Underwriting is the process by which a life insurer determines whether it can accept an application for life insurance and, if so, on what basis, so that the proper premium is charged. The underwriter reviews the application and decides whether the applicant is acceptable and at what premium rate.

From the free practice set Underwriting: insurable interest, medical information, and risk classification

Correct answer: 26

A group health plan or insurer offering group or individual coverage that provides dependent coverage of children must continue to make it available for an adult child until the child turns 26. The plan need not cover that child's own children.

From the free practice set ACA market reforms: preexisting conditions, annual and lifetime limits, essential health benefits, and medical loss ratio

Correct answer: Term and permanent

For the most part, life insurance plans are either term or permanent, or a combination of the two. Term is temporary protection; permanent insurance lasts for life and builds cash value.

From the free practice set Term life insurance types

Correct answer: The completed application and payment of the initial premium

The applicant's consideration is the completed application together with the initial premium. The insurer's consideration is its promise to pay. Later premiums are conditions for keeping the policy in force, not the consideration for the contract.

From the free practice set Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Correct answer: The insured is terminally or chronically ill

Viatical settlement is the traditional name for a settlement where the insured is terminally or chronically ill, often with a short life expectancy.

From the free practice set Life settlements

Correct answer: Preferred

Preferred classes are for applicants whose health and habits are better than average, and they receive rates lower than standard. Non-tobacco use is often a key preferred criterion.

From the free practice set Underwriting: insurable interest, medical information, and risk classification

Correct answer: Liquidation phase

The payout phase, also called the annuity or liquidation phase, is when the owner has annuitized and the value is paid out as income.

From the free practice set The annuity principle

Correct answer: It meets the requirements of Internal Revenue Code section 401(a)

A plan is qualified when it, and the trust that holds its assets, meet the requirements of IRC section 401(a). Meeting those requirements is what unlocks the plan's tax advantages.

From the free practice set Qualified and nonqualified retirement plans

Correct answer: As a rider, such as a cost of living rider, attached to a base policy

Increasing term, whose death benefit grows by a fixed amount or percentage, is most often added as a rider, such as a cost of living rider or a return of premium rider, rather than sold on its own.

From the free practice set Term life insurance types

Correct answer: File written comments with the Superintendent within 30 days, sending a copy to the insurer, and the comments become part of her file

Section 2112(f)(2) lets the producer, within thirty days after receiving the notification, file written comments on its substance with the Superintendent, sending a copy to the reporting insurer at the same time. The comments become part of the Superintendent's file and travel with every copy of the report.

From the free practice set New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

Correct answer: It terminates immediately along with the corporation's license

Section 2110(d) provides that revoking or suspending a producer's license terminates forthwith that license and the authority it conferred on all sub-licensees. A sub-licensee acts only in the licensee's name, so when the entity's license ends, so does the sub-licensee's authority.

From the free practice set New York producer licensing: process, definitions, and license types (Ins. Law 2101-2109, 2136)

Correct answer: It is excluded from gross income under the exclusion ratio

Under 26 U.S.C. § 72(b)(1), the portion of each annuity payment that bears the same ratio to the payment as the investment in the contract bears to the expected return is excluded from gross income. That is the return of principal; the interest and survivorship portion is taxable.

From the free practice set The annuity principle

Correct answer: Both annuitants have died

A joint and survivor annuity has two annuitants, usually spouses, and payments continue until the death of both. The survivor's payment may continue at 100% or be reduced, for example to 50%, 66.67% or 75%.

From the free practice set The annuity principle

Correct answer: A Type B charitable, educational or religious corporation formed under the not-for-profit corporation law

Notwithstanding the general rules, a Type B charitable, educational or religious corporation formed under the not-for-profit corporation law, or its agent, may procure a life policy on another person and designate itself as beneficiary.

From the free practice set Underwriting: insurable interest, medical information, and risk classification

Correct answer: An assisted living facility

Assisted living facilities combine a residence with help with activities of daily living and supervision, with less medical care than a nursing home.

From the free practice set Individual and group long-term care insurance

Correct answer: Stop-loss limit

The out-of-pocket maximum is also called the stop-loss limit because it stops the insured's share of covered costs at a set amount.

From the free practice set Basic and major medical expense insurance

Correct answer: To keep someone who is already ill from reinstating just to have that illness covered

The standard reinstatement provision's 10-day sickness waiting period guards against adverse selection: a person who lets a policy lapse and then feels ill could otherwise reinstate just to cover that illness. Accidents cannot be anticipated the same way.

From the free practice set Mandatory provisions I: entire contract, incontestability, grace period, reinstatement

Correct answer: Life insurance creates an estate, while an annuity liquidates one

Life insurance creates an immediate estate at death for survivors. An annuity systematically liquidates an estate, paying out principal and interest over a period, often the annuitant's lifetime.

From the free practice set The annuity principle

Correct answer: risk sharing

Sharing spreads the cost of a loss among members of a group so each bears a portion. The partners split any judgment, which is sharing.

From the free practice set Risk, exposure, hazard, peril, and loss, and the methods of handling risk

Correct answer: In the policy or in a notice attached to it

Section 3203(a)(11) requires that a provision granting the free look right appear in the policy or in a notice attached to it.

From the free practice set Core contract provisions: entire contract, insuring clause, free look, consideration, owner's rights

Correct answer: A group life insurance policy

The consent requirement applies to every contract of insurance on a person except group life, group or blanket accident and health, and family insurance, and except for a spouse insuring a spouse or insurance on a young minor.

From the free practice set Underwriting: insurable interest, medical information, and risk classification