CALIFORNIA LIFE, ACCIDENT AND HEALTH

YOU MUST READ THIS FILE BEFORE YOUR EXAM!!!

KEY FACTS - 2015

Important Note: You must know every one of the key facts and practice exam questions included
in this handout as there is a high probability they will be on your exam. Make sure to read this key
facts sheet multiple times and take it with you to the test site to re-read three times just prior to
taking your exam. Good luck!!

 On a replacing long term care policy the commission will be calculated based on the difference
between the annual premium of the replacement policy and the original policy.

 An agent, broker, or other person who contacts a consumer as a result of receiving information
generated by a cold lead device, shall immediately disclose that fact to the consumer.

 Under Part A of Medicare it is the provider who submits the claim.

 Adult day care coverage in a Long Term Care policy will cover part time care in a facility for a
person who lives at home.

 A group contract is between the insurer and the employer.

 A Keogh plan is a retirement plan for those who are self employed.

 An "Illustration" is a presentation or depiction that includes nonguaranteed elements of a policy of

life insurance over a period of years.

 In a life insurance policy illustration "non-guaranteed elements" means the premiums, benefits,
values, credits or charges under a policy of life insurance that are not guaranteed or not determined at
issue.

 A stock redemption buy/sell agreement facilitates the purchase of a deceased shareholder’s shares
from the shareholder’s heirs by a corporation.

 A widow or widower without children would be eligible for Social Security survivors benefits at age
60.

 If a senior has purchased an annuity which is invested in a mutual fund and they cancel during the
free look the CIC requires they be refunded the value of the account.

 Medicare will send out a Medicare Summary Notice (previously known as the Explanation of
Medicare Benefits) each quarter which details the services which were provided under Part A and B,

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if they were covered, and how much they were covered for. The Medicare Summary Notice is not a
bill. Money due will be billed directly by the provider who performed the services.

 Every Qualified Long Term Care policy sold in California must state the following on the first page
of the policy: "This contract for long-term care insurance is intended to be a federally qualified long-
term care insurance contract and may qualify you for federal and state tax benefits."

 The free look notice for seniors must be printed in no less than 10-point uppercase type, on the cover
page of the policy or certificate and the outline of coverage.

 A collateral assignment can be utilized to obtain a loan.

 If a policy loan is outstanding when the insured dies and the beneficiary selects the fixed period
settlement option the outstanding loan will effect the amount of the payments received, NOT the
length they are received for.

 An equity indexed annuity has a fixed minimum interest rate, and the chance to get a higher rate of
return like that of the stock market.

 A Modified Endowment Contract has a 10% IRS early withdrawal penalty.

 The agent’s commission comes from the insurer expenses portion of the premium charged.

 Life Insurance policy illustration regulations were NOT created to eliminate disclosure.

 The CIC defines Insurance as a contract whereby one undertakes to indemnify another against loss,
damage, or liability arising from a contingent or unknown event.

 An outline of coverage shall be delivered to a prospective applicant for long-term care insurance at
the time of initial solicitation.

 A joint life policy covers multiple lives and pays out when the first insured dies.

 In addition to completing the pre-licensing requirement Life Agent, Fire & Casualty broker-agents
and Personal Lines agents must also complete a 12-hour Ethics and Code course.

 In a non-contributory group disability income policy any policy benefits paid would be included in
the employee’s gross income (be taxable).

 If an insurance agent hires a website designer to create a website it is the insurance agent who is
responsible for the content of the website.

 The “exclusion ratio” is the formula used to determine the amount of annuity distribution which is
taxable.

 The insured can change the beneficiary anytime if they are revocable.

 Coordination of benefits is a provision which would prevent a family from collecting for the same
loss twice in a group plan.

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 A representation may be altered or withdrawn before the insurance is effected, but not afterwards.

 With regard to long-term care insurance, all insurers, brokers, agents, and others engaged in the
business of insurance owe a policyholder or a prospective policyholder a duty of honesty, and a duty
of good faith and fair dealing.

 If the premium for a group disability income policy is fully paid by the employee benefits would be
excluded from the employee’s gross income (not taxable).

 In life insurance insurable interest must exist when a policy is first issued.

 In life insurance, the measure of liability is the sum or sums payable as provided in the policy to the
person entitled thereto.

 The Insurance Commissioner shall be elected by the people in the same time, place and manner as the
Governor.

 Under the CIC all advertisements, policies and certificates of term life insurance sold to those age 55
and older must include a term life insurance monetary value index, which is similar to the Life
Insurance Surrender Cost Index. In developing a term life insurance monetary value index, the
commissioner shall consider actual premiums and policy and certificate benefits and the manner in
which they are affected with the passage of time. Any term life insurance monetary value index
developed pursuant to this section shall assume an insured's desire to retain coverage for at least 10
years.

 Term life insurance directed to individuals 55 years of age or older must prominently disclose any
change in premium resulting from the aging of the insured, policy duration, or any other factor. If the
insurer retains any right to modify premiums in the future, that fact shall also be disclosed.

 The Social Security Blackout period is a period of time when surviving family members are NOT
eligible for Social Security survivors benefits (survivors benefits stop during this period).

 The Social Security Blackout period begins when the youngest child reaches age 16.

 The Social Security Blackout period ends when the surviving spouse reaches age 60.

 Social Security full retirement age is based upon the year in which you were born.

 Retirement benefits under Social Security are only available to workers who are fully insured.

 An Employee Stock Ownership Program (ESOP) is a qualified, defined contribution, employee

benefit plan designed to invest primarily in the stock of the sponsoring employer.

 A profit sharing plan is a plan that gives employees a share in the profits of the company. Each
employee receives a percentage of those profits based on the company’s earnings.

 A speculative risk is a risk situation that includes a chance of loss and a potential for gain.
Speculative risks are not insurable.

 The premium is the amount the insured pays the insurer for the coverage provided.

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 The Law of Large Numbers states the more similar risks the insurance company combines together
the better they can guess approximately how many losses they will have in a given time period.

 The Doctrine of Utmost Good Faith allows each party to rely on the representations made by the other
party.

 Life insurance companies are required to give the policyholder a minimum 10 day free look, unless
the policyholder is age 60 or older in which case they are considered a senior citizen and must receive
a 30 day minimum free look.

 In order to transact insurance (sell insurance) agents must hold at least one insurer appointment.

 A Tax Sheltered Annuity (TSA or 403-B) is a qualified plan created for public school employees and
non-profits.

 Roth IRAs have non-deductible contributions.

 Annuity death benefits are NOT tax deductible or tax free. Life insurance death benefits are tax free
however annuities are not life insurance. The beneficiary of an annuity death benefit would have to
pay ordinary income tax on any amount they receive over and above the cost basis (amount invested)
of the annuity owner.

 Divorce is a qualifying event under COBRA which will allow the employee to apply to continue their
coverage under the group plan.

 The Consolidated Omnibus Reconciliation Act (COBRA) requires employers with 20 or more
employees offer health insurance continuation to employees and employees dependents who become
ineligible for coverage due to a qualifying event. If the employee elects continuation they are
responsible for paying the full premium for coverage and can only continue their coverage under the
group plan for a limited period of time.

 If a daughter needs a break from caring for her father her father may have coverage in his Long Term
Care policy that would pay for a caregiver to come in to give her a break. This coverage is called
respite care.

 An individual who needs terminal ill care would find this coverage provided in their Long Term Care
policy as hospice care.

 Long Term Care policies are underwritten on the applicant’s ability to care for themselves (Activities
of Daily Living), such as eating, bathing and transferring (moving around).

 There are three types of ordinary life insurance that you can remember using the acronym W-E-T
(Whole Life, Endowment, Term). Group insurance is not a type of ordinary life insurance.

 The insurance applicant is the individual who is applying to purchase insurance.

 Each authorized insurer is required to establish a division within the insurer to investigate fraudulent
claims.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

 Claims forms are required to include the following statement related to fraudulent claims: “Any
person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a
crime and may be subject to fines and confinement in state prison”.

 The waiting period included in disability income policies is also known as the elimination period.

 The period of time (30 days, 60 days, 90 days or 180 days) the insured is not eligible for benefits once
they become disabled is known as the waiting period.

 An individual that has contributed to Social Security 6 of the last 13 quarters who becomes disabled is
currently insured under the system.

 Bob works for Alpha insurance company and does things necessary to transact insurance that are not
specified in his contract. This is referred to as implied authority.

 If an annuitant selects the 10 year period certain annuity payout option it guarantees if they die within
the first 120 payments the remaining payments will be made to the beneficiary. However, the
annuitant will be paid as long as they live. Which could be substantially longer than 10 years.

 When an annuitant enters the payout period and annuitizes the contract the insurance company will
spread their cost basis (amount invested) over their lifespan. For example, if an annuitant had
invested $50,000 into the annuity (their cost basis) and the annuity account balance was now
$100,000 then the annuitant annuitized and was to receive payments of $4,000 per year they would
NOT have to pay tax on the first $2,000 they receive each year.

How is this figured? First, divide the total amount ($100,000) by $4,000 (the annual payments the
annuitant will receive) to find out the annuitants projected lifespan (25 years). Then divide their cost
basis ($50,000) by 25 years ($2,000). The first $2,000 of payments the annuitant receives each year
for the first 25 years is a return of their cost basis and is not taxable. Any amount over the $2,000
they receive each year is taxable as ordinary income. What happens if they live longer than 25 years?
The $4,000 per year will continue to be paid but will now be fully taxable since all of their cost basis
has been returned to them.

 If you no longer hold any insurer appointments your license is considered to be inactive.

 If an employer holds your license and wants to cancel it they are required to send written notice to the
commissioner.

 The Employees Retirement Income Security Act (ERISA) states that fiduciary pension plans were
created for the benefit of plan participants and beneficiaries.

 If a retirement plan includes a 7 year vesting schedule each employee must be vested 100% by the
end of the 7th year. Vesting means ownership of employer contributions.

 An insurance company based in Utah that is selling in California is a Foreign insurer in California.

 An insurance company that has enough reserves to pay for all its liabilities is referred to as a solvent
insurer.

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 The state insurance guarantee fund provides protection to policyholders whose insurer becomes
insolvent (financially impaired). This fund only covers member insurers (licensed insurance
companies).

 If an applicant has had a professional license revoked in the past 5 years the insurance commissioner
can deny their licensing application without a prior hearing.

 The insurance company that purchases reinsurance is referred to as the primary insurer (a.k.a. ceding
insurer).

 The waiver of premium rider will waive the insured’s premium if the insured becomes disabled.

 A disability income rider that is added to a life insurance policy will pay a replacement of the
insured’s lost income if they become disabled.

 The Accidental Death Benefit rider will pay double the face amount if the insured dies in an accident,
and is also known as double indemnity.

 An insured would name a contingent beneficiary to ensure where the policy proceeds will go if the
primary beneficiary dies prior to the insured.

 Extended term is a non-forfeiture option that provides a new term life insurance policy with the same
face amount of coverage as the original policy. Extended term is not a settlement option.

 A Settlement Options can be pre-determined by the owner of the policy prior to their death, but is
usually selected by the beneficiary upon the insured’s death.

 Policies issued by Mutual insurers pay dividends to policyholders. The dividend option is selected by
the policyholder on the insurance application.

 A non-participating policy owner will not receive dividends. Non-participating policies are issued by
stock insurers. Stock insurers pay dividends to stockholders, not policyholders.

 Dividends are declared by the board of directors and cannot be guaranteed.

 The conversion feature allows an employee to go from group coverage to an individual policy.

 A family policy provides life insurance for an entire family and allows the children to convert from
term to whole life coverage without a physical exam.

 A Hospital confinement policy will pay a set amount per day if the insured is confined in the hospital.

 A corridor deductible applies in a major medical policy between the basic and excess coverage.

 Major Medical policies include a deductible, coinsurance and a stop loss. First dollar coverage is
NOT a feature of Major Medical.

 A capitation fee is a per head (capitation) fee that is paid to doctors that treat subscribers of HMO’s.
A capitation fee is NOT a feature of Major Medical.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

 A stop loss is the maximum the insured would have to pay of the coinsurance.

 Coinsurance is a feature of major medical insurance and is defined as a sharing of the loss after the
deductible has been satisfied. Coinsurance is usually expressed as a percentage sharing of the loss
between the insurer and the insured, with the insurer paying the larger percentage, such as 90/10.

 Co-payments are included in HMO and PPO plans and are a fixed amount the subscriber must pay
when they go to the doctor.

 A gatekeeper (Primary Care Physician) cannot be a specialist, they must be a general practice doctor.

 If an employee wants to enroll without any restrictions they would enroll during the eligibility period
(open enrollment period).

 A group contract where the employer pays 100% of the premium is referred to as a non-contributory
group plan.

 A Multiple Employer Trust is a trust that small employers join to purchase health insurance.

 If an individual increases their insurance policy limits they are NOT eliminating their risk, they are
transferring more of their risk.

 Social Security has the hardest definition of total disability to meet.

 Medicare Part C does NOT cover prescription drugs. Medicare Part D covers prescription drugs.

 Medicare Part A provides coverage for hospital services and is free to those eligible once they reach
age 65.

 Medicare Part B is optional and if an eligible individual enrolls they must pay a monthly premium for
the coverage. Part B of Medicare provides coverage for doctors services.

 Medicare supplement companies can offer whatever plans they wish as long as they offer at least Plan
A. They are not required to offer all 12 plans (A-L).

 A specified disease policy is a policy that covers only certain dread diseases such as cancer insurance.

 Preferred risks receive the lowest premium charges as they pose the lowest risk to the insurer.

 An insurance binder always creates immediate coverage which is the main difference between a
binder and a conditional receipt.

 The incontestability clause states that after a life insurance policy has been in effect for 2 years it
becomes totally incontestable. This is very restrictive for the insurer and prevents them from
contesting a claim for any reason after 2 years.

 Replacement is when you replace your customer’s current policy with a new one and is NOT illegal.
However, you would NOT replace your customer’s policy if the new policy is worse and the premium
is higher. This would be considered twisting and is illegal.

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 A captive insurer is an insurer created by a corporation to insure its own risks.

 If a company decides to self insure this decision would not have any impact on claims severity.

 An occupational disability income policy provides coverage on and off the job.

 Workers Compensation laws require the employer to be responsible for employee injury on the job
regardless of fault.

 The entire contract clause states the application is part of the contract if attached when issued.

 Under Social Security in order to receive total disability benefits the disability must be expected to
last at least 12 months or end in death.

 Under Coordination of Benefits the coverage you have where you work is considered to be primary.

 HMO’s stress preventative medicine.

 Some health insurance policies include deductibles. Deductibles are paid by the insured. The higher
the deductible the lower the premium.

 A guaranteed renewable health insurance policy would have the highest premium.

 Guaranteed renewable health insurance policies cannot be changed except by class.

 If an insured wants to sell their life insurance policy to an investor (viatical/life settlement) they can
do so by requesting an absolute assignment.

 An absolute assignment is a permanent transfer of ownership rights.

 In California Life only, Health only, Property only and/or Casualty only insurance licensees must
complete 24 hours of continuing education each license renewal period (2 years). The 24 hour per
licensing period requirement is the same regardless of the number of licenses held.

 Agents who sell Long Term Care are required to complete Long Term Care specific continuing
education within the core requirement, not in addition.

 Agents who sell Long Term Care are NOT required to take an exam on the topic every 10 years.

 An insurance company that is based in Canada and doing business in California is a alien insurer.

 The doctrine of utmost good faith states that all parties to the contract can rely upon the statement of
the other party.

 Concealment is when a party fails to communicate that which a party knows, and ought to
communicate, so that the other party may make a sound decision.

 Employees that are covered under a group policy receive certificates of insurance as their proof of
coverage.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

 Purchasing life insurance to fund a buy/sell agreement is a business use of life insurance NOT a
personal use.

 Key person life insurance is used by a business to protect themselves in case a valued employee dies.
The death benefit would be paid to the company to hire and train a replacement.

 In a contributory group policy the premium is shared between the employer and employee. The
employee contributes toward the premium.

 The disability income coverage under Social Security was created to provide a minimum floor of
income in case of total disability. It was NOT created to provide a full replacement of lost income.

 Most workers contribute to Social Security through taxes levied on their earnings. Benefits are based
on contributions, but are NOT equal to contributions.

 The underwriting division within the insurance company selects which risks the insurer will take on.

 Decreasing term life insurance (aka – mortgage redemption insurance) is often used to pay off an
outstanding mortgage upon death of the borrower.

 If a payor benefit rider is added to a juvenile life policy it will waive the premium for the policy until
the child reaches a certain age (often 21) if the parent dies.

 Variable insurance products are regulated by the state department of insurance and the Securities and
Exchange Commission (SEC) since they are considered to meet the definition of a securities product.

 If a rider is added to a cash value life insurance policy the extra premium paid for the rider will NOT
apply toward the cash value.

 If an insured purchases a cost of living rider this rider will automatically increase their policy limits
tied to the consumer price index. However, if the policy limit increases, so will the underlying
premium.

 The misstatement of age clause allows the insurance company to adjust the face amount at the time of
death to what the premium the insured paid would have purchased them had they told the truth about
their age when they purchased the policy.

 In California senior citizens are those age 60 and older. Senior citizens who buy life insurance are
required to receive a 30 day minimum free look. People under age 60 who buy life insurance are
required to receive a minimum 10 day free look.

 The common disaster clause applies when both the insured and primary beneficiary die as a result of
the same accident. It states that the primary beneficiary always dies first and protects the interest of
the contingent beneficiary.

 The reduced paid-up non-forfeiture option will provide a new whole life policy with a reduced face
amount of protection.

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 A subscriber of an HMO could receive emergency medical attention without prior authorization of
their primary care physician (gatekeeper).

 Health Maintenance Organizations are NOT required to provide coverage for prescriptions drugs.

 A morbidity table contains statistical data relating to the probability of a sickness or disability
occurring. A mortality table contains statistical data relating to the probability of death.

 A period of time that excludes coverage for prior medical conditions that begins when a health
insurance policy is brand new is known as a probationary period or pre-existing condition exclusion.

 Disability insurers have to eliminate applications that seem likely to have losses much more
frequently or much more severely than what the insurer’s rates anticipate. This is the underwriter’s
responsibility.

 The location of the group would NOT be a factor in determining premiums charged for group
disability income.

 The any occupation definition in disability income states the insured must be unable to perform any
job they are suited to do by prior training, experience or education.

 Intentional injuries are NOT covered by health insurance.

 The return of premium rider that can be added to a disability income policy will provide a return of a
percentage of premiums paid at periodic intervals, provided the insured remains disabled.

 Under the California Insurance Code (CIC) life insurance agents CANNOT issue binders.

 If an organization terminates a key employee the organization will still be eligible to hold a license as
their organization will be unaffected.

 If the insurance Commissioner issues a Notice of Seizure for documents and the agent fails to
produce the documents they would be subject to up to 1 year in jail and/or a $1,000 fine.

 Agents who receive commission related to premium financing must keep their records for three years.

 Financial loss exposure is NOT one of the three major types of loss exposures.

 Hospice care is care for the terminally ill and is covered by most Long Term Care policies. Hospice
care would NOT cover costs associated with rehabilitation.

 There are six main Activities of Daily Living that trigger coverage on Long Term Care policies.

 If an agent issues a binder for a company they are not appointed by the commissioner can suspend or
revoke the agent’s license.

 Money invested in variable annuities is held in the insurance companies separate account.

 Upon the death of a licensed agent their license will terminate.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

 Convalescence is NOT a level of care for which benefits are paid on a LTC policy.

 Under the CIC if an applicant enters a plea of “nolo contendere” they will be convicted. Nolo
contendere is Latin for no contest.

 The spendthrift clause protects the policy proceeds from the creditors of the beneficiary. However,
the spendthrift clause will not apply if the proceeds are paid out in a lump sum.

 An insurer organized in California and selling in California is considered to be a domestic insurer in

California.

 Mutual insurers are owned by policyholders.

 When replacing a policy the agent is NOT required to send a copy of the replacement notice to the
existing insurer. The new insurance company will provide notice to the existing insurer.

 ERISA is the Federal law that is designed to protect group plan participants, establish pension
equality and mandate strict reporting and disclosure requirements.

 If an employee is injured while driving their own car while working their injuries would be covered
by Workers Compensation.

 A person who is transacting insurance without a license is guilty of a misdemeanor.

 In order to remain financially solvent under the CIC an insurer must have enough assets to provide for
its liabilities and for reinsurance for all outstanding risks and must also meet minimum requirements
equal to their paid-in capital (value of company if liquidated).

 HMOs and PPOs are referred to as service providers since the doctors and hospitals get paid directly
for those services provided.

 A movie company that is concerned about the financial loss they would incur in case of the illness of
one of their starring actors would purchase miscellaneous insurance.

 In insurance terms a representation can be considered an implied warranty.

 If an agent is engaging in unfair methods of competition they are subject to penalties of no more than
$5,000 for each act, not to exceed $10,000 if the act is judged to be willful.

 If the insurer discovers the insured has violated a material warranty they can rescind the contract
(void the policy).

 An intentional concealment entitles the injured party the option to rescind the contract.

 Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of
his own judgment upon the matters in question.

 The Health Insurance Counseling and Advocacy Program (HICAP) does NOT sell insurance, nor
endorse any particular carrier or product. HICAP provides free counseling to seniors on health
insurance related issues.

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 Providing free insurance coverage in connection with the sale of services as an inducement for
completing the transaction is NOT legal.

 When a premium is paid on a universal life policy the insurance company will subtract from it the
mortality and general expenses then add the current interest and deposit it into the cash value.

 The very poor do NOT need Long Term Care as they would be eligible for similar coverage provided
under Medi-Cal and the very rich would NOT need Long Term Care as if they needed the services
they could afford to pay for it themselves.

 Part 1 of a Workers Compensation policy provides Workers Compensation coverages as required by

state law (statutory coverage).

 Life insurance agents must keep records regarding policies sold in this state for a minimum of 5
years.

 The transplant donor benefit in a disability income policy considers the insured to be disabled if
donating a body organ.

 The purpose of the rehabilitation provision in a disability income policy is to encourage a disabled
insured to return to their original occupation.

 In order to determine the amount of premium an insured will pay, the insurer multiplies the rate by
the number of exposure units purchased.

 Insurance agents are acting in a fiduciary capacity when they are handling their customer’s premiums.

 Growth accumulating in a qualified plan is NOT currently taxable to the employee. It is taxable upon
withdrawal.

 Employee benefit plans CANNOT self fund for life insurance benefits, only health benefits.

 The insurance policy is the written instrument in which the insurance contract is set forth.

 Life insurance agents are NOT required to keep records of printed material in general use which has
been distributed by the insurer.

 The interest settlement option will allow only the death benefit earnings to be paid to the beneficiary.

 A defined contribution plan is a plan in which employers make specific contributions to an

employee’s retirement account.

 When an applicant reveals medical conditions that require more information the insurer will usually
require an attending physicians report.

 An employee would be considered to be partially disabled when they are working part-time and
receiving lost income under their long-term disability benefit.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

 Under Section 770 of the CIC the insurance commissioner will usually issue a cease and desist order
for a violation of more than one transaction if the violation dealt with loans on the security of real or
personal property.

 The process whereby a mutual insurer becomes a stock company is called demutualization.

 Any situation that presents the possibility of a loss is known as a loss exposure.

 The beneficiary is NOT required to sign the application for insurance.

 The rate is the cost per exposure unit.

 To authorize the release of an attending physician’s report, the applicant must sign a consent form.

 Members of the Medical Information Bureau are required to report medical impairments found during
the underwriting process.

 The request for an attending physician’s report must be accompanied by a copy of the signed
authorization.

 Life insurance companies are members of the Medical Information Bureau.

 Agent records must be made available to the commissioner at any time.

 If an insured is found guilty of turning in a fraudulent claim they can face imprisonment and/or a
$150,000 fine or twice the dollar amount of the fraudulent claim, whichever is greater. For example,
if an insured turned in a fraudulent claim totaling $85,000 they would be fined $170,000.

 To meet the chronically ill trigger of a long term care policy, an individual must be unable to perform
a minimum of 2 activities of daily living.

 The rules regarding life insurance policy illustrations are NOT intended to ensure that the illustration
specify that non-guaranteed elements will continue unchanged for all years shown.

 If an insurer is inadvertently found guilty of unfair trade practices while issuing, renewing and
servicing a policy, the insurer could be prosecuted for 3 violations, one for each act.

 Group life insurance does NOT exclude accidental death.

 California requires a minimum of 2 employees be covered in a group life contract.

 Life insurance creates an immediate estate upon the death of the insured in that the death benefit will
be paid to the beneficiary upon their death.

 Every insurer offering individual life insurance policies or annuities to senior citizens that use non-
guaranteed elements in illustrations must provide a statement to that effect which must appear in bold
print.

 Industrial life insurance is generally written with a death benefit of $2,000 or less.

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 In a defined benefit plan benefits are linked to the employee’s years of service and/or amount of
compensation.

 Life insurance illustrations showing premiums, values, credits or charges that are not determined at
issue demonstrate non-guaranteed elements.

 When an insurer presents an illustration for life insurance they CAN use the insurer’s “disciplined
current scale” in the illustration.

 An insurance company which is owned by individuals who purchase shares of stock in the company,
share in profits in proportion to shares owned, and vote for a board of director’s is known as a stock
insurer.

 Eligibility for Social Security retirement benefits is based upon the number of quarters earned.

 An insurance broker is NOT appointed by an insurer.

 The California Life and Health Insurance Guarantee Association (CLHIGA) does NOT cover
employer self-funded plans.

 The California Life and Health Insurance Guarantee Association (CLHIGA) does NOT cover group
stop-loss plans.

 In a group life policy with a death benefit of more than $50,000, the premium cost for insurance
above $50,000 is taxable as income to the insured.

 When a corporation ceases to exist entirely, their insurance license terminates.

 If an insurer knowingly allows one of its agents to mislead a member of the public in order to induce
the person to change their existing insurance, the Commissioner may suspend the insurer’s certificate
of authority for the class of business involved.

 Life insurance illustrations are NOT required to include a statement that the benefits in the illustration
are guaranteed. Benefits may be guaranteed or non-guaranteed.

 If an insurer indicates that an illustration will be used, they must send a summary status report to the
policy owner annually.

 If a dependent child covered by a group life plan is incapable of self-support, coverage under the plan
may continue without any age limitation.

 In a group life plan, a dependent child attending an educational institution may be covered until age
24.

 The IRS requires contributions made into a qualified plan on behalf of employees by employers vest
as specified intervals. Under the 7 year graded vesting plan an employee is required to be at least
20% vested after 3 years of employment. Vesting simply means ownership of employer
contributions. An employee is 100% vested in their contributions immediately when made.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

 Under the 7 year graded vesting schedule the IRS requires employer contributions be vested at least
40% after 4 years, 60% after 5 years, 80% after 6 years and 100% after 7 years.

 If an agent puts an ad on the internet it must include their license number, name and business address
but NOT their phone number.

 If an applicant lies about their age to obtain a rate of $8 per thousand of life insurance coverage when
in fact the rate at their correct age should have been $12 per thousand, at death the insurer will only
pay 8/12ths of the face amount of the policy.

 Under the misstatement of age provision, if the insured lies about their age in order to obtain a lower
premium, at death the insurer will pay less than the face amount.

 Automatic premium loan is a rider than can be added to a cash value life insurance policy in case the
insured forgets to pay their premium. It takes effect at the end of the grace period.

 The “free look” on life insurance and annuities is also known as the “right to return”.

 Dividends received by policyholders of a mutual insurer are not taxable.

 A “binding receipt” provides a limited amount of coverage right away.

 There is no coverage under a “conditional” receipt until all conditions are satisfied.

 Deferred compensation plans are non-qualified.

 A ROTH IRA has both non-deductible contributions and non-taxable distributions.

 A qualified plan where the employer contributes a specified amount is known as a “defined
contribution” plan, such as a 401K.

 Annual renewable term life insurance has a level face amount, but an increasing premium.

 On a Family policy of life insurance, the dependents coverage is convertible to whole life insurance
without a physical exam based upon their attained age.

 A Family life insurance policy consists of whole life on one spouse and level, convertible term on the
other spouse and children.

 Whole life insurance is also known as “continuous premium” whole life insurance.

 A life insurance policy that allows the policy owner to “self-direct” cash values into different sub-
accounts is known as Variable life.

 The Guaranteed Insurability Rider allows the insured to adjust benefits upwards at specified future
option dates.

 The rate of return paid on the cash value of an Indexed Whole Life policy will keep up with the rate
of inflation.

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 Group life policies may exclude aviation, suicide and military action, but not death due to other
accidents.

 If a beneficiary wants to leave the life insurance proceeds with the insurer and receive investment
income, they should select the “interest” option.

 All eligible employees must participate in a non-contributory group life plan.

 Life insurance policies do not contain a probationary period for pre-existing conditions.

 “Fully insured” status on social security requires 40 quarters of coverage.

 Both the agent and the applicant must sign the Notice Regarding Replacement.

 Agents need not have the Commissioner’s approval to use their actual name.

 If an agent hires a website designer to design his website, the agent is responsible for the website’s
content.

 Group coverage is usually less expensive than individual coverage.

 Insurers are concerned about “persistency” because they will lose money if a policy does not stay in
force due its high initial acquisition cost.

 Cash surrender of an annuity prior to age 59 ½ will result in ordinary income tax and a 10%
premature distribution penalty, both of which apply to the earnings portion.

 If you need to multiply the value of an accumulation unit by the number of units owned in the
separate account, you have a “variable” annuity.

 A “non-medical” application allows the insurer to write a life insurance policy without a physical
exam.

 HICAP counselors are not allowed to accept compensation.

 The amount that is exchanged for coverage is the premium.

 Third party administrators often help employers administer their self-funded plans.

 A hazard is something that increases the risk.

 The quarterly mode of payment costs more than the annual mode of payment.

 Life insurance premiums are refunded if death occurs due to suicide within 2 years.

 A policy is considered to be “executed” when coverage is bound.

 Most claims are settled by “negotiation”.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

 On disability income insurance, the “waiting period” is like a deductible, except it is stated in terms of
time rather than in dollars.

 Disability income policies do not offer a “life time” benefit period.

 On an accident and health policy with an “accidental means” clause, both the cause and the result
must be accidental in order for coverage to apply.

 An insurer may not change a “non-cancellable” health insurance policy in any way.

 “Guaranteed renewable” health insurance policies must offer renewal and cannot changed in any way,
EXCEPT rates by “class” only.

 Premiums paid for key person life insurance are not tax deductible, but benefits are not taxable.

 Contributions to social security are compulsory for most workers.

 A terminated employee may not be eligible for group continuation under COBRA if they were
terminated for cause.

 A representation as to the future, unless it is merely a statement of an expectation or belief, is

considered to be a “promise”.

 That portion of the premium used by an employer to buy group life coverage for an employee in
excess of $50,000 is taxable to the employee.

 A Variable/Universal life policy has no fixed, guaranteed rate of return.

 On a major medical expense policy, a “stop-loss” feature limits out-of-pocket expenses.

 Extended term is a life insurance non-forfeiture provision, not a rider or a settlement option.

 ERISA is a federal law that protects qualified plan participants and their beneficiaries.

 On a major medical expense policy, the co-insurance requirements are calculated after subtracting the
deductible.

 A computer programmer will still be eligible for disability income benefits although he returned to
work as a janitor if he has the “own occupation” definition of total disability in his policy.

 Sole proprietors without any employees are not eligible for group life coverage.

 On non-contributory group disability income, premiums are tax deductible for employers, but benefits
are taxable to employees.

 On a disability income policy, the social security offset rider will pay the difference between what
social security pays and the insured’s actual loss of earned income.

 The Principle of Indemnity is most closely associated with insurable interest.

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 A “prohibited” person may not engage in the business of insurance without the written consent of the
Commissioner.

 Under federal law, a “prohibited” person is a person whose activities affect interstate commerce and
who knowingly, with the intent to deceive, makes any false material statement or financial report to
any insurance regulator for the purpose of influencing their actions.

 Under federal law, upon conviction, a “prohibited” person may be imprisoned 10 to 15 years and
fined up a maximum of $50,000 per violation.

 Before making a sale, the first thing an agent should do is identify the client’s overall financial
objectives.

 The Family and Medical Leave Act provides certain employees with up to 12 weeks of unpaid, job-
protected leave per year for the birth and care of a newborn child, the adoption of a child, to care for
an immediate family member (spouse, child or parent) with a series health condition; or to take
medical leave when the employee is unable to work due to a serious health condition.

 Wearing eyeglasses is not considered to be a disability under the Americans with Disabilities Act
(ADA), although confinement to a wheelchair, deafness and HIV/AIDs are covered by the act.

 Under Original Medicare, it is the provider (hospital or doctor) of the health care that is required to
submit claims to Medicare by law.

 Under the Women’s Health and Cancer Rights Act all health insurance plans in California which
cover mastectomies MUST also cover reconstructive surgery.

 The California Major Risk Medical Insurance Program (MRMIP) was created to provide health
insurance to CA residents who are unable to obtain coverage in the individual health insurance
market.

 MRMIP subscribers participate in the program by paying monthly premiums, an annual deductible
and co-payments. Services are delivered through licensed health insurance plans.

 The MRMIP is funded annually by tobacco tax funds.

 To eligible for the MRMIP, individuals must be a CA resident, not eligible for Medicare or COBRA
benefits and have a pre-existing condition as shown by a denial letter from a health insurance plan
dated within the last 12 months.

 When the MRMIP reaches its enrollment cap, individuals who qualify will be placed on a waiting list
until enrollment slots become available.

 Any time spent on the waiting list does not count towards the MRMIP 3-month pre-existing condition
exclusion. However, if an individual has been on the waiting list for 180 days or more the pre-
existing condition exclusion will be waived.

 MRMIP premiums are based upon an individual’s age, where they live within the state and the
number of dependents that are enrolled in the program.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

 The federal Patient Protection and Affordable Care Act (PPACA) of 2010 expands health insurance
coverage, controls health care costs and improves the health care delivery system. The various
provisions of this law will be fully implemented by the year 2015.

 The PPACA requires most U.S. citizens and legal residents to have health insurance starting in 2014.

 The PPACA creates state-based American Health Benefit Exchanges through which low income
individuals and small businesses can purchase health insurance coverage.

 As a result of the PPACA, California has contracted with the federal Dept. of Health and Human
Services to establish a federally-funded high risk pool program to provide health coverage for eligible
individuals, known as the Pre-Existing Condition Program (PCIP).

 The PCIP will last until 12/31/13 when national health reform is set to begin. After that date, there
will no longer be a need for the PCIP because federal rules will not allow insurers to reject persons
with pre-existing conditions or charge them higher rates than those without such conditions.

 To qualify for the California PCIP, an individual must be a CA resident, have no health insurance
coverage for the past 6 months, be a U.S. citizen or lawfully present in the U.S., and have been denied
coverage within the past 12 months due to a pre-existing condition.

 The PCIP provides medical services through a PPO provider network that has contracted with a wide
variety of health providers throughout the state.

 Starting in 2014, the California Health Benefit Exchange will make it easier for individuals and small
businesses to compare plans and buy health insurance in the private market.

 The California Health Benefit Exchange will enhance competition and provide the same advantages
available to large employer groups by organizing the private insurance market, including a more
stable risk pool, greater purchasing power, more competition among insurers and detailed information
regarding the price, quality and services.

 The PPACA also requires insurers to provide dependent coverage for children up to age 26 on all
individual and group health insurance policies. Children can join or remain on their parent’s plan
even if they are married, not living with them or attending school.

 Under the PPACA, individual and group health insurance plans cannot limit or deny benefits or deny
coverage for a child younger than age 19 because the child has a pre-existing condition. Starting in
2014, these protections will be extended to all Americans.

 The PPACA inter-relates with other federal laws, including Medicare, COBRA, HIPAA and the
Children’s Health Insurance Program (CHIP).

 The Access for Infants and Mothers (AIM) Program provides low-cost health care coverage for
pregnant women who don’t have insurance to cover their pregnancy and are not receiving Medi-Cal
or Medicare Part A and Part B benefits.

 Babies born to women who are enrolled in AIM are eligible for enrollment in the Healthy Families
Program unless the baby is enrolled in employer-sponsored health insurance or no-cost Medi-Cal.

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 To be eligible for AIM, a person shall be a resident of the state, have a household income that does
not exceed 250% of the federal poverty level and agree to pay 1.5% of the cost of services.

 The Healthy Families Program provides low-cost health, dental, and vision coverage for children and
teens up to age 19 who reside in households with family incomes below 200% of the federal poverty
level.

 To be eligible for the Healthy Families Program, children must live in CA, be age 18 or younger, not
be eligible for no-cost Medi-Cal, live in families without health insurance from an employer for the
past 3 months and meet citizenship or immigration requirements.

 Applicants for the Healthy Families Program may apply by completing a Health e-App, which is an
easy to use, interactive, online application that supplements the paper application process.

 Applicants for the Healthy Families Program must meet federal income guidelines. If income is
below the Healthy Families income level, applications will be forwarded to the Dept. of Social
services who will contact the applicant to inform them if their family qualifies for no-cost Medi-Cal.

The following concepts are taken directly from the educational objectives and have also been on the exam
recently:

Be able to identify information that does NOT need to be communicated in a contract:

(a) known information

(b) information that should be known
(c) information which the other party waives
(d) information that is not material to the risk

Know that a representation in an insurance contract qualifies as an implied warranty.

Know that the materiality of concealment is the rule used to determine the importance of a
misrepresentation.

Know that a representation is false when the facts fail to correspond with its assertions or
stipulations.

Know that the financial rating of the insurer is NOT required to be specified in the insurance
policy.

Know that either intentional or unintentional concealment entitles an injured party to rescission of
a contract.

Know the price of insurance for each exposure unit is called the rate.

Know that an MGA can be any person, firm, association, partnership, or corporation that manages
all or part of an insurer’s business (including a separate division, department or underwriting
office)

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Know that an MGA acts as an agent and produces and underwrites gross direct written premium
equal to or more than 5 percent of the policyholder surplus as reported in the insurer’s last annual
statement and either:

a. Adjusts or pays claims in excess of an amount determined by the Commissioner, or;

b. Negotiates and binds ceding reinsurance on behalf of the insurer

Know the duties of a co-partnership whose membership has changed. Note: To return the old
license with signatures of the original members to the commissioner is NOT one of those duties.

Know that the interpretation of policy provisions is not a primary objective of insurance regulation.

Be able to identify that a primary insurer is the insurance company who transfers its loss exposure
to another insurer in a reinsurance transaction.

Be able to identify who may be an insurer: person, association, organization, partnership,

business trust, limited liability company or corporation.

Know that de-mutualization is a process whereby a mutual insurer becomes a stock company.

Know that it is a misdemeanor to refuse to deliver any books, records, or assets to the
Commissioner once a seizure order has been executed in an insolvency proceeding.

Know that if an insured signs a fraudulent claim form, the insured may be guilty of perjury.

Know that it would be a discriminatory practice for an insurer to refuse to accept, charge higher
premiums for, or provide different terms of insurance when a potential applicant for a disability
insurance policy is shown to have a genetic characteristic which could contribute to the person's
disability.

Know the following concerning survivorship life insurance: (a) offers premiums that are quite low
compared with those that would be charged for separate policies; (b) well situated to meet the
need for cash to cover estate taxes; (c) face amounts are usually more than one million dollars.

Know that extended term insurance is the nonforfeiture option that uses cash surrender values to
purchase paid-up term insurance for the full face amount of the policy.

Know how viatical settlements are effected through the use of absolute assignment.

Know that a written binder is deemed a valid insurance policy for the purpose of proving that the
insured has insurance coverage. This excludes life insurance.

Know that the employee pays all or part of the costs in a contributory group insurance plan.

Know that an attending physician’s statement is required when an application reveals conditions
that require more information.

Know that with indemnity plans claim forms are typically completed and submitted by the
participant.

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Know that the following may opt for a self insured medical and disability plan: labor unions,
fraternals, and co-ops.

Know that the probationary period in a group health policy is intended for people who join the
group after the policy effective date.

Know that the Employee Retirement Income Security Act of 1974 (ERISA) fiduciary standards
benefit plan participants and beneficiaries.

Know coverage provided by Medicare Part B - Medical Insurance (deductibles, coinsurance,

physician services, second opinion before surgery, hospital outpatient, other covered services,
mental illness, diagnostic tests and x-rays performed on outpatient basis, etc.)

Know that Medicare Part B is only for individuals age 65 or older.

Know that insurers MAY offer Medicare Supplement insurance plans that contain only core
benefits.

Know that skilled nursing care, intermediate nursing care, custodial care, home health care, home
care and community based care are standard levels of care in a Long Term Care policy.

Know that Social Security disability benefits are paid to persons whose disability is expected to last
at least 12 months or lead to death.

PRACTICE QUESTIONS

1. Which of the following health care providers is not a physician?

A. Dermatologist
B. Neurologist
C. Optometrist
D. Urologist

Answer: C
Explanation: A physician is also known as a medical doctor (M.D.). An optometrist is a Doctor of
Optometry, an O.D. not a physician, or M.D..

2. An insurance policy must specify all of the following except:

A. The parties between whom the contract is made

B. The property or life insured
C. The interest of the insured in property insured
D. Financial Rating of the insurer

Answer: D
Explanation: Under the California Insurance Code (CIC) an insurance policy must specify the following:

(a) The parties between whom the contract is made.

(b) The property or life insured.
(c) The interest of the insured in property insured, if he is not the absolute owner thereof.
(d) The risks insured against.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

(e) The period during which the insurance is to continue.

(f) Either:
(1) A statement of the premium, or
(2) If the insurance is of a character where the exact premium is only determinable upon the termination
of the contract, a statement of the basis and rates upon which the final premium is to be determined
and paid.

The financial rating of the insurer need NOT be specified.

3. Travel Accident Insurance would be sold by all of the following except:

A. Vending Machines
B. Credit card companies
C. Professional Insurance Agents
D. Insurer representatives

Answer: C
Explanation: Travel Accident insurance is generally sold using vending machines in airport lobbies,
however it can also be purchased from credit card companies, or insurer representatives. It is NOT sold
by professional insurance agents.

4. When will the first benefit check be issued for a disability income policy with a 90 day
elimination period:

A. 90th day of continued disability

B. 91st day of continued disability
C. 120th day of continued disability
D. 121st Day of continue disability

Answer: D
Explanation: Since the policy has a 90 day waiting or elimination period there will be no benefits paid for
the first 90 days of disability. After the insured satisfies the waiting/elimination period, benefits must be
paid at least monthly and will be paid on the first day of the month for the previous month.

5. All of the following would be considered a violation of federal law except:

A. Providing false information on an insurance application

B. Transacting insurance in the state as a restricted person without prior authorization of the
insurance commissioner
C. Falsifying financial reports
D. Embezzling customer moneys

Answer: A
Explanation: Although providing false information on an insurance application would be a violation of
state law, it is not a violation of Section 1033 of the United States Code which addresses crimes
committed by persons engaged in the business of insurance whose activities affect interstate commerce.

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6. A person convicted of the federal law regulating issues that effect the insurance industry and
interstate commerce can be sentenced to how many years in prison:

A. 3
B. 5
C. 7
D. 10 or 15

Answer: D
Explanation: Depending on which violations occurred Section 1033 of the United States code states the
maximum imprisonment can be either 10 or 15 years.

7. The minimum participation percentage for large group insurance under the California code is:

A. 25%
B. 40%
C. 75%
D. 50%

Answer: C
Explanation: The California Insurance Code requires a 75% minimum participation percentage for large
group Life insurance.

8. A person found guilty of a violation of the federal law regulating issues that effect the insurance
industry and interstate commerce can be subject to a civil penalty of up to:

A. $10,000
B. $20,000
C. $30,000
D. $50,000

Answer: D
Explanation: The Attorney General may bring a civil action in the appropriate United States district court
against any person who engages in conduct constituting an offense under section 1033 of Title 18 of the
United State Code and, upon proof of such conduct such person shall be subject to a civil penalty of not
more than $50,000 for each violation.

9. Which of the following classes of insurance is exempt from the California Insurance Guarantee
Association (CIGA):

A. Life and annuity

B. Plate glass
C. Workers Compensation
D. Fire

Answer: A
Explanation: Life and annuity policies are specifically excluded from coverage under the California
Insurance Guarantee Association, however, life and annuity policies are covered by the California Life
and Health Insurance Guarantee Association which is a separate Act altogether.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

10. The federal law COBRA applies to employers with a minimum of ___ employees:

A. 10
B. 20
C. 50
D. 100

Answer: B
Explanation: COBRA requires that group health plans sponsored by employers with 20 or more
employees in the prior year offer employees and their families the opportunity for a temporary extension
of health coverage (called continuation coverage) in certain instances where coverage under the plan
would otherwise end.

11. All of the following are qualifying events under COBRA except:

A. Reduction in the hours of employment

B. Death of an employee
C. Termination due to gross misconduct
D. Loss of job

Answer: C
Explanation: The following is a list of qualifying events under COBRA:

Qualifying Events for Employees:

 Voluntary or involuntary termination of employment for reasons other than gross misconduct
 Reduction in the number of hours of employment

Qualifying Events for Spouses:

 Voluntary or involuntary termination of the covered employee's employment for any reason other
than gross misconduct
 Reduction in the hours worked by the covered employee
 Covered employee's becoming entitled to Medicare
 Divorce or legal separation of the covered employee
 Death of the covered employee

12. In which of the following situations would the Family and Medical Leave Act not apply:

A. A husband moves with his wife who has been transferred out of the country
B. Adoption of child
C. Taking care of sick parent
D. Sickness

Answer: A

Explanation: Under the Family and Medical Leave Act (FMLA) Covered employers must grant an
eligible employee up to a total of 12 workweeks of unpaid leave during any 12-month period for one or
more of the following reasons:

 for the birth and care of the newborn child of the employee;

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 for placement with the employee of a son or daughter for adoption or foster care;
 to care for an immediate family member (spouse, child, or parent) with a serious health condition; or
 to take medical leave when the employee is unable to work because of a serious health condition.

13. Under the Americans with Disabilities Act (ADA) which of the following is not considered a
disability:

A. Obese
B. Hearing
C. Sight
D. Diabetes

Answer: A
Explanation: To be protected under the ADA, a person must have a record of, or be regarded as having a
substantial, as opposed to a minor, impairment. A substantial impairment is one that significantly limits or
restricts a major life activity such as hearing, seeing, speaking, walking, breathing, performing manual
tasks, caring for oneself, learning or working. Diabetes can be considered to meet the definition of
disability under the act, whereas being obese does not.

14. Under the Americans with Disabilities Act (ADA) which of the following is not considered a
disability:

A. Wearing eye glasses

B. Aids
C. Alzheimer’s
D. Diabetes

Answer: A
Explanation: Wearing eyeglasses is not considered to be a disability under the Americans with
Disabilities Act (ADA), although Alzheimer’s, diabetes and HIV/AIDs are.

15. Under the Family and Medical Leave Act how many weeks of leave must be provided per year
for the birth of a child?

A. 4
B. 8
C. 12
D. 16

Answer: C
Explanation: Under the Family and Medical Leave Act (FMLA) Covered employers must grant an
eligible employee up to a total of 12 workweeks of unpaid leave during any 12-month period for one or
more of the following reasons:

 for the birth and care of the newborn child of the employee;
 for placement with the employee of a son or daughter for adoption or foster care;
 to care for an immediate family member (spouse, child, or parent) with a serious health condition; or
 to take medical leave when the employee is unable to work because of a serious health condition.

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 Life, Accident and Health (Life Agent) Key Facts - 2015

16. Under the Women’s Health and Cancer Rights Act all health insurance plans which cover
mastectomies must also cover which of the following:

A. Reconstructive surgery
B. Prescription drug coverage
C. Rehabilitation
D. Home health care

Answer: A
Explanation: Under WHCRA, group health plans, insurance companies and health maintenance
organizations (HMOs) offering mastectomy coverage also must provide coverage for certain services
relating to the mastectomy in a manner determined in consultation with a attending physician. This
required coverage includes all stages of reconstruction of the breast on which the mastectomy was
performed, surgery and reconstruction of the other breast to produce a symmetrical appearance, and
prostheses and treatment of physical complications of the mastectomy.

17. Which of the following is NOT a typical benefit period in a disability income policy:

A. 2 years
B. to age 65
C. 5 years
D. Lifetime

Answer: D
Explanation: Although a lifetime benefit period may be offered by an insurer as an rider, it is NOT a
“typical” benefit period.

18. What is the most common type of specified disease policy:

A. Cancer
B. Cataract
C. Diabetes
D. Heart Disease

Answer: A
Explanation: Cancer is the most common type of specified disease (dread disease) policy.

19. Put the following policies in order regarding premiums in the early years from lowest to highest:

A. Modified life, Traditional life, Single Premium life

B. Traditional life, Single Premium life, Modified life
C. Single Premium life, Modified life, Traditional life
D. Traditional life, Modified life, Single Premium life

Answer: A
Explanation: Since a modified whole life policyholder will receive a discounted premium in the early
years of the policy, modified life will have the lowest premium followed by traditional whole life and
then a single premium whole life policy, which would have the largest premium of the three.

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20. All of the following are qualified plans EXCEPT:

A. IRA
B. Deferred compensation plan
C. 401K
D. TSA

Answer: B
Explanation: A deferred compensation plan is a non-qualified plan.

21. What percentage of employee contributions must vest immediately in a 401K:

A. 20%
B. 40%
C. 80%
D. 100%

Answer: D
Explanation: The money a participant contributes to a 401K plan is always 100% vested immediately. In
other words, whatever money the participant puts into the plan, adjusted for any investment gains or
losses, is always 100% vested.

22. Which of the following health care providers do not come under the jurisdiction of the
Department of Insurance:

A. Health
B. Dental
C. Chiropractor
D. Acupuncture

Answer: D
Explanation: Acupuncture is not regulated under the jurisdiction of the Department of Insurance.

23. A married couple who would like to purchase a life insurance policy to cover estate taxes and pay
when the last spouse dies would purchase:

A. Joint Life
B. Survivorship life
C. Endowment
D. Annuity

Answer: B
Explanation: Survivorship life pays when the surviving insured dies and is commonly used to help pay
estate taxes since estate taxes are due upon the death of the last spouse.

28 Insurance and Securities School of California – www.testeachersonline.com

 Life, Accident and Health (Life Agent) Key Facts - 2015

24. A life insurance policy which will allow the insured to self direct the cash value into different
sub-accounts is:

A. Universal Life
B. Adjustable Life
C. Variable Life
D. Endowment

Answer: C
Explanation: A variable life insurance policy will allow the insured to select from a number of different
investment accounts to invest the cash value. Variable life is a securities product and a securities license
is needed to sell it in addition to a life insurance license.

25. Life settlements are accomplished through the use of:

A. Collateral assignment
B. Settlement options
C. Absolute assignment
D. Non-forfeiture options

Answer: C
Explanation: A policy owner can enter into a life settlement agreement by making an absolute
assignment of their policy to a life settlement provider.

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