Kansas Life & Health Insurance License, Practice Exams

Variable universal life (VUL) insurance combines:

1. Flexible premiums with policyowner-directed separate-account investments ✓
2. Decreasing term coverage with a built-in cost-of-living adjustment
3. Group coverage that requires no individual evidence of insurability
4. A fixed level premium with a guaranteed minimum cash value at all times

Why: VUL merges universal life's premium and death-benefit flexibility with variable separate accounts; the owner bears the investment risk.

The ownership provision of a life policy establishes that the policyowner has the right to:

1. Name the beneficiary, take loans, and surrender the policy ✓
2. Only pay premiums, with no other rights over the contract
3. Receive the death benefit even while the insured is still living
4. Change the insurer's underwriting decision after the policy is issued

Why: The owner holds the contractual rights (naming beneficiaries, loans, surrender, assignment); the owner and the insured may be different people.

A Kansas county attorney learns of a suspected insurance fraud from an independent source. The criminal anti-fraud division has referred nothing. Under K.S.A. 40-113, may the county attorney institute criminal proceedings?

1. No - a reference from the criminal anti-fraud division is a condition precedent to any fraud charge.
2. No - insurance fraud may be prosecuted only by the attorney general.
3. Yes - a prosecutor may act in that discretion with or without a reference from the division. ✓
4. Yes, but only once the commissioner of insurance has certified in writing that fraud is suspected.

Why: Section 40-113(a), having described the division's duty to refer, adds that the prosecutor may, in such prosecutor's discretion, WITH OR WITHOUT SUCH A REFERENCE, institute the appropriate criminal proceedings under the laws of this state. The division's referral route and the prosecutor's independent charging discretion are two separate things, and the statute is explicit that the second does not depend on the first. Nothing in the section makes a certification by the commissioner a precondition either.

A Medicare Part A benefit period begins when a patient is admitted and ends:

1. 60 days after the patient has been discharged ✓
2. On the last calendar day of that same month
3. Only when the patient changes to a different hospital
4. After exactly one full year from the admission date

Why: A benefit period starts at admission and ends after the patient has been out of a hospital/SNF for 60 consecutive days; a new period (and deductible) can then begin.

A Kansas insurer prints its admitted assets on a circular it hands out at a trade show. Under K.A.R. 40-9-1, what must it also do, and is the circular an advertisement?

1. Show its liabilities somewhere in the circular; and yes, a circular is an advertisement.
2. Show its liabilities equally conspicuously; but no, only paid media are advertisements.
3. Show its liabilities equally conspicuously; and yes, a circular is an advertisement. ✓
4. Nothing further; and no, a circular handed out in person is not an advertisement.

Why: K.A.R. 40-9-1(a) provides that whenever an insurance company doing business in this state ADVERTISES ITS ASSETS it shall ADVERTISE ITS LIABILITIES IN THE SAME CONNECTION AND IN A MANNER EQUALLY CONSPICUOUS, so showing the liabilities somewhere less prominent does not comply. Liabilities are computed as for the annual statement and assets are the ADMITTED assets. Subsection (c) defines the term broadly: EACH POLICY, SIGN, CIRCULAR, CARD, OR OTHER MEANS BY WHICH PUBLIC ANNOUNCEMENTS ARE MADE is an advertisement, so a circular handed out in person is one, and the definition is not limited to paid media. The regulation implements K.S.A. 40-235.

A provision allowing a terminally ill insured to receive part of the death benefit while still living is the:

1. An accelerated (living) death benefit for the terminally ill ✓
2. An automatic premium loan against the death benefit, used by the terminally ill to keep the policy in force while living
3. A reinstatement putting a lapsed policy back in force after proof of insurability
4. A coordination-of-benefits offset

Why: The accelerated death benefit lets a terminally or chronically ill insured access part of the face amount before death; the remainder goes to beneficiaries.

A deductible 'carryover' provision in a major medical plan allows expenses incurred in the last months of the year to:

1. Be refunded in full to the insured at year end
2. Double the plan's annual out-of-pocket maximum amount
3. Apply toward the next year's deductible ✓
4. Permanently eliminate the deductible for all future years

Why: A carryover provision lets eligible expenses from the final months (often the last three) count toward the following year's deductible.

A Kansas insurer with $3,000,000 in gross premiums in the preceding calendar year has a financial examination. Under K.S.A. 40-223, what is the most it can be charged for the examination's collective costs?

1. $50,000. ✓
2. $75,000.
3. $100,000.
4. There is no cap; the company pays the costs actually incurred, on the commissioner's demand.

Why: K.S.A. 40-223(b)(1) makes the examined company pay, ON DEMAND OF THE COMMISSIONER, the examiners' compensation and expenses together with employment on-costs, outside consulting and data processing fees, and a pro rata amount to fund examination equipment and software. Paragraph (b)(2) then caps the collective total for a FINANCIAL examination by the company's GROSS PREMIUMS, BOTH DIRECT AND ASSUMED, IN THE PRECEDING CALENDAR YEAR, on a rising scale: $50,000 for LESS THAN $5,000,000; $75,000 from $5,000,000 to under $25,000,000; $100,000 from $25,000,000 to under $50,000,000; $125,000 from $50,000,000 to under $100,000,000; $175,000 from $100,000,000 to under $250,000,000; $250,000 from $250,000,000 to under $500,000,000; and the actual total costs at $500,000,000 or more. Three million falls in the first band. The cap includes examination of the company's SUBSIDIARIES. A market regulation examination is capped separately at $25,000 by (b)(3).

An owner surrenders a policy for its $32,000 cash value after paying $20,000 in premiums. How much is taxable?

1. $12,000 ✓
2. $32,000
3. $20,000
4. $0

Why: On surrender, the gain over cost basis is taxable: $32,000 − $20,000 = $12,000 of ordinary income.

A Kansas insurer defends an accident and sickness claim on the basis of a statement in the application. No copy of the application was attached to or endorsed on the policy when it was issued. Under K.S.A. 40-2205, may the statement be used?

1. Yes, if the insurer can prove that the applicant made the statement in the application and that it was material.
2. No, unless the insured was given a copy of the application within fifteen days of issue.
3. Yes; attaching the application is a formality that does not affect the insurer's defences.
4. No; the insured is not bound by any statement in an application not attached to the policy. ✓

Why: K.S.A. 40-2205(A) provides that THE INSURED SHALL NOT BE BOUND BY ANY STATEMENT MADE IN AN APPLICATION FOR A POLICY UNLESS A COPY OF SUCH APPLICATION IS ATTACHED TO OR ENDORSED ON THE POLICY WHEN ISSUED AS A PART THEREOF. A separate rule governs REINSTATEMENT OR RENEWAL: on written request by the insured, beneficiary or assignee, the insurer must deliver or mail a copy of that application WITHIN FIFTEEN DAYS of receipt at its home or any branch office, and if it does not, IT IS PRECLUDED FROM INTRODUCING THE APPLICATION AS EVIDENCE in any action on the policy. That fifteen days belongs to the reinstatement case, not to the original issue, so it cannot rescue a statement from an unattached original application. Subsection (B) also forbids anyone but the applicant altering a written application without the applicant's written consent, save for clearly marked administrative insertions by the insurer.

In insurance, a 'peril' is:

1. A condition that increases the likelihood or severity of a loss
2. The carelessness of an insured who relies on having coverage
3. The dishonest intent of an applicant to profit from a loss
4. The cause of a loss, such as fire, accident, or illness ✓

Why: A peril is the actual cause of loss; a hazard is a condition increasing the chance or severity of that loss.

A Kansan is sold a policy by an insurer that had no certificate of authority in Kansas at the time. The insurer later becomes insolvent. Under K.S.A. 40-3008, is the policy covered?

1. No, unless the policyholder can show they did not know the insurer was unlicensed.
2. Yes; the association covers policies issued in this state whatever the insurer's status.
3. Yes; the insurer's want of authority is a matter between it and the commissioner.
4. No; a policy issued when the insurer was not licensed here is excluded. ✓

Why: K.S.A. 40-3008(o)(6) excludes ANY POLICY OR CONTRACT ISSUED IN THIS STATE BY A MEMBER INSURER AT A TIME WHEN IT WAS NOT LICENSED OR DID NOT HAVE A CERTIFICATE OF AUTHORITY TO ISSUE SUCH POLICY OR CONTRACT IN THIS STATE. The exclusion turns on the insurer's status AT ISSUE and there is no exception for a buyer who did not know the insurer was unlicensed; the buyer loses guaranty association protection, and the text makes no provision for later licensing to repair it.

Under K.S.A. 40-2209f, when may a Kansas small employer carrier exclude a late enrollee?

1. At any time, including during an open enrolment period.
2. Only where the late enrollee declined coverage in writing when first eligible.
3. Never; a carrier must accept an eligible employee whenever application is made.
4. At any time except during an open enrolment period. ✓

Why: K.S.A. 40-2209f(c) is a single sentence: A CARRIER MAY EXCLUDE A LATE ENROLLEE EXCEPT DURING AN OPEN ENROLLMENT PERIOD. The open enrolment window is therefore the whole of the late enrollee's protection, and no written declination or other condition is attached to the carrier's right. Read it with K.S.A. 40-2209p, which requires an insurer offering such coverage to accept every small employer that applies, subject to that section's exclusions.

An owner withdraws from a deferred annuity during its surrender-charge period. The result is:

1. Forfeiture of all interest credited to date
2. No charge at all, because annuity withdrawals are always penalty-free
3. A surrender charge on the amount above any free-withdrawal allowance ✓
4. Immediate annuitization of the entire contract into a life income option

Why: Withdrawals beyond the free-withdrawal amount during the surrender period incur a declining surrender charge.

A premium on a Kansas life policy remains unpaid after the period the policy specifies. Under K.S.A. 40-412, within what time must an action on the contract, or an action to reinstate it as premium-paying, be commenced?

1. Six months after the expiration of the period specified for that premium. ✓
2. One year after the expiration of the period specified for that premium.
3. Two years after that period expires, as for other contract actions.
4. Three years after expiry, matching the policy's reinstatement right.

Why: K.S.A. 40-412 bars an action on or in respect of a life insurance contract on which a premium remains unpaid after the period specified in the policy - for the enforcement of any right conditioned on that premium, or subject to termination for failing to pay it - unless the action, OR AN ACTION TO REINSTATE THE POLICY AS A PREMIUM-PAYING POLICY, is commenced WITHIN SIX MONTHS after that period expires. Both kinds of action are on the same clock. This is a different six months from K.S.A. 40-410's, which governs how long after default a cancellation needs prior notice, and it is not the three-year reinstatement provision K.S.A. 40-420(9) requires the policy to contain - that is a contractual right, this is a limitation on suing.

A person who is required to be licensed under the uniform insurance agents licensing act, and who is not licensed, solicits insurance in Kansas. An insurer pays that person a commission for it. Under K.S.A. 40-4910, who has contravened the section?

1. The insurer alone; the section governs who may pay, not who accepts.
2. The unlicensed person alone; the insurer may rely on a representation.
3. Neither, if the commission is returned once the omission is found.
4. Both - one prohibition binds the payer, and a separate one binds the recipient. ✓

Why: Section 40-4910 states the rule twice, from each end. Subsection (a) bars an insurance company or insurance agent from PAYING a commission, service fee, brokerage or other valuable consideration to a person for selling, soliciting or negotiating insurance in this state where that person is required to be licensed and is not. Subsection (b) bars that person from ACCEPTING it, in the same words. Two prohibitions, two parties, and returning the money afterwards is not among the exceptions the section allows.

A Kansas insured has a life expectancy of fourteen months and a policy, written by an insurer rated in one of the highest four categories by a rating agency, with a remaining death benefit of $200,000 and no outstanding loans. Under K.A.R. 40-2-31, what is the least the viatical settlement provider may pay?

1. $120,000, being 60 percent of the remaining death benefit.
2. $130,000, being 65 percent of the remaining death benefit. ✓
3. $140,000, being 70 percent of the remaining death benefit.
4. Whatever the parties agree; the regulation sets no minimum payment.

Why: K.A.R. 40-2-31(b)(1) sets a minimum payment by band, in each case AFTER DEDUCTING ANY OUTSTANDING LOANS against the policy: 80 PERCENT of the remaining death benefit for a life expectancy of LESS THAN SIX MONTHS; 70 PERCENT for AT LEAST SIX BUT LESS THAN 12 MONTHS; 65 PERCENT for AT LEAST 12 BUT LESS THAN 18 MONTHS; and 60 PERCENT for 18 BUT LESS THAN 25 MONTHS. Fourteen months falls in the 12-to-18-month band, so 65 percent of $200,000 is $130,000. Paragraph (b)(3) allows any percentage or amount in the subsection to be reduced by five percent, unless the cash surrender value is paid, where the policy was written by an insurer rated less than the highest four categories by a rating agency; the insurer here is in the highest four, so no reduction applies. Each band includes its lower figure and excludes its upper one, so a life expectancy of exactly twelve months takes 65 percent and not 70. The regulation took effect on 12 July 2024 and implements K.S.A. 40-5015, which empowers the commissioner to set standards for evaluating the reasonableness of payments under viatical settlement contracts.

Under a universal life policy's Option A (Option 1), the death benefit is:

1. Reduced each year by the amount of interest the policy earns
2. Equal to the face amount plus the entire accumulated cash value at all times
3. Level, while the cash value grows inside it ✓
4. Tied directly to the performance of a chosen stock-market index

Why: Option A keeps a level death benefit (cash value accumulates within it); Option B pays the face amount plus the cash value, so it increases.

A fraternal benefit society provides insurance:

1. To its members through a lodge or membership system, on a nonprofit basis ✓
2. To the general public for a profit, distributing earnings to its stockholders
3. Exclusively through group annuity contracts sold to employers
4. Only to federal, state, and municipal government employees

Why: Fraternal benefit societies are nonprofit membership organizations providing insurance to members under a lodge system.

A Kansan held life insurance, an annuity and a disability income policy with one failed member insurer, and no health benefit plan. Under K.S.A. 40-3008, what is the most the association will pay in respect of that life?

1. $300,000 in aggregate across all of the categories. ✓
2. $500,000 in aggregate across all of the categories.
3. $850,000, being the sum of the applicable category limits.
4. There is no aggregate cap; each category limit applies independently.

Why: K.S.A. 40-3008(q)(2)(E)(i) caps the association at AN AGGREGATE OF $300,000 IN BENEFITS WITH RESPECT TO ANY ONE LIFE under subparagraphs (A), (B), (C) and (D) - the life, health, annuity and structured settlement limits - EXCEPT WITH RESPECT TO BENEFITS FOR HEALTH BENEFIT PLANS UNDER (q)(2)(B)(iii), IN WHICH CASE THE AGGREGATE LIABILITY SHALL NOT EXCEED $500,000 WITH RESPECT TO ANY ONE INDIVIDUAL. So the category limits are ceilings within an aggregate, not amounts to be added up to $850,000. There is no health benefit plan here, so the aggregate is $300,000. A separate cap at (E)(ii) applies to ONE HOLDER OF MULTIPLE NONGROUP LIFE POLICIES - whether an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or others - of $5,000,000 in benefits regardless of the number of policies held.

Under K.A.R. 40-2-12, what must a Kansas life insurance agent do in connection with EVERY life insurance application, whether or not a replacement is involved?

1. Obtain a signed statement from the applicant only; the agent's own view is not recorded.
2. Submit the agent's own statement only; the applicant signs nothing about replacement.
3. Nothing; both statements are required only once a replacement is known to be involved.
4. Obtain a signed statement from the applicant, and submit the agent's own statement. ✓

Why: K.A.R. 40-2-12(c) imposes two duties on every application. The agent must OBTAIN A STATEMENT SIGNED BY THE APPLICANT as part of each life insurance application as to whether the new insurance will replace existing life insurance, and must SUBMIT TO THE INSURER a statement as to whether, TO THE BEST OF THE AGENT'S KNOWLEDGE, a replacement is involved. Two statements from two sources, and neither waits until a replacement is known to be involved. Subsection (e) is the insurer's side: it must inform its field representatives of the regulation and require both statements with each application.

Which term life policy has a face amount that declines over the term and is commonly used to cover a mortgage balance?

1. Increasing term
2. Decreasing term ✓
3. Level term
4. Renewable term

Why: Decreasing term's face amount drops over time (premium usually level), matching a declining debt such as a mortgage.

A long-term care policy has a 90-day elimination period. Benefits begin:

1. After 90 days of qualifying care the insured pays for ✓
2. After a one-year waiting period measured from the policy's effective date
3. Only after the insured turns 80
4. Immediately on the first day of any care, because the 90 days apply only to the policy's lifetime maximum

Why: The elimination period is a deductible in days; the insured covers care during it, and benefits start afterward.

Which premium payment mode generally produces the lowest total annual cost?

1. Semiannual
2. Monthly
3. Annual ✓
4. Quarterly

Why: Paying annually avoids the loading/carrying charges added to more frequent payment modes.

In a health policy, the period after issue during which sickness-related claims are not yet covered is the:

1. Elimination period in the policy
2. Benefit period
3. Grace period
4. Probationary period ✓

Why: The probationary (waiting) period applies to newly issued coverage before sickness claims are payable.

Credit disability insurance is designed to:

1. Replace the borrower's full salary during any period of unemployment
2. Cover the lender's legal costs of collecting on a defaulted loan
3. Pay off the entire loan balance immediately upon any minor injury
4. Make a borrower's loan payments if the borrower becomes disabled ✓

Why: Credit disability covers the loan payments (often monthly) while the insured borrower is disabled; credit life instead pays off the balance at death.

Pension maximization is a strategy in which a retiree:

1. Takes the larger single-life pension and buys life insurance to protect the spouse ✓
2. Delays starting the pension indefinitely in order to keep earning additional years of service credit
3. Withdraws the entire pension as a lump sum, drops all coverage, and self-insures the survivor need
4. Always elects the reduced joint-and-survivor pension on the view that it is the safest possible choice

Why: Pension max takes the higher single-life payout and uses life insurance to provide for the surviving spouse, instead of accepting a smaller joint-and-survivor benefit.

A Kansas insurer repeatedly breaches a requirement that appears not in K.S.A. 40-2404(9)'s lettered list but in a regulation about claims settlement. Under K.S.A. 40-2404, can that be an unfair claim settlement practice?

1. No - only conduct in the lettered paragraphs can be an unfair practice.
2. Yes - it reaches the listed practices or any regulations pertaining to them. ✓
3. Yes, but the flagrancy and frequency threshold applies only to the list.
4. No - a regulation breach falls under the rule-making powers alone.

Why: K.S.A. 40-2404(9) opens on 'any of the following OR ANY RULES AND REGULATIONS PERTAINING THERETO'. That is the hook by which K.A.R. 40-1-34, which adopts the NAIC unfair claims settlement practices model regulation by reference subject to Kansas exceptions, is enforced as an unfair claim settlement practice. Two consequences follow: a regulation breach is within the paragraph, and the SAME threshold governs it. So it is wrong to say the flagrancy and frequency threshold applies only to the lettered list: the regulation must also be breached flagrantly and in conscious disregard, or with such frequency as to indicate a general business practice.

A Kansas individual insurance agent holds only a crop qualification. Under K.S.A. 40-4903, what is that agent's biennial continuing education requirement?

1. 2 C.E.C.s in courses certified as crop C.E.C.s. ✓
2. 18 C.E.C.s, the general agent requirement.
3. None; a crop-only agent is exempt.
4. 2 C.E.C.s in any certified category.

Why: Section 40-4903(c)(1) reduces the requirement for an individual agent holding ONLY a crop qualification to a minimum of two C.E.C.s, in courses certified as crop C.E.C.s under the property and casualty category. The word 'only' is what triggers the reduction - an agent who holds crop alongside any other qualification is back on the general 18-credit requirement in subsection (c). The reduced requirement is not an exemption: two credits are still owed, and they must be crop-certified.

Under K.A.R. 40-2-12, what must a Kansas replacing insurer do about the new policy's contestability, and how?

1. Limit it to the replaced policy's, which the regulation achieves without any policy wording.
2. Nothing; a replacement policy is contestable on its own terms from its own date of issue.
3. Make the new policy incontestable from issue, whatever the replaced policy provided.
4. Limit it to the replaced policy's, by including the limit in the policy or a rider. ✓

Why: K.A.R. 40-2-12(f)(6) requires the replacing insurer, EITHER BY INCLUSION IN THE REPLACEMENT POLICY OR BY A RIDER ATTACHED TO IT, to provide that the new life insurance will not be contestable by it, in the event of the insured's death, to any greater extent than the replaced insurance would have been contestable had the replacement not occurred. The protection does not extend to any amount by which the new cover EXCEEDS the replaced cover. The regulation operates through the contract: the insurer must put the limit in the policy or a rider, rather than the limit applying without any policy wording. Kansas reaches a similar result by statute for a creditor's replacement of insurance on its debtors, at K.S.A. 40-449.

A Kansas insurer lets its claimants know that it has a policy of appealing from arbitration awards made in their favour. Under K.S.A. 40-2404, when does making that known become a listed unfair claim settlement practice?

1. Whenever it is made known, because an insurer may not appeal an arbitration award at all.
2. Only where the insurer has in fact appealed more awards than it has accepted.
3. When it is done to compel claimants to accept settlements less than the amount awarded. ✓
4. Only where the arbitration was compulsory rather than agreed between the parties.

Why: K.S.A. 40-2404(9)(k) is about the PURPOSE. It lists making known to insureds or claimants a policy of appealing from arbitration awards in favour of insureds or claimants FOR THE PURPOSE OF COMPELLING THEM TO ACCEPT SETTLEMENTS OR COMPROMISES LESS THAN THE AMOUNT AWARDED IN ARBITRATION. The right of appeal is not taken away; what is prohibited is advertising the practice as leverage. Nothing turns on how many appeals were actually brought, or on whether the arbitration was compulsory or agreed.

Which policy combines flexible premiums with cash value invested in separate accounts and requires a securities license to sell?

1. Universal life with flexible premiums crediting a declared interest rate to cash value
2. Group annually renewable term funded by the employer
3. Variable universal life with separate-account investing ✓
4. Whole life with a guaranteed level premium

Why: Variable universal life adds separate-account investing (securities-licensed) to universal life's flexible premiums.

Choosing the cash surrender nonforfeiture option means the owner:

1. Uses the cash value to buy a smaller, fully paid-up permanent policy
2. Keeps the full face amount as term insurance for a limited number of years
3. Takes the net cash value and ends the coverage ✓
4. Borrows against the cash value while leaving the policy in force

Why: Cash surrender pays the net cash value and terminates the policy.

A Kansas Medicare supplement policyholder misses a premium. Under K.S.A. 40-2221a, what must the insurer send before terminating, and what happens if the premium is then paid?

1. A notice within 30 days of the due date; payment within 30 days of its mailing reinstates the policy.
2. A notice within 45 days of the due date; payment within 10 days of its mailing reinstates the policy.
3. A notice within 45 days of the due date; payment within 45 days of its mailing reinstates the policy. ✓
4. No notice is required; the policy terminates at the end of the grace period.

Why: K.S.A. 40-2221a(a) forbids terminating a Medicare supplement policy for failure to pay premium unless the insurer SENDS THE INSURED A NOTICE, to the last address of record, saying the policy terminated for non-payment as of the due date. The envelope must carry, in BOLD-FACED TYPE IN A CONSPICUOUS PLACE ON THE FRONT, the words IMPORTANT - PREMIUM RENEWAL NOTICE ENCLOSED. The notice must be SENT NO LATER THAN 45 DAYS FOLLOWING THE DATE ON WHICH PREMIUM WAS DUE and must state the amount needed to reinstate and the time in which it must be remitted. On payment WITHIN 45 DAYS OF THE INSURER'S HAVING MAILED THE NOTICE, the policy is AUTOMATICALLY REINSTATED AS CONTINUOUS COVERAGE WITHOUT LAPSE - WITHOUT ANY NEW EXCLUSIONS, REDUCTIONS OR WAITING PERIODS AND WITHOUT PROOF OF INSURABILITY. Two 45s, running from different events.

In a cross-purchase buy-sell agreement funded with life insurance:

1. A bank holds the policies in trust until an owner retires fully
2. Each owner buys a policy on each of the other owners ✓
3. The business entity itself owns one policy on every individual owner
4. The policies must always be term insurance with no cash value

Why: In a cross-purchase plan, each owner owns a policy on each other owner; in an entity plan, the business owns the policies.

In a variable annuity, the contract value during the accumulation phase is held in:

1. Separate accounts whose value fluctuates with investment performance ✓
2. An escrow account managed by the state insurance department
3. The insurer's general account with a fully guaranteed minimum interest rate
4. A federally insured bank deposit account protected against any loss

Why: Variable annuity funds are in separate accounts (sub-accounts); the owner bears investment risk, unlike a fixed annuity's guaranteed general-account return.

How does Kansas regulate suitability in annuity transactions, and from when?

1. By a schedule of suitability standards written into the regulation, since 1974.
2. By adopting the NAIC annuity suitability model regulation, in force since 2010.
3. It does not; annuity suitability is left to federal securities regulation.
4. By adopting a Department policy and procedure by reference, effective 1 January 2024. ✓

Why: K.A.R. 40-1-53 provides that the Kansas insurance department's 'policy and procedure regarding suitability in annuity transactions,' INCLUDING THE APPENDICES, DATED JANUARY 10, 2023, is adopted by reference, and that the regulation is EFFECTIVE ON AND AFTER JANUARY 1, 2024. It implements K.S.A. 40-222, 40-2403, 40-2404, 40-2406, 40-2407 and 40-4916, so Kansas annuity suitability rests on the examination power, the unfair trade practices act and the producer licensing act together. The suitability standards themselves are in the adopted department document, not written out in the regulation, and the regulation does not adopt an NAIC model by its own terms.

The National Association of Insurance Commissioners (NAIC) primarily:

1. Sets and enforces nationwide insurance premium rates
2. Directly licenses every insurance producer in the United States
3. Develops model laws and standards that states may choose to adopt ✓
4. Pays claims when an insurance company becomes insolvent

Why: The NAIC is a coordinating body of state regulators that drafts model laws and promotes uniformity; it has no direct regulatory authority of its own.

An insured dies with a $20,000 policy loan outstanding. The beneficiary receives:

1. Nothing, because the loan voids the coverage
2. The full death benefit, with the loan forgiven entirely
3. Only the policy's remaining cash value
4. The death benefit minus the outstanding loan and any interest ✓

Why: An outstanding loan plus interest is deducted from the death benefit paid to the beneficiary.

In an annuity, the person whose life the income payments are based on is the:

1. Insurer
2. Annuitant ✓
3. Beneficiary
4. Owner

Why: The annuitant is the measuring life for payments; the owner controls the contract and the beneficiary receives any death proceeds.

Compared with an HMO, a PPO generally:

1. Is offered only to Medicare-eligible senior enrollees
2. Provides no coverage at all outside its provider network
3. Allows out-of-network care at higher cost without referrals ✓
4. Requires a primary care physician and referrals to specialists

Why: A PPO offers more flexibility: out-of-network care is covered at higher cost, with no gatekeeper or referrals required.

A 'free-look' provision in an individual health policy gives the insured the right to:

1. Examine other applicants' policies before buying their own
2. Return the policy within a set period for a full premium refund ✓
3. Cancel any single claim within ten days of filing it
4. Switch to a different insurer at no cost in the first year

Why: The free-look period (commonly 10 days, or longer for Medicare supplements) lets the insured return the policy for a full refund if not satisfied.

A beneficiary receives a $250,000 life insurance death benefit as a lump sum. For federal income tax, the beneficiary:

1. Owes tax only on amounts over $100,000
2. Owes no income tax on the death benefit ✓
3. Owes capital-gains tax on the full amount
4. Owes ordinary income tax on the full death benefit

Why: Life insurance death benefits paid as a lump sum are generally received income-tax-free.

An insurer's conduct on Kansas claims matches three of the practices listed in K.S.A. 40-2404(9). It happened once each, none of it deliberate, and no pattern is shown. Under that paragraph, what is the position?

1. Three unfair claim settlement practices are established, one for each matching paragraph.
2. One unfair claim settlement practice is established, because three matches show a pattern.
3. No unfair claim settlement practice is established, because neither threshold limb is met. ✓
4. The position depends on whether the insurer has been examined since the conduct occurred.

Why: Matching a lettered description is necessary but not sufficient. K.S.A. 40-2404(9) requires in addition that the conduct be committed FLAGRANTLY AND IN CONSCIOUS DISREGARD of the provisions, or WITH SUCH FREQUENCY AS TO INDICATE A GENERAL BUSINESS PRACTICE. Three isolated and unintentional lapses across three different paragraphs meet neither limb: frequency means repetition amounting to a general business practice, not a count of how many different descriptions the conduct touched. Whether the insurer has since been examined does not change the test.

In a typical dental plan, routine cleanings and exams fall under which category?

1. Orthodontic treatment subject to a separate lifetime maximum
2. Basic services such as fillings and routine tooth extractions
3. Major restorative services such as crowns, bridges, and full dentures
4. Preventive care ✓

Why: Preventive care (cleanings, exams, x-rays) is usually covered at the highest level; basic and major services and orthodontia follow with greater cost sharing.

In which annuity does the owner bear the investment risk, with values held in separate accounts?

1. Single-premium deferred fixed annuity
2. Fixed annuity
3. Immediate fixed annuity
4. Variable annuity ✓

Why: A variable annuity's value depends on separate-account performance; the owner bears investment risk, and a securities license is required to sell it.

Under K.S.A. 40-420, after how long must a Kansas life policy make a loan available on the security of the policy, at what maximum rate, and to which policies does the requirement not apply?

1. After two years' premiums, at not more than 6%, and not required in term insurance.
2. After three years' premiums, at not more than 8%, and not required in term insurance. ✓
3. After three years' premiums, at not more than 6%, and required in every form of policy.
4. After five years' premiums, at not more than 8%, and not required in participating policies.

Why: K.S.A. 40-420(5) requires a provision that AFTER THE PREMIUM SHALL HAVE BEEN PAID FOR THREE YEARS the company will, while the policy is in force, advance on proper assignment or pledge of the policy and on its sole security, at a specified rate of interest NOT TO EXCEED 8% PER ANNUM, a sum equal to, or at the insured's option less than, the amount required by K.S.A. 40-429. The company deducts existing indebtedness and any unpaid balance of the current year's premium, and may collect interest in advance to the end of the policy year. The provision is NOT required in TERM insurance, and does not apply to temporary or pure endowment insurance issued in exchange for lapsed or surrendered policies. The paragraph is expressly subject to K.S.A. 40-420a to 40-420d, the policy loan interest rate provisions.

Under the entire contract provision, the contract consists of the policy and:

1. The attached copy of the application for the policy ✓
2. A separate buyer's guide kept on file by the agent
3. The insurer's internal underwriting guidelines manual
4. Any verbal promises the producer made at the sale

Why: The entire contract is the policy plus the attached application; no outside documents can be incorporated by reference.

A 'moral hazard' in underwriting refers to:

1. A tendency toward dishonesty that increases the chance of a loss ✓
2. A physical condition of property that makes a loss more likely to occur
3. The actual cause of a loss, such as a fire, accident, or illness
4. Indifference or carelessness because insurance exists to cover losses

Why: A moral hazard arises from dishonesty (e.g., misrepresentation or fraud); a morale hazard is carelessness, a physical hazard is a tangible condition, and a peril is the cause of loss.

'Coercion' as an unfair trade practice occurs when someone:

1. Uses physical or economic pressure to force the purchase of insurance ✓
2. Charges two identical risks two different premium amounts
3. Replaces a policy at another insurer through misrepresentation
4. Offers a small gift not specified in the policy to close a sale

Why: Coercion uses force or intimidation (for example, a lender requiring a borrower to buy insurance from a particular insurer) to induce an insurance transaction.

An insured can no longer perform bathing, dressing, and toileting without help. Under a typical LTC policy requiring loss of 2 of 6 ADLs, benefits:

1. Are triggered, because at least two ADLs cannot be performed ✓
2. Are denied unless the insured cannot perform all six of the listed ADLs
3. Begin only after the insured reaches age 80
4. Require a physician to certify severe cognitive impairment as well

Why: Inability to perform 2 of the 6 ADLs (or severe cognitive impairment) triggers LTC benefits; here three ADLs are affected.

Insurers usually limit disability income benefits to about 60–70% of the insured's gross income in order to:

1. Guarantee the insurer a profit on every policy that is sold
2. Comply with a federal cap on all insurance benefit amounts
3. Match the benefit exactly to the insured's monthly expenses
4. Preserve the insured's financial incentive to return to work ✓

Why: Benefits are capped below full income (and are tax-free when individually paid) so the insured retains a financial incentive to recover and return to work.

The 'needs approach' to setting the amount of life insurance focuses on:

1. The projected cash value the policy is expected to build over twenty years
2. The total dollar amount of premium the applicant is willing to pay monthly
3. A simple fixed multiple of the insured's current gross annual salary
4. The family's actual financial obligations and goals ✓

Why: The needs approach totals the specific obligations and goals the coverage must fund, versus the human-life-value (income multiple) approach.

A Kansas annual dividend life policy offers several dividend options. Under K.S.A. 40-420, what right does the insured have, and what must the policy do about a failure to choose?

1. A right to take the dividend in cash each year, and the policy must name a default option. ✓
2. A right to take the dividend in cash each year, with unelected dividends accumulating.
3. A right to choose among the options offered, but no right to insist on cash.
4. A right to take cash only in the first two policy years, then the insurer elects.

Why: K.S.A. 40-420(4) requires a participating policy provision and then gives the insured under any ANNUAL DIVIDEND policy the right EACH YEAR to have the dividend paid IN CASH. Where the policy offers other dividend options it must also provide WHICH OPTION IS EFFECTIVE if the insured does not elect one on or before the expiration of the grace period for the premium - so the default is a matter for the contract, not for the insurer's later choice. The paragraph does not apply to paid-up, temporary or pure endowment insurance issued in exchange for lapsed or surrendered policies, or to nonparticipating policies.

A $2,000 covered expense goes to two plans; the primary pays $1,500. Under coordination of benefits, the secondary pays up to:

1. $500 ✓
2. $1,500
3. $2,000
4. $1,000

Why: COB caps total payment at the actual expense; the secondary pays the remaining $500.

A Kansas accident and sickness policyholder is told by the selling agent that a policy exclusion will not be applied to them. Under the entire contract provision required by K.S.A. 40-2203, what is the effect?

1. The waiver binds the insurer, the agent having apparent authority to give it.
2. The waiver binds the insurer if the policyholder relied on it to their detriment.
3. The waiver binds the insurer unless the policy expressly forbids oral variations.
4. None; no agent has authority to change the policy or waive any of its provisions. ✓

Why: The provision required by K.S.A. 40-2203(A)(1) is captioned 'Entire contract; changes' and does three things. It makes the policy, the endorsements and the attached papers THE ENTIRE CONTRACT OF INSURANCE. It provides that NO CHANGE IN THE POLICY SHALL BE VALID UNTIL APPROVED BY AN EXECUTIVE OFFICER OF THE INSURER, and unless that approval is ENDORSED ON OR ATTACHED TO the policy. And it closes with the sentence that settles the point: NO AGENT HAS AUTHORITY TO CHANGE THIS POLICY OR TO WAIVE ANY OF ITS PROVISIONS. That sentence is in the policy by force of statute, so the answer resting on the policy being silent about oral variations cannot arise, and neither apparent authority nor reliance overrides it.

A return-of-premium (ROP) term policy:

1. Pays double the original face amount if the insured dies within the first ten policy years
2. Returns a portion of the death benefit to the insurer when the insured dies
3. Automatically converts into a whole life contract at the end of the level term period
4. Refunds the premiums paid if the insured outlives the level term ✓

Why: ROP term refunds the premiums paid if the insured survives the level term period.

Under a disability policy's 'waiver of premium' provision, premiums are waived:

1. Only if the insured is hospitalized as an inpatient for the loss
2. After the insured has been totally disabled for a set waiting period ✓
3. For the entire class of insureds whenever claims rise sharply
4. Immediately on the first day the insured reports being unwell

Why: After a qualifying waiting period of continuous total disability, premiums are waived (often retroactively) while disability continues.

In an equity-indexed annuity, the 'cap rate' is the:

1. Maximum interest rate credited even if the index rises more ✓
2. Share of the index gain that the insurer credits to the contract
3. Guaranteed minimum rate credited when the index loses value in a year
4. Fee deducted on surrender in year one

Why: The cap is the ceiling on credited interest; the participation rate sets the share of the gain and the floor sets the minimum.

A Social Insurance Supplement (SIS) rider on a disability policy pays a benefit:

1. As a permanent addition paid on top of the insured's full Social Security check
2. Only once Social Security has approved the claim and the first federal check arrives
3. Only to insureds with no Social Security work credits, since others are covered federally
4. When the insured is disabled but Social Security benefits are not yet payable ✓

Why: An SIS rider supplements income when the insured is disabled but Social Security disability is denied or not yet being paid.

Long-term care policies commonly cover care in settings other than nursing homes, including:

1. Home health care, adult day care, and assisted living ✓
2. Just short-term rehabilitation after a surgery
3. Only acute-care hospitals and emergency rooms
4. Exclusively the insured's own private residence

Why: Modern LTC policies cover a range of settings — home health, adult day care, assisted living, and respite care — not only nursing homes.

K.S.A. 40-239 defines an insurance agent. On what does that definition turn?

1. Written authorisation from a company to negotiate or effect contracts on its behalf. ✓
2. Receipt of commission from the company on business the person places with it.
3. Holding a licence issued by the commissioner, whatever authority the company has given.
4. Soliciting insurance from the public, whether or not any company has authorised the person to do so.

Why: K.S.A. 40-239 defines an insurance agent as AN INDIVIDUAL, CORPORATION, ASSOCIATION, PARTNERSHIP OR OTHER LEGAL ENTITY AUTHORIZED IN WRITING, BY ANY INSURANCE COMPANY OR HEALTH MAINTENANCE ORGANIZATION lawfully qualified to transact business in this state, TO NEGOTIATE OR EFFECT CONTRACTS OF INSURANCE, SURETYSHIP OR INDEMNITY ON BEHALF OF such company - and also as ANY MEMBER OF A PARTNERSHIP OR ASSOCIATION, OR ANY STOCKHOLDER, OFFICER OR AGENT OF A CORPORATION, permitted by law to negotiate or effect such contracts WHERE THAT ENTITY HOLDS A DIRECT AGENCY APPOINTMENT from a company. The hinge is the company's WRITTEN AUTHORISATION, not the licence and not the commission. The section closes with the consequence: ALL SUCH AGENTS SHALL THEREBY BECOME LIABLE TO ALL THE DUTIES, REQUIREMENTS, LIABILITIES AND PENALTIES AS PROVIDED IN THIS CODE. K.S.A. 40-4902 defines the same words differently for the uniform insurance agents licensing act, where the test is being required to be licensed.

A nonqualified annuity owner (age 45) surrenders the contract for a $30,000 gain. The tax consequence is:

1. Ordinary income tax on the $30,000 plus a 10% penalty ✓
2. Tax-free treatment, because the entire surrender is a return of premiums already taxed to the owner
3. A 10% penalty but no income tax
4. Capital-gains tax on the $30,000 only

Why: Annuity gain is ordinary income; surrender before 59½ also triggers the 10% premature-distribution penalty.

Under a group AD&D plan, the 'capital sum' is the amount paid for:

1. Voluntary surrender of the certificate for its accumulated cash value
2. A covered dismemberment, such as loss of a hand, foot, or sight ✓
3. Any illness-related hospital stay that lasts longer than one week
4. The accidental death of the insured employee while actively at work

Why: The capital sum is a stated percentage of the principal sum, paid for a covered dismemberment (e.g., loss of a limb or sight); the principal sum is paid for accidental death.

A field representative appointed by the Kansas commissioner of insurance receives a consumer complaint about an insurer, and wants both to investigate the complaint and to examine the insurer's affairs and financial condition. What does K.S.A. 40-110 permit that representative to do?

1. Inquiry and investigation, yes; making or directing an examination of the insurer, no. ✓
2. Both, since receiving a complaint and examining an insurer are treated as the same function.
3. Neither, without the prior written authorisation of the assistant commissioner of insurance.
4. The examination, yes; receiving a complaint from a consumer directly, no.

Why: Section 40-110(a) empowers field representatives to conduct inquiries and investigations and to receive complaints, and then withholds one thing from them in terms: they shall not be empowered to make, or direct to be made, an examination of the affairs and financial condition of any insurance company in the process of organization, applying for admission, or doing business in this state. The line is drawn between investigating a complaint and examining a company's condition, and no authorisation within the department moves it.

Choosing a longer elimination period on a disability policy generally results in:

1. A shorter benefit period
2. A higher monthly benefit
3. A waiver of the first claim
4. A lower premium ✓

Why: A longer elimination period shifts more short-claim cost to the insured, lowering the premium.

The provision that automatically uses available cash value to pay a premium not paid by the end of the grace period is the:

1. Paid-up addition
2. Reinstatement provision
3. Automatic premium loan ✓
4. Accelerated benefit

Why: The automatic premium loan provision borrows against cash value to cover an unpaid premium, preventing a lapse.

Contributions an employer makes to a qualified retirement plan are generally:

1. Tax-deductible to the employer ✓
2. Nondeductible until the employee actually retires and takes a distribution
3. Limited to whatever the employee personally chooses to contribute first
4. Taxed twice, once to the employer and again to the participating employee

Why: Qualified plan contributions are deductible to the employer and grow tax-deferred; the employee is taxed on distributions.

'Twisting' is an unfair trade practice defined as:

1. Using misrepresentation to induce a client to replace an existing policy ✓
2. Charging two clients different premiums for identical coverage by mistake
3. Sharing a small portion of one's commission with a licensed co-agent
4. Recommending the lowest-cost policy a client genuinely qualifies for

Why: Twisting is inducing a policy replacement through misrepresentation or incomplete comparisons; doing so within the same insurer is called churning.

A group of affiliated insurers is billed its annual assessment for the Kansas insurance department service regulation fund and does not pay it. Under K.S.A. 40-112, when does the payment become past due, and what penalty attaches?

1. Past due after 30 days from the billing date; a penalty of 5% of the amount assessed.
2. Past due after 45 days from the billing date; a penalty of 10% of the amount assessed. ✓
3. Past due after 60 days from the billing date; a penalty of 15% of the amount assessed.
4. Past due after 90 days from the billing date; a penalty of 25% of the amount assessed.

Why: Section 40-112(e) makes an assessment past due if it is not paid to the insurance department within 45 days of the billing date, imposes a penalty equal to 10% of the amount assessed on any past due payment, and then provides that the total of the assessment and the penalty bears interest at 1.5% per month or any portion of a month. Note that the interest runs on the assessment and the penalty together, not on the assessment alone.

At the end of a group insurance policy year a Kansas insurer readjusts the rate of premium on the basis of the loss and expense experience under the policy. Under K.S.A. 40-2404, what does the rebate paragraph permit?

1. The readjustment, made retroactive for as many prior years as the experience covers.
2. The readjustment, made retroactive only for that policy year. ✓
3. The readjustment prospectively only; no retroactive adjustment is ever permitted.
4. Nothing; a group premium readjustment is a rebate however it is calculated.

Why: K.S.A. 40-2404 paragraph (8)(b)(iii) excepts the readjustment of the rate of premium for a GROUP insurance policy based on the loss or expense experience under it, at the end of the first or any subsequent policy year - and limits it in one respect: the readjustment 'may be made retroactive only for such policy year'. So retroactivity is permitted but confined to the single year whose experience justified it. The exception is for group policies; it does not reach individual contracts.

In an equity-indexed annuity, the 'participation rate' determines:

1. The fixed monthly income the annuitant will receive after annuitizing
2. The percentage surrender charge applied during the first contract year
3. The minimum guaranteed interest rate paid in a year of market losses
4. How much of the index's gain is credited to the contract ✓

Why: The participation rate sets the share of the index increase credited; a cap may further limit it, and a floor (often 0%) prevents loss.

A cost-of-living (COLA) rider on a life insurance policy:

1. Lowers the premium automatically whenever consumer prices fall
2. Refunds a portion of premiums during years of high inflation rates
3. Converts the death benefit into an inflation-indexed annuity at death
4. Periodically increases the death benefit to keep pace with inflation ✓

Why: A life COLA rider raises the face amount at intervals (tied to an inflation index) so the death benefit retains its purchasing power; premiums rise with the added coverage.

A point-of-service (POS) plan member who self-refers out of network will typically:

1. Pay higher cost-sharing than for in-network, gatekept care ✓
2. Pay the same $20 copay as for in-network care
3. Be disenrolled from the plan for bypassing the primary care gatekeeper
4. Receive no benefits at all for that visit

Why: A POS plan combines HMO and PPO features: in-network care needs a gatekeeper referral, while out-of-network self-referral is allowed at higher cost.

Custodial care under a long-term care policy refers to:

1. Emergency treatment provided in a hospital intensive-care unit
2. Help with daily living activities, not requiring medical skill ✓
3. Around-the-clock care delivered only by registered nurses
4. Short-term rehabilitation following a hospital stay

Why: Custodial care assists with activities of daily living (bathing, dressing, eating) and does not require medical training; skilled care does.

A key feature of convertible term insurance is that it can be changed to a permanent policy:

1. Only if the insured becomes totally disabled first
2. Only after a new medical exam confirms insurability
3. Only during the first policy year
4. Without providing evidence of insurability ✓

Why: Convertible term can be converted to permanent coverage without evidence of insurability.

On written application by an individual agent, K.S.A. 40-4903 lets the commissioner extend the time within which to fulfil the minimum continuing education requirements in two kinds of case. What are they, and what is the longest extension available?

1. Medical hardship or military service, for not more than 90 days.
2. Extreme financial hardship or military service, for not more than 180 days.
3. Medical hardship or military service, for not more than 180 days. ✓
4. Any hardship the commissioner accepts, for not more than one full biennium.

Why: Section 40-4903(e)(4) confines the extension to cases involving MEDICAL HARDSHIP OR MILITARY SERVICE, requires a written application from the agent, and caps it at a period not to exceed 180 days. Financial hardship is not a ground for this extension - 'extreme hardship' appears elsewhere in the section, at (e)(2), and there it goes to waiver of the $100 penalty rather than to extra time for the credits themselves. The reserve-forces exemption and extension in subsection (c)(5) are a separate route with its own trigger.