Michigan Life & Health Insurance License, Practice Exams

Under Section 2038, in addition to a monetary penalty, the director may suspend or revoke a person's license or certificate of authority in what circumstance?

1. For any single violation of the chapter, whether or not the person knew of the violation
2. Only if an affected consumer files a written complaint with the director within 30 days
3. If the person knowingly and persistently violated a provision of the chapter ✓
4. Only after three separate hearings

Why: Sec. 2038(1)(b) authorizes suspension or revocation of the person's license or certificate of authority if the person knowingly and persistently violated a provision of the chapter.

A health policy with monthly premiums has a grace period of 10 days. A premium is 8 days late when the insured incurs a covered loss. The insurer:

1. Pays half of the benefit and bills the insured for the two months of overdue premium
2. Rescinds coverage back to the paid-to date and refunds the unearned premium to the insured
3. Denies the claim, since coverage lapsed on the due date
4. Covers the loss, since the policy is still in force during the grace period ✓

Why: Coverage continues during the grace period; the claim is paid (the overdue premium may be deducted).

A terminally ill insured uses the policy's accelerated death benefit. The amount received:

1. Is added on top of the full death benefit at death
2. Must be repaid with interest before the insured dies
3. Converts the policy into a long-term care annuity
4. Reduces the death benefit later paid to the beneficiary ✓

Why: Accelerated benefits advance part of the face amount to a qualifying insured; the death benefit payable later is reduced accordingly (and the advance is generally tax-free).

Under section 1244(1), an order requiring payment of civil fines must NOT exceed what aggregate amount?

1. $10,000.00
2. $25,000.00
3. $50,000.00 ✓
4. $100,000.00

Why: Section 1244(1)(a) provides that an order under this subsection must not require the payment of civil fines exceeding $50,000.00.

Under a presumptive disability provision, the insured is presumed totally disabled (and paid full benefits) upon:

1. Any short illness expected to resolve within a single week
2. Total loss of sight, hearing, speech, or two limbs ✓
3. Reaching the policy's stated benefit-period maximum age
4. Voluntary early retirement from a physically demanding job

Why: Presumptive disability pays full benefits for specified losses (sight, hearing, speech, or two limbs) even if the insured is able to work.

Medicare Part A 'lifetime reserve days' are:

1. Unlimited days of fully covered skilled nursing facility care
2. 60 extra hospital days usable once over the beneficiary's lifetime ✓
3. Days the beneficiary may transfer to a spouse or dependent
4. Renewed automatically at the start of every new benefit period

Why: After 90 days in a benefit period, a beneficiary may draw on 60 lifetime reserve days (with higher coinsurance); once used, they are not replaced.

A $1,000 covered expense is submitted to two health plans. The primary plan pays $800. Under coordination of benefits, the secondary plan typically pays:

1. $200 ✓
2. $800
3. $1,000
4. $0

Why: COB limits total payment to 100% of the expense; the secondary plan pays the remaining $200, not a duplicate benefit.

Under the 'accumulate at interest' dividend option, dividends:

1. Are applied to reduce the amount of the next premium
2. Are left on deposit to earn interest, which is taxable ✓
3. Are used to buy small amounts of paid-up additions
4. Are mailed to the policyowner as a cash check yearly

Why: Dividends are retained to earn interest; the dividend itself is a return of premium, but the interest earned is taxable.

Under MCL 500.4037, for a universal life policy the insurer must send written notice of impending termination to the policyowner's last known address at least how many days before termination?

1. 15 days
2. 30 days ✓
3. 45 days
4. 60 days

Why: MCL 500.4037(g) requires written notice be sent to the policyowner's last known address at least 30 days prior to termination of coverage.

Standardized Medicare Supplement (Medigap) plans are labeled:

1. By the beneficiary's state of residence
2. With letters such as A through N ✓
3. With numbers 1 through 10
4. By the insurer's own brand names

Why: Medigap plans are standardized by letter (A–N in most states); the same letter offers the same core benefits across insurers.

The 'conformity with state statutes' provision states that any policy provision in conflict with the law of the state where the insured lives is:

1. Enforceable exactly as written, since the parties' own agreement overrides state insurance law
2. Grounds for the insurer to cancel the policy
3. Void, voiding the entire policy back to its issue date
4. Automatically amended to meet the minimum requirements of that statute ✓

Why: This provision deems any conflicting provision amended to conform to the minimum statutory requirements of the insured's state.

'Rebating' generally refers to:

1. Refunding the unearned premium when a policy is properly cancelled
2. Charging a higher premium to a substandard, higher-risk applicant
3. Returning a claim overpayment to the insurer after a billing error
4. Offering something of value not in the contract to induce a sale ✓

Why: Rebating is giving a prospect any inducement (such as part of the commission or a gift) not specified in the policy to persuade them to buy; it is illegal in most states.

A person under age 65 qualifies for Medicare immediately (no 24-month wait) if they have:

1. Reached full retirement age early
2. Enrolled in a Medigap policy
3. Any pre-existing chronic condition
4. End-stage renal disease or ALS ✓

Why: ESRD (with conditions) and ALS confer Medicare eligibility without the 24-month disability waiting period.

The key difference between a defined benefit and a defined contribution plan is that a defined benefit plan:

1. Is always funded entirely by employee salary deferrals alone
2. Can never be offered by a private for-profit employer
3. Specifies only the contributions going in, leaving the participant's final retirement benefit uncertain
4. Promises a specific retirement benefit, with the employer bearing the funding risk ✓

Why: A defined benefit plan guarantees a stated benefit (employer bears investment risk); a defined contribution plan defines inputs, and the benefit depends on account performance.

As worded in MCL 500.3408(1)(a)(i), and as an insurer may print it for uniform use in several states, the TIME LIMIT ON CERTAIN DEFENSES provision bars use of a non-fraudulent misstatement in the application after how many years from the date of issue?

1. 1 year
2. 4 years
3. 5 years
4. 3 years ✓

Why: MCL 500.3408(1)(a)(i) words the provision as 'After 3 years from the date of issue of this policy', and Sec. 3408(2) lets insurers print '3 years' for uniform use; for a policy delivered or issued for delivery in Michigan, however, the actual time limit must not exceed 2 years.

An automatic premium loan provision is designed to:

1. Refund all premiums if the insured is never disabled or ill
2. Automatically increase the death benefit each policy anniversary
3. Lend the policyowner the full face amount on demand at any time
4. Pay an overdue premium from the cash value to prevent a lapse ✓

Why: If a premium is unpaid at the end of the grace period, the APL provision automatically borrows from the cash value to keep the policy in force.

For purposes of the Michigan ILLEGAL OCCUPATION OR CRIMINAL ACTIVITY provision, which of the following does 'willful criminal activity' NOT include?

1. Operating a vehicle while intoxicated in violation of the Michigan Vehicle Code
2. Operating a methamphetamine laboratory
3. A civil infraction that does not rise to the level of a misdemeanor or felony ✓
4. Commission of a felony, or an attempt to commit one

Why: MCL 500.3452(2)(b) provides that 'willful criminal activity' does not include a civil infraction or other activity that does not rise to the level of a misdemeanor or felony. Section 3452(2)(a) lists intoxicated driving and operating a methamphetamine laboratory as included examples.

In which policy does the owner bear the investment risk, with cash value fluctuating based on separate-account performance?

1. Whole life
2. Term life
3. Variable life ✓
4. Universal life

Why: Variable life invests cash value in separate accounts; the owner bears investment risk, so cash value (and sometimes death benefit) can rise or fall. It requires a securities license to sell.

Retirement plan 'catch-up' contributions allow individuals to contribute additional amounts once they reach age:

1. 50 ✓
2. 40
3. 59 and one half
4. 65

Why: Participants age 50 and older may make catch-up contributions above the standard annual limits to IRAs and employer plans.

Compared with a life-only annuity, an installment refund annuity:

1. Stops all payments the moment the annuitant dies, leaving nothing to anyone
2. May be purchased only with a single lump-sum premium paid at retirement
3. Guarantees total payments at least equal to the premium ✓
4. Always pays a higher monthly amount than every other available payout option

Why: A refund annuity guarantees that payments (to the annuitant plus beneficiary) total at least the premium paid; life-only pays the most but stops at death.

An insured with a $100,000 policy dies during the grace period while owing a $200 premium. The beneficiary receives:

1. $99,800 ✓
2. $100,000
3. $0
4. $50,000

Why: Coverage stays in force during the grace period; the claim is paid with the overdue premium deducted: $100,000 − $200 = $99,800.

An applicant wants coverage that pays an increasing death benefit to keep pace with inflation. The best choice is a policy or rider providing:

1. A return-of-premium rider refunding paid premiums
2. A cost-of-living (increasing) benefit ✓
3. A level face amount for life
4. Decreasing term matched to a mortgage balance

Why: A cost-of-living/increasing benefit raises the death benefit over time to offset inflation.

Adjustable life insurance allows the policyowner to:

1. Change the premium, face amount, or coverage type as needs change ✓
2. Receive the death benefit in cash while the insured is still living
3. Invest the cash value directly in mutual funds they personally select
4. Skip underwriting entirely no matter how much coverage is added

Why: Adjustable life lets the owner modify the premium, face amount, and protection period (shifting between term and permanent) as circumstances change.

Under the optional Michigan OTHER INSURANCE IN THIS INSURER provision, when aggregate indemnity from like policies issued by the same insurer exceeds the stated maximum limit, what happens to the excess insurance?

1. The excess remains valid but pays only after the other policy's limit is used
2. The excess insurance is void and premiums paid for the excess are returned ✓
3. The excess is converted into paid-up coverage with no further premium due
4. The insurer doubles the premium on the excess coverage

Why: MCL 500.3436 provides that the excess insurance is void and all premiums paid for that excess are returned to the insured or the insured's estate.

In addition to a cease and desist order, section 1244 permits the director to order which of the following?

1. Imprisonment of the violator for not more than 90 days in the county jail
2. Deportation proceedings against a nonresident producer
3. Restitution to the insured or claimant to cover incurred losses, damages, or other harm ✓
4. Forfeiture of the violator's personal assets to the regulatory fund

Why: Section 1244(1)(c) permits the director to order that restitution be made to the insured or other claimant to cover incurred losses, damages, or other harm attributable to the violation (and (b) a refund of overcharges, (d) suspension/revocation).

Medicare Part D provides coverage for:

1. Inpatient hospital, skilled nursing facility, and hospice care
2. Routine dental, vision, and hearing-aid services for enrollees
3. Long-term custodial care provided in a nursing facility
4. Outpatient prescription drugs ✓

Why: Part D covers outpatient prescription drugs, offered through private plans.

A client wants a guaranteed income they cannot outlive, accepting that payments stop at death with nothing to heirs. The option offering the highest payment is:

1. Life with 20-year period certain
2. Joint and survivor annuity
3. Straight life (pure life) annuity ✓
4. Installment refund annuity

Why: Pure life pays the most because payments cease at death with no refund or survivor benefit; the other options pay less to protect a beneficiary.

An annuitant has a $30,000 basis and a $120,000 expected return. Of each $6,000 payment, the taxable amount is:

1. $4,500 ✓
2. $1,500
3. $6,000
4. $3,000

Why: Exclusion ratio = 30,000/120,000 = 25%; $1,500 excluded, $4,500 taxable.

Under section 1247, within what period after the final disposition of an administrative action taken against a producer in another jurisdiction must the producer report it to the commissioner?

1. Within 30 days after final disposition ✓
2. Within 15 days after final disposition
3. Within 60 days after final disposition
4. Within 90 days after final disposition

Why: Section 1247(1) requires a producer to report any administrative action taken in another jurisdiction, or by another governmental agency in this state, within 30 days after the final disposition of the matter, including a copy of the order, consent to order, or other relevant legal documents.

Section 2020 prohibits unfair discrimination in accident or health insurance. It bars unfair discrimination between individuals of the same class and essentially the same hazard with respect to what?

1. The premium, membership or policy fees, rates, benefits payable, or any terms or conditions of the contract ✓
2. Only the amount of premium charged, and not membership fees or policy fees
3. Only the producer assigned to service the policy after issue
4. Only the underwriting questionnaire used at application, and not the rates or benefits ultimately payable

Why: Sec. 2020 prohibits unfair discrimination between individuals of the same class and essentially the same hazard in the amount of premium, membership or policy fees, or rates, in the benefits payable, or in any of the terms or conditions of the accident or health contract.

Credit life insurance is typically written as:

1. A variable policy whose benefit rises and falls with interest rates
2. Whole life insurance with a growing cash value that the borrower may freely access at any time
3. Decreasing term equal to the outstanding loan balance, payable to the creditor ✓
4. Level term naming the borrower's family as the primary beneficiary

Why: Credit life is decreasing term tied to the loan balance; if the borrower dies, it pays the remaining debt to the creditor.

Under MCL 500.2027, refusing to insure or continue to insure an individual or risk solely because the applicant was previously denied coverage by another insurer is:

1. An unfair method of competition / unfair practice ✓
2. Permitted underwriting prudence
3. Allowed only for property insurance
4. Permitted if the prior denial was for fraud

Why: Sec. 2027(b) makes it an unfair practice to refuse to insure or continue to insure an individual or risk solely because the insured or applicant was previously denied coverage by an insurer.

A 'bonus' annuity credits an extra percentage to the premium up front but usually comes with:

1. No surrender charges at all
2. Immediate tax-free withdrawals
3. A longer surrender-charge period ✓
4. A guaranteed doubling of the account

Why: Bonus annuities add an upfront credit but typically offset it with longer or higher surrender charges and sometimes lower base rates.

An owner returns a newly issued policy on day 8 of a 10-day free-look period. The insurer must:

1. Keep the first month's premium
2. Refund all premiums paid ✓
3. Charge a cancellation fee
4. Refund half of the premium only

Why: During the free-look period the owner may return the policy for a full refund of premiums paid.

Under MCL 500.3708, the dependent special enrollment period made available for marriage, birth, or adoption must be a period of at least how many days?

1. 30 days ✓
2. 10 days
3. 20 days
4. 60 days

Why: MCL 500.3708(4) provides the dependent special enrollment period shall be a period of not less than 30 days.

Under Section 2006, a provider must bill the health plan within what period after the date of service (or discharge) for a claim to qualify as a clean claim?

1. 90 days
2. 6 months
3. 1 year ✓
4. 2 years

Why: Sec. 2006(8)(f) requires the provider to bill the health plan within 1 year after the date of service or date of discharge in order for a claim to be a clean claim.

An annuitant has a $60,000 cost basis and a $120,000 expected return. Of each $12,000 annual payment, the taxable portion is:

1. $6,000 ✓
2. $3,000
3. $12,000
4. $0

Why: Exclusion ratio = 60,000/120,000 = 50%; $6,000 of each $12,000 payment is excluded and $6,000 is taxable.

The Medicare Part D Low-Income Subsidy ('Extra Help') assists eligible beneficiaries with:

1. Premiums for a private Medicare Supplement policy
2. Prescription drug costs such as premiums and copays ✓
3. The cost of long-term custodial nursing-home care
4. Hospital room-and-board charges under Part A

Why: Extra Help (LIS) lowers Part D premiums, deductibles, and copays for beneficiaries with limited income and resources.

A distinguishing feature of adjustable life insurance is that the owner can:

1. Only ever convert it into a fixed single-premium immediate annuity
2. Invest the cash value directly in stocks and bonds of their choosing
3. Receive guaranteed dividends regardless of the insurer's experience
4. Change the premium, face amount, or coverage period as needs change ✓

Why: Adjustable life lets the owner modify premium, face amount, and protection period, effectively shifting between term and permanent coverage.

After issue, a rider that REDUCES or eliminates benefits in a Michigan LTC policy (other than one effectuating the insured's written request) requires what?

1. Signed acceptance by the insured individual ✓
2. No action by the insured
3. Approval only by the commissioner
4. A 30-day waiting period

Why: MCL 500.3923(1) requires that riders or endorsements added after issue that reduce or eliminate benefits require signed acceptance by the insured individual.

Dividends on a participating policy are left to accumulate at interest. For tax purposes:

1. Only the dividend is taxable; the interest is not
2. Both the dividend and the interest it earns are reported as ordinary income
3. Neither the dividend nor the interest is taxable
4. The interest earned is taxable, but the dividend itself is not ✓

Why: Policy dividends are a nontaxable return of premium; the interest they earn while on deposit is taxable.

An out-of-pocket maximum is reached. For the rest of the plan year, the plan pays:

1. Only 50% of further covered expenses
2. Nothing further until the next year
3. Only the deductible amount again
4. 100% of covered, in-network expenses ✓

Why: Once the out-of-pocket maximum is met, the plan covers 100% of further covered in-network expenses for the remainder of the year.

A contributory group life plan, in which employees pay part of the premium, generally requires:

1. 100% of all eligible employees to enroll in the plan
2. Only the highly compensated employees to participate
3. No minimum level of employee participation at all
4. At least 75% of eligible employees to participate ✓

Why: Contributory plans typically require at least 75% participation, while noncontributory (employer-paid) plans require 100%.

For a Michigan disability insurance policy other than a health insurance policy, the time limit for the defenses in the TIME LIMIT ON CERTAIN DEFENSES or INCONTESTABLE provision must not exceed what period, even if the policy form prints a longer term?

1. 1 year
2. 2 years ✓
3. 3 years
4. 5 years

Why: MCL 500.3408(2) lets an insurer print '3 years' in the provision so that it can use a uniform policy in several states, but notwithstanding any contract provision, the time limits for these defenses in a policy delivered or issued for delivery in Michigan must not exceed 2 years.

An inflation protection feature in a long-term care policy:

1. Gradually shortens the policy's elimination period after each year in force
2. Raises the benefit over time to offset rising costs ✓
3. Guarantees that the insurer can never increase the policy's premium rate
4. Refunds a part of the premium if long-term care services are never needed

Why: Inflation protection increases the daily/monthly benefit over time so coverage keeps pace with rising long-term care costs.

The McCarran-Ferguson Act established that the insurance business is primarily regulated by:

1. A single federal insurance agency in Washington
2. International treaty organizations and trade bodies
3. The individual states ✓
4. The Internal Revenue Service and the U.S. Treasury

Why: McCarran-Ferguson (1945) affirmed that regulation of insurance is left to the states, except where federal law specifically applies.

The cash value in a permanent life insurance policy accumulates:

1. As taxable income each year
2. Tax-free with no conditions
3. Only when dividends are paid
4. Tax-deferred ✓

Why: Cash value grows tax-deferred while the policy is in force.

An insured returns to work, then becomes disabled again from the same cause five months later. Under a recurrent disability provision (six-month period), the insured:

1. Receives only half of the original monthly benefit
2. Continues the prior claim with no new elimination period ✓
3. Loses all coverage for that recurring condition
4. Must satisfy a brand-new elimination period first

Why: A recurrence from the same cause within the stated period is treated as a continuation, so no new elimination period applies.

An insurer terminating a producer relationship for a reason listed in section 1239 must notify the commissioner within what period following the effective date of termination?

1. Within 15 days
2. Within 60 days
3. Within 30 days ✓
4. Within 90 days

Why: Section 1208b(1) requires the insurer to notify the commissioner within 30 days following the effective date of termination when the reason is one listed in section 1239.

A modern whole life policy 'matures' (endows) when the:

1. Policyowner first takes a loan against the cash value
2. Insured makes the final scheduled premium payment
3. The policy has been continuously in force for a period of exactly twenty full years
4. Insured reaches the maturity age and the cash value equals the face amount ✓

Why: At the maturity age (commonly 121, formerly 100), the cash value equals the face amount and the policy endows, paying the face to a living insured.

A tax-sheltered annuity (TSA / 403(b)) is available to employees of:

1. Only for-profit corporations listed on a stock exchange
2. Public schools and certain tax-exempt nonprofit organizations ✓
3. Any employer, with no limits on annual contribution amounts
4. Federal agencies exclusively, in place of Social Security

Why: 403(b) tax-sheltered annuities are for employees of public schools and 501(c)(3) tax-exempt organizations; contributions are pre-tax and grow tax-deferred.

An applicant placed in a 'substandard' risk class will:

1. Receive a premium discount
2. Pay a higher-than-standard premium ✓
3. Be automatically declined
4. Get a guaranteed-issue policy

Why: Substandard (rated) risks present higher mortality risk and pay an increased premium.

What is the minimum length of the 1-time long-term care training course required under section 1204f?

1. 4 hours
2. 6 hours
3. 8 hours ✓
4. 12 hours

Why: Section 1204f(5) provides the 1-time long-term care training course must not be less than 8 hours.

An insurer marketing Medicare supplement coverage in Michigan must establish marketing procedures to ensure what about its agents' policy comparisons?

1. That every comparison an agent makes will favor the insurer's own policy forms over competing ones
2. That comparisons are delivered orally only, never in writing
3. That any comparison of policies by its agents will be fair and accurate ✓
4. That a copy of each comparison is filed with the director

Why: MCL 500.3835(1)(a) requires marketing procedures to ensure that any comparison of policies by agents is fair and accurate.

In a variable annuity, the contract value is measured in accumulation units during the pay-in phase and in ___ during the payout phase.

1. Annuity units ✓
2. Guaranteed dollars
3. Surrender shares
4. Mortality credits

Why: During accumulation the value is tracked in accumulation units; at annuitization it converts to a fixed number of annuity units whose dollar value varies.

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 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.

A producer offers a prospect free airline tickets, not part of the policy, to induce the purchase. This is:

1. A permissible marketing gift
2. Rebating ✓
3. Defamation
4. Twisting

Why: Offering an inducement not specified in the policy to persuade a purchase is rebating, prohibited in most states.

An insured needs help with bathing and dressing but is otherwise alert. The level of care required is:

1. Skilled nursing care
2. Acute hospital care
3. Custodial care ✓
4. Intensive care

Why: Assistance with ADLs that does not require medical skill is custodial care; skilled care requires licensed medical professionals.

Under section 1242, what must the commissioner do if an applicant for a solicitor, counselor, or adjuster license fails to meet chapter 12's requirements?

1. Refuse to grant the license, with written notice setting forth the basis ✓
2. Issue the license on a conditional basis for 12 months and require the applicant to cure the deficiency before renewal
3. Issue a temporary license valid for 90 days
4. Refer the application to the Attorney General

Why: Section 1242(1) requires the commissioner to refuse to grant the license, with written notice setting forth the basis; the applicant may request a hearing within 30 days after mailing of the refusal.

Long-term care policy benefits are commonly triggered when the insured is unable to perform a specified number of:

1. Prescription drug refills scheduled in a calendar month
2. Hours of paid work in a normal 40-hour work week
3. Activities of daily living (ADLs) ✓
4. Routine physician office visits in a calendar year

Why: Benefits typically trigger on inability to perform 2 of 6 ADLs (or severe cognitive impairment).

A resident individual applying for an insurance producer license must do what before being licensed, unless exempt under section 1206b?

1. Post a surety bond
2. Complete 40 hours of CE
3. Obtain an attorney's certification
4. Pass a written examination ✓

Why: Section 1204(1) provides that a resident individual applying for an insurance producer license shall pass a written examination unless exempt pursuant to section 1206b.

A cost-of-living adjustment (COLA) rider on a disability income policy:

1. Refunds part of the premium if the insured is never disabled at all
2. Lowers the policy's premium automatically each and every year that the coverage stays in force
3. Increases the monthly benefit during a long claim to keep pace with inflation ✓
4. Shortens the elimination period after the first year of coverage

Why: A COLA rider raises the benefit being paid during an extended disability to offset inflation.

A lump-sum life insurance death benefit paid to a named beneficiary is generally:

1. Income-tax-free ✓
2. Taxed as a capital gain
3. Subject to a 10% penalty
4. Fully taxable as ordinary income

Why: Death benefits paid to a beneficiary are generally received income-tax-free.

The standard nonforfeiture law (MCL 500.4060) does NOT apply to which of the following?

1. Ordinary whole life insurance
2. Industrial life insurance
3. Endowment policies that build cash value
4. Group insurance ✓

Why: MCL 500.4060(9) lists exclusions, including reinsurance, group insurance, pure endowments, and annuity/reversionary annuity contracts. Group insurance is excluded.

The 'cash surrender' nonforfeiture option provides that the policyowner:

1. Receives the accumulated cash value in a lump sum and ends coverage ✓
2. Buys a smaller paid-up permanent policy with the cash value
3. Keeps the full face amount as term insurance for a limited time
4. Borrows against the cash value while keeping the policy in force

Why: Cash surrender pays the net cash value in a lump sum and terminates the policy; reduced paid-up and extended term keep some insurance in force.

A plan has a $1,500 deductible, 80/20 coinsurance, and a $4,000 out-of-pocket maximum. On a $30,000 bill, the insured pays:

1. $4,000 ✓
2. $7,200
3. $5,700
4. $1,500

Why: Deductible $1,500 + 20% of $28,500 = $7,200, but the $4,000 out-of-pocket maximum caps the insured's cost at $4,000.

Under Section 2043, if the practice has not been discontinued, the commissioner may, through the attorney general, file a petition to enjoin and restrain the person in which court?

1. The federal district court
2. The Michigan Supreme Court
3. The probate court of the insured's county
4. The circuit court of Ingham county ✓

Why: Sec. 2043(2) authorizes the commissioner, through the attorney general, to file a petition in the circuit court of Ingham county to enjoin and restrain the person from engaging in the unfair method, act, or practice.

A consumer who buys insurance through a producer representing the buyer (not the insurer) is working with a(n):

1. Adjuster
2. Underwriter
3. Captive agent
4. Broker ✓

Why: A broker legally represents the insurance buyer; an agent represents the insurer.

MCL 500.3905 bars Michigan long-term care coverage from limiting or excluding coverage by type of accident. Which type of accident falls outside that bar, so that coverage may be limited or excluded for it?

1. A fall in the insured's home
2. An accident during a recreational sport
3. An accident at the insured's workplace
4. A motor vehicle accident ✓

Why: MCL 500.3905(1)(b) provides that long-term care coverage shall not limit or exclude coverage by type of accident other than a motor vehicle accident (subject to the listed exceptions), so only a motor vehicle accident falls outside the bar.

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 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.

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.

Under MCL 500.2069, on conviction of violating section 2066 (rebating), the offender must be sentenced to pay a fine of not more than:

1. $500.00 for each violation, without imprisonment
2. $1,000.00 for each violation, plus revocation
3. $2,000.00 for each violation, set by the commissioner
4. $100.00 for each violation, or imprisonment in the county jail ✓

Why: Sec. 2069 provides that on conviction of violating section 2066, the offender must pay a fine of not more than $100.00 for each violation, or be imprisoned in the county jail in the court's discretion.

An accident-only policy provides benefits for:

1. Long-term custodial nursing-home care after an accident
2. Losses resulting from accidents, but not from sickness ✓
3. Routine preventive care and annual wellness checkups only
4. Both accidental injuries and any illness the insured develops

Why: Accident-only coverage is limited to losses caused by accidental injury; sickness is excluded, making it a limited (supplemental) policy.

A partial disability benefit in a disability income policy typically:

1. Pays the full monthly benefit for any minor injury or illness
2. Pays a reduced amount when the insured can work only part of the time ✓
3. Continues for the insured's entire remaining lifetime automatically
4. Refunds the premiums paid if the insured is never fully disabled

Why: Partial disability pays a reduced (often flat) benefit when the insured can perform some duties or work part-time, frequently following a period of total disability.

Modified whole life insurance is characterized by:

1. A lower premium for an initial period, then a higher level premium for life ✓
2. A premium that is higher in the first years and then drops sharply
3. Premiums that fluctuate yearly based on the insurer's investment returns
4. Coverage that decreases steadily until it reaches zero at age 65

Why: Modified whole life charges a reduced premium for the first few years, then a higher level premium for the remainder of life.