New Jersey Life & Health Insurance License, Practice Exams

An endowment policy is distinguished by the fact that it:

1. Pays the face amount at a set maturity date if the insured is still living ✓
2. Decreases its face amount steadily over the policy's term
3. Provides only temporary coverage that expires with no value
4. Invests the entire premium in the insurer's separate investment accounts chosen by the owner

Why: An endowment pays the face amount either at the insured's death or upon reaching the maturity date while living; modern tax rules limit their use.

If the named beneficiary of a life policy is a minor child, the death proceeds:

1. Are forfeited entirely until the child reaches the age of majority
2. Must by law be split equally among all of the insured's relatives
3. Are usually paid to a guardian or trust, not directly to the minor ✓
4. Revert to the insurance company until a court orders otherwise

Why: Insurers generally will not pay proceeds directly to a minor; a guardian, custodian, or trust receives and manages the funds.

Under 17:23A-8, after an individual submits a proper written request for access to recorded personal information, the insurance institution, agent or support organization must respond within:

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

Why: Section 17:23A-8(a) requires the insurance institution, agent or support organization to respond within 30 business days from the date the request is received.

What is the core licensing requirement set by N.J.S.A. 17:22A-29?

1. A person shall not sell, solicit or negotiate insurance in this State unless licensed for that line of authority under the Act ✓
2. A producer licensed for one line of authority may sell any other line without further examination
3. Only residents of this State may sell, solicit or negotiate insurance covering New Jersey risks
4. An applicant must obtain an appointment from an authorized insurer before being permitted to sit for the licensing examination, and that appointment must remain in force

Why: N.J.S.A. 17:22A-29 provides that a person shall not sell, solicit or negotiate insurance in this State unless licensed for that line of authority in accordance with the Act.

In a variable life insurance policy, the investment risk on the cash value is borne by:

1. The producer who originally sold the policy contract
2. The state insurance guaranty association at all times
3. The insurance company, which guarantees the cash value in full
4. The policyowner ✓

Why: In variable life the cash value is held in separate accounts the owner directs, so the policyowner assumes the investment risk (a minimum death benefit is usually guaranteed).

A Medicare Supplement (Medigap) policy must provide a free-look period of at least:

1. 30 days ✓
2. 10 days
3. 24 hours
4. 6 months

Why: Medicare Supplement policies carry a 30-day free-look, longer than the typical 10-day individual health free-look.

Under federal COBRA, continuation coverage after termination of employment or a reduction in hours is generally available for up to:

1. 6 months
2. 12 months
3. 18 months ✓
4. 36 months

Why: COBRA provides up to 18 months following termination or reduced hours (36 months for certain other qualifying events).

All other factors being equal, paying premiums monthly rather than annually generally results in:

1. A lower total cost due to a volume discount for frequent payments
2. An automatic reduction in the policy's face amount each month
3. A higher total annual cost because of added administrative loading ✓
4. Exactly the same total cost regardless of the payment frequency

Why: More frequent modes carry higher total cost (loading) to offset administrative expense and lost interest to the insurer.

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.

A producer makes untrue statements in a public advertisement about a policy's benefits. This is:

1. False advertising, an unfair trade practice ✓
2. Unfair discrimination in policy benefits
3. Twisting, because the statements induce a policy exchange
4. Permissible puffery, since opinions about benefits are not statements of fact

Why: Untrue or misleading advertising about insurance is the unfair practice of false advertising/misrepresentation.

Which nonforfeiture option uses the cash value to continue the full face amount as term insurance for as long as the cash value will buy?

1. Automatic premium loan
2. Cash surrender
3. Reduced paid-up
4. Extended term ✓

Why: Extended term keeps the full face amount as term coverage for a limited period; it is often the automatic default.

Nonoccupational disability coverage pays benefits for disabilities that occur:

1. Only from sickness, since accidental injuries fall to the workers' compensation system
2. At any time, on or off the job, exactly as 24-hour occupational coverage does
3. Off the job (work-related injuries are covered by workers' compensation) ✓
4. Only while the insured is performing assigned duties during scheduled work hours

Why: Nonoccupational coverage excludes on-the-job injuries (covered by workers' compensation); occupational/24-hour coverage applies both on and off the job.

Higher-income Medicare beneficiaries pay an income-related monthly adjustment amount (IRMAA) that:

1. Reduces their Part A hospital deductible each year
2. Increases their Part B and Part D premiums ✓
3. Exempts them from all Medicare cost sharing
4. Converts their coverage to Medicaid automatically

Why: IRMAA adds a surcharge to Part B and Part D premiums for beneficiaries whose income exceeds set thresholds.

A graded-premium whole life policy charges premiums that:

1. Are invested in equity sub-accounts chosen by the policyowner each year
2. Decrease every year until the coverage is fully paid up
3. Start low and increase for a period, then level off ✓
4. Stay exactly the same for the entire life of the policy

Why: Graded-premium whole life begins with low premiums that rise over an initial period before leveling, easing early affordability.

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.

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.

Under the uniform 'time limit on certain defenses' provision in a health policy, after a stated period (e.g., two years) the insurer generally cannot:

1. Require the insured to furnish written proof of loss within 90 days of the date of loss
2. Deny a claim based on a pre-existing condition or application misstatement ✓
3. Enforce a named exclusion such as war or self-inflicted injury
4. Raise the premium for an entire underwriting class

Why: After the stated period, the insurer cannot void coverage or deny non-fraudulent claims for pre-existing conditions or misstatements — the health-policy analog of incontestability.

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.

Medicare Supplement (Medigap) policies sold in most states are:

1. Custom-designed individually for each applicant's medical history
2. Available only to people who also qualify for full Medicaid
3. Identical to Medicare Advantage plans in every meaningful respect
4. Standardized into plans identified by letters such as A through N ✓

Why: Medigap plans are standardized (lettered A–N in most states), so the same lettered plan offers the same core benefits regardless of insurer.

The 'law of large numbers' is important to insurers because it:

1. Eliminates the need for insurers to classify or underwrite risks
2. Guarantees that no single insured will ever file a large claim
3. Makes losses more predictable as the number of similar risks grows ✓
4. Requires every applicant to be charged the exact same premium

Why: The larger the pool of similar exposures, the more closely actual losses approach predicted losses, allowing accurate pricing.

'Controlled business' refers to insurance a producer writes:

1. Only after passing a market conduct exam
2. Through a fraternal benefit society that operates on a lodge system for its members
3. For large commercial clients in another state under a nonresident producer license
4. Mainly on themselves, their family, or their own business ✓

Why: Controlled business is coverage on the producer's own interests; states limit it so licenses aren't obtained merely to self-deal.

Under the endorsement method of a split-dollar plan, the policy is:

1. Held in an irrevocable trust outside the reach of both parties
2. Required to lapse automatically when the employee retires
3. Owned by the employee personally, who then assigns the entire policy back to the employer as collateral security for a loan
4. Owned by the employer, which endorses part of the death benefit to the employee's beneficiary ✓

Why: In endorsement split-dollar the employer owns and controls the policy and endorses a portion of the death benefit to the employee's named beneficiary.

How are the fees for licensing insurance producers established under N.J.S.A. 17:22A-44, and are they refundable?

1. Set by the Commissioner by regulation, and all such fees are nonrefundable ✓
2. Set by the NAIC in its uniform fee schedule and refunded when an application is denied
3. Fixed by statute in dollar amounts and refundable in full when an application is withdrawn
4. Set by each appointing insurer and partly refundable

Why: N.J.S.A. 17:22A-44(a) directs the Commissioner to set fees by regulation, and subsection (c) makes all fees payable to the Commissioner nonrefundable.

In a whole life policy, the 'net amount at risk' is the:

1. Difference between the death benefit and the cash value ✓
2. Cash value remaining after a policy loan is repaid
3. Total of all premiums the policyowner has paid to date
4. Portion of the premium used to cover the insurer's expenses

Why: The net amount at risk is the death benefit minus the accumulated cash value; it shrinks over time as the cash value grows toward the face amount.

Medicare Part D prescription drug coverage is provided:

1. Through private plans approved by Medicare ✓
2. Only to those who also have Medicaid
3. Directly by the federal hospital insurance trust
4. Automatically with no enrollment needed

Why: Part D drug coverage is offered by private insurers approved by Medicare; beneficiaries enroll in a stand-alone or Advantage drug plan.

Social Security disability benefits use a strict definition: the inability to engage in:

1. The specific occupation the insured personally held immediately before the disability began
2. Any work the insured personally finds enjoyable
3. Physical labor, though desk work is still expected
4. Any substantial gainful activity due to a medically determinable impairment ✓

Why: SSDI requires inability to perform any substantial gainful activity (not just one's own occupation), expected to last at least 12 months or result in death.

An applicant buys a Medicare supplement policy and, after reviewing it at home, decides she does not want it. Under N.J.S.A. 17B:26A-8, she may return the policy and have her premium refunded if she returns it within:

1. 20 days of its delivery
2. 30 days of its delivery ✓
3. 60 days of its delivery
4. 10 days of its delivery

Why: Section 26A-8 requires a prominently printed notice that the applicant has the right to return the Medicare supplement policy within 30 days of delivery for a refund if not satisfied for any reason.

An insured dies in the first policy year and the insurer discovers material fraud on the application. The insurer may:

1. Contest the claim, because fraud is an exception to incontestability ✓
2. Cancel the policy but must still pay the full benefit
3. Only reduce the benefit, never deny the claim
4. Do nothing, since all first-year claims are automatically paid

Why: During the contestable period (and, for material fraud, often beyond it) the insurer may contest or deny a claim involving fraudulent misstatements.

A return-of-premium (ROP) rider or policy provides that, if the insured survives the term, the insurer:

1. Refunds the total premiums that were paid during the term ✓
2. Converts the policy into a paid-up annuity with no further cost
3. Doubles the death benefit for the next renewal period automatically
4. Pays a dividend equal to the policy's accumulated cash value balance

Why: An ROP feature returns the premiums paid if the insured outlives the level term period; premiums are higher to fund this.

A 'period certain only' annuity option pays income:

1. Only if the annuitant survives the full accumulation period
2. For the annuitant's entire life and stops at their death
3. In a single lump sum at the end of the surrender-charge period
4. For a fixed number of years whether or not the annuitant lives ✓

Why: Period-certain-only pays for a set number of years; if the annuitant dies early, payments continue to a beneficiary for the remainder.

Under the standard nonforfeiture law, a cash surrender value must be available on surrender within 60 days of a defaulted premium after premiums have been paid for at least how many full years on an ordinary (non-industrial) life policy?

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

Why: N.J.S.A. 17B:25-19(a)(2) requires a cash surrender value after premiums have been paid for at least 3 full years in the case of ordinary insurance (5 full years for industrial).

The period during which an annuity owner pays premiums and the contract grows is the:

1. Elimination period
2. Accumulation period ✓
3. Probationary period
4. Annuitization period

Why: During the accumulation period money is paid in and grows tax-deferred; the annuitization (payout) period is when income payments are made.

Under the transfer-for-value rule, when a life policy is transferred for valuable consideration, the death benefit may:

1. Become partly taxable as income to the policy's new owner ✓
2. Be doubled to offset the buyer's purchase price
3. Lose its cash value but keep its income-tax exemption
4. Always remain fully income-tax-free to the new owner

Why: Transferring a policy for value can make part of the death benefit taxable income to the transferee, unless an exception applies.

An executive receives $300,000 of group term life insurance fully paid by the employer. The portion that creates imputed taxable income is:

1. $250,000 ✓
2. $300,000
3. $50,000
4. $150,000

Why: The first $50,000 is tax-free; the cost of the remaining $250,000 is imputed income.

The primary purpose of the Medical Information Bureau (MIB) is to:

1. Help member insurers detect omissions or fraud on applications ✓
2. Sell consumer medical histories directly to the general public
3. Set the premium rates that all member companies must charge
4. Provide free medical examinations to insurance applicants

Why: The MIB is a nonprofit information exchange whose coded reports help member insurers identify errors, omissions, or misrepresentations on applications.

Under N.J.S.A. 17B:26-1, after a health insurance form is disapproved by the commissioner, it may not be issued unless resubmitted and approved; the statute references a disapproval period of how many days?

1. 90 days
2. 45 days
3. 60 days ✓
4. 30 days

Why: N.J.S.A. 17B:26-1 references a 60-day period in connection with the commissioner's review/disapproval of filed forms and the commencement of that period upon submission of rates.

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.

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.

Under the New Jersey group life conversion privilege, the converted individual policy may, at the person's option, be on any form then customarily issued by the insurer at the attained age, except that the group policy may:

1. Limit the conversion to whole life only with a medical exam
2. Cap the converted face amount at $2,000
3. Require a new two-year contestable period regardless of state law
4. Exclude the option to elect term insurance ✓

Why: N.J.S.A. 17B:27-72(i)(1) allows the individual conversion policy to be on any form then customarily issued, except that the group policy may exclude the option to elect term insurance.

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.

'Unfair discrimination' in insurance means:

1. Setting premiums using actuarially sound mortality tables
2. Declining an applicant who genuinely presents a substandard risk
3. Offering preferred rates to applicants who do not use tobacco
4. Charging different rates to individuals of the same class and risk ✓

Why: Unfair discrimination is applying different rates or terms to insureds of the same class and equal risk; risk-based distinctions are permitted.

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.

Under the New Jersey optional-policy-provisions rule, an insurer that wants to use wording different from the statutory text of an optional provision must use wording that is:

1. Filed with the commissioner but effective without approval
2. Identical to the model language adopted by the NAIC
3. Drafted and certified by the insured's own attorney
4. Approved by the commissioner and not less favorable to the insured ✓

Why: N.J.S.A. 17B:26-16 permits a corresponding provision of different wording approved by the commissioner that is not less favorable in any respect to the insured (or owner).

A residual disability benefit is payable when the insured:

1. Returns to work but still suffers a loss of income ✓
2. Reaches the end of the elimination period without ever filing a claim
3. Becomes completely and permanently unable to perform the duties of any job
4. Dies as the result of an accident during the policy's stated benefit period

Why: Residual benefits pay a partial benefit proportional to lost income when the insured works but earns less due to disability.

Under N.J.S.A. 17B:27A-17, 'community rating' means a methodology in which the premium charged by a carrier for all persons covered by a policy form is the same, based on the experience of the entire pool, without regard to:

1. The effective date of the plan
2. The carrier's surplus position and reserve levels when the rate is set
3. The number of dependents covered
4. Age, gender, health status, residence or occupation ✓

Why: Section 27A-17 defines community rating as charging the same premium for all persons covered by a policy form based on the entire pool, without regard to age, gender, health status, residence or occupation.

A terminally ill insured accesses the accelerated death benefit for $40,000 on a $100,000 policy. At death, the beneficiary receives:

1. $40,000, matching the amount already advanced
2. $140,000 (the face amount plus the advance)
3. $60,000 (the death benefit reduced by the advance) ✓
4. $100,000, because an accelerated payment is treated as a policy loan

Why: The accelerated benefit advances part of the face amount; the death benefit is reduced accordingly: $100,000 − $40,000 = $60,000.

A bank tells a borrower the loan will be approved only if they buy the lender's insurance. This unfair practice is:

1. Twisting
2. Coercion ✓
3. Rebating
4. Defamation

Why: Using economic force — conditioning a loan on buying particular insurance — is coercion.

How long does a New Jersey insurance producer license remain in effect?

1. It remains in effect indefinitely once issued, and the holder has no further fee, reporting or continuing education obligations of any kind
2. It is valid for exactly one year from the date of issue and must then be replaced by a new original application and a new written examination
3. It is valid for two years and then automatically expires, after which the former licensee must complete prelicensing education again before reapplying
4. It remains in effect (unless revoked or suspended) as long as the required fee is timely paid and education requirements are timely met ✓

Why: N.J.S.A. 17:22A-33(b) provides the license remains in effect, unless revoked or suspended, as long as the fee is timely paid and, for resident individuals, education requirements are timely satisfied.

Which managed-care plan typically requires members to select a primary care physician and obtain referrals to see specialists?

1. EPO
2. HMO ✓
3. Indemnity plan
4. PPO

Why: An HMO uses a primary care physician 'gatekeeper' and referrals, with care generally limited to the network; a PPO allows out-of-network care at higher cost without referrals.

A comprehensive major medical plan differs from a basic-plus-supplementary design because it:

1. Pays every covered basic and major medical expense from the first dollar with no deductible or coinsurance
2. Responds only to catastrophic bills above a large corridor deductible, leaving routine care to the insured
3. Integrates basic and major medical under a single deductible ✓
4. Pays a flat $300 daily hospital indemnity

Why: Comprehensive major medical combines basic and major medical into one plan with a single deductible and coinsurance.

An annuitant has a $50,000 cost basis and a $100,000 expected return. Of each $10,000 annual payment, how much is taxable?

1. $5,000 ✓
2. $2,500
3. $10,000
4. $0

Why: Exclusion ratio = basis ÷ expected return = 50,000/100,000 = 50%. Half of each $10,000 payment ($5,000) is excluded; the other $5,000 is taxable.

Under the New Jersey change-of-beneficiary provision, unless an irrevocable designation has been made, whose consent is NOT required to change the beneficiary or assign the policy?

1. The commissioner's
2. The premium payor's
3. The insurer's
4. The beneficiary's ✓

Why: N.J.S.A. 17B:26-15 reserves the right to change beneficiary to the insured and states the beneficiary's consent is not required for surrender, assignment, or change of beneficiary unless the designation was irrevocable.

A New Jersey life policy has been in force during the insured's lifetime for 18 months when the insurer discovers a material misrepresentation in the application. Under the required incontestability provision, may the insurer contest the policy?

1. No, contestability ends after one year
2. No, life policies are never contestable for misrepresentation
3. Yes, but only for nonpayment of premium
4. Yes, because the two-year incontestable period has not yet elapsed ✓

Why: N.J.S.A. 17B:25-4 makes a life policy incontestable (except for nonpayment of premium) only after it has been in force during the insured's lifetime for 2 years from its date of issue; at 18 months the insurer may still contest.

Under 17:33A-5(c), after receiving the notice of an administrative penalty assessment, the noticed party has how long to deliver a written request for a hearing?

1. 20 calendar days ✓
2. 45 calendar days
3. 30 calendar days
4. 10 calendar days

Why: Section 17:33A-5(c) gives the noticed party 20 calendar days from receipt of the notice to deliver a written request for a hearing; if no hearing is requested, the notice becomes a final order after the 20-day period.

A Keogh (HR-10) plan is a qualified retirement plan designed for:

1. Government workers who are excluded from Social Security coverage
2. Self-employed individuals and unincorporated businesses ✓
3. Employees of public schools and tax-exempt charitable organizations only
4. Large publicly traded corporations with thousands of workers

Why: Keogh (HR-10) plans let self-employed persons and their employees make tax-deductible retirement contributions.

A plan has a $500 deductible and 75/25 coinsurance. On a $4,500 covered bill, the insured pays:

1. $1,500 ✓
2. $1,000
3. $1,125
4. $2,000

Why: Deductible $500 + 25% of the remaining $4,000 ($1,000) = $1,500.

The annuity suitability and disclosure standards enacted by P.L.2008, c.88 apply specifically to annuities solicited to whom?

1. A consumer, meaning a natural person who resides in New Jersey ✓
2. Only holders of certificates under a group annuity contract issued to an employer
3. Only participants in qualified retirement plans governed by federal law
4. Only New Jersey residents aged 65 and older

Why: N.J.S.A. 17B:25-35 defines 'consumer' as a natural person who resides in this State, and 'annuity' as an annuity directly solicited to a consumer; the act's purpose under 17B:25-34 is to protect such consumers.

Only 'pure risk' is insurable because it involves:

1. The chance of either a loss or a profit, as in a business venture
2. The chance of a loss or no loss, but never a gain ✓
3. A loss that is certain to happen at a known future date
4. A hazard the insured deliberately creates

Why: Pure risk presents only loss or no-loss (insurable); speculative risk includes a chance of gain (e.g., gambling) and is not insurable.

Under N.J.S.A. 17B:27A-10, membership in the New Jersey Individual Health Coverage Program consists of:

1. All carriers subject to the act ✓
2. Only health maintenance organizations
3. Only the State exchange
4. Only carriers that voluntarily elect to join

Why: Section 27A-10(a) provides that all carriers subject to the act shall be members of the New Jersey Individual Health Coverage Program.

A 'per-cause' deductible differs from a calendar-year deductible because the per-cause deductible:

1. Applies separately to each distinct illness or injury ✓
2. Is satisfied only once for all claims in a given year
3. Decreases automatically with each year the policy is held
4. Is waived entirely for any in-network covered service

Why: A per-cause (per-occurrence) deductible must be met for each separate cause of loss; a calendar-year deductible applies once per year across all causes.

A single-premium immediate annuity (SPIA) begins income payments:

1. After the contract's surrender-charge schedule has completely expired
2. Within one payment period of purchase ✓
3. Only after a mandatory deferral period of at least ten years has elapsed
4. Once the annuitant reaches the age of fifty-nine and one-half years old

Why: An immediate annuity starts paying within one payment interval (e.g., within a month) of the lump-sum purchase.

Which annuity payout option pays the highest monthly income but stops at the annuitant's death with nothing to beneficiaries?

1. Installment refund
2. Life with a fixed period certain
3. Life only (straight life) ✓
4. Joint and survivor

Why: Life-only (straight life) pays the most because payments cease at death with no survivor or refund feature.

Section 17:29B-3 establishes the basic prohibition of the act. It provides that:

1. No person shall engage in any trade practice defined or determined under the act to be an unfair method of competition or an unfair or deceptive act in the business of insurance ✓
2. A trade practice is unfair only after the Commissioner has first adopted a regulation naming that specific practice, and until such a rule is adopted no person may be charged under the act
3. The prohibition reaches only unfair or deceptive acts committed in connection with life insurance and annuity contracts, leaving accident and health insurance business to be governed by Title 17B alone
4. Unfair practices are permitted so long as they are disclosed to the policyholder in writing

Why: Section 17:29B-3 broadly prohibits any person from engaging in this State in any trade practice defined in or determined pursuant to the act to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.

An insured wants the death proceeds to provide a guaranteed monthly income to a spouse for life. The appropriate settlement option is:

1. Lump sum
2. Life income ✓
3. Fixed period
4. Interest only

Why: The life income option pays the payee a guaranteed income for life; the amount depends on the payee's life expectancy.

If an applicant fails the producer examination, what does N.J.S.A. 17:22A-31 provide?

1. The applicant is barred from reapplying for one year
2. The applicant's prior examination fee is credited toward the retake
3. The applicant may reapply but must remit all required fees and forms before being rescheduled ✓
4. The applicant must complete an additional 20 hours of prelicensing education before any retake is scheduled

Why: N.J.S.A. 17:22A-31(d) provides that an applicant who fails to appear or fails the exam may reapply and shall remit all required fees and forms before being rescheduled.

Under a 'recurrent disability' provision, if the insured becomes disabled again from the same cause within the stated time, the insurer treats it as:

1. Grounds to cancel the policy and refund the premiums paid since the first disability
2. A continuation of the prior claim, with no new elimination period ✓
3. An automatic doubling of the monthly benefit for the second period of disability
4. A new claim with a new elimination period

Why: A recurrence of the same disability within the stated period (e.g., six months) is a continuation, so the insured need not satisfy a new elimination period.

In a variable annuity, accumulation units measure the contract's value:

1. During the pay-in phase before income payments begin ✓
2. Only after the contract has been fully annuitized into a stream of income
3. While the annuitant is receiving level, guaranteed monthly income payments
4. According to a fixed interest rate the insurer declares anew each year

Why: Accumulation units track value during the accumulation phase; annuity units are used during the payout phase.

Which settlement option pays the beneficiary an income that cannot be outlived?

1. Fixed period
2. Interest only
3. Fixed amount
4. Life income ✓

Why: A life income settlement option pays for the beneficiary's lifetime, regardless of how long they live.

A retiree takes a distribution from a traditional (qualified) 401(k). The distribution is:

1. Subject to capital-gains rates only
2. Fully taxable as ordinary income ✓
3. Completely income-tax-free
4. Taxed only on the growth portion

Why: Pre-tax qualified plan distributions are fully taxable as ordinary income when received.

A tax-qualified long-term care policy that meets federal standards generally offers:

1. Coverage only for care delivered in a skilled nursing facility
2. Tax-free benefits and premiums that may be deductible within limits ✓
3. A guaranteed cash refund of all premiums at the insured's death
4. Benefits that are always fully taxable as ordinary income

Why: Tax-qualified LTC policies (under HIPAA standards) pay benefits income-tax-free (within per-diem limits) and allow a limited premium deduction.

A 'shared care' rider on long-term care policies allows:

1. Two unrelated insureds to split a single premium payment
2. A child to inherit the parent's unused benefits tax-free
3. The insurer to reduce benefits when both spouses are healthy
4. Spouses to draw from each other's pool of benefits ✓

Why: A shared care rider lets a couple access one another's benefit pool if one spouse exhausts their own coverage.

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.

Under N.J.S.A. 17B:27A-17, an 'eligible employee' for small employer health coverage means a full-time employee who works a normal work week of:

1. 25 or more hours ✓
2. 20 or more hours
3. 40 or more hours
4. 30 or more hours

Why: Section 27A-17 defines 'eligible employee' as a full-time employee who works a normal work week of 25 or more hours; those working fewer than 25 hours are excluded.

In group insurance underwriting, the insurer primarily evaluates:

1. The credit score of every employee covered by the plan
2. Each individual member's detailed personal medical history
3. The characteristics and risk of the group taken as a whole ✓
4. Only the health of the employer's executive leadership team

Why: Group underwriting assesses the group as a unit (size, industry, turnover, purpose), not each member individually.

The uniform 'claim forms' provision requires that, after receiving notice of a claim, the insurer:

1. Conduct a mandatory in-person investigation before issuing forms
2. Pay the claim in full within 24 hours of being notified of the loss
3. Require the insured to use only the insurer's online claim portal
4. Furnish claim forms within 15 days, or accept proof in any form ✓

Why: If the insurer does not supply claim forms within 15 days of notice, the insured may submit written proof of loss in any form.

Under N.J.S.A. 17B:25-35, which annuity is one in which the insurer invests the considerations in a separate account based on the owner's stated risk level and which may lose some or all of the owner's investment?

1. Immediate annuity
2. Variable annuity ✓
3. Fixed annuity
4. Deferred annuity

Why: N.J.S.A. 17B:25-35 defines a 'variable annuity' as one invested in a separate account based on the owner's stated investment risk, which may lose some or all of the owner's investment.

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.