New York Life & Health Insurance License, Practice Exams

Survivorship (second-to-die) life insurance is most commonly used to:

1. Fund a child's future college costs through the policy's accumulated cash value
2. Provide estate liquidity after the second insured dies ✓
3. Replace the income of a sole wage earner who has several young children at home
4. Cover a short-term business loan that must be fully repaid within five years

Why: It pays at the second death and is widely used to fund estate taxes and costs.

For purposes of § 2607, the term 'sex' is defined to include which of the following?

1. Marital status, parental status, and the number of dependents in the household
2. Sexual orientation, gender identity or expression, and transgender status ✓
3. Only the biological sex recorded on the birth certificate
4. Age, disability status, and past treatment for a mental condition

Why: Section 2607(b) provides that 'sex' shall include sexual orientation, gender identity or expression, and transgender status.

Under a 'per capita' beneficiary designation, if one of several named beneficiaries dies before the insured, that share:

1. Passes down to that deceased beneficiary's own children
2. Is retained by the insurer as an unclaimed windfall
3. Is divided among the surviving named beneficiaries ✓
4. Reverts to the policyowner's estate for probate handling

Why: Per capita splits proceeds equally among the surviving named beneficiaries; per stirpes instead sends a deceased beneficiary's share to that person's descendants.

Under Section 4224, a person in this state is also prohibited from knowingly RECEIVING which of the following as an inducement?

1. A subscription to a periodical worth fifteen dollars given to each applicant who completes an application
2. A wellness program furnished in a nondiscriminatory manner incidental to a group policy
3. A medical examination paid for by the insurer as part of its underwriting
4. A rebate of premium or policy fee, or any special favor or advantage in the dividends or benefits ✓

Why: Section 4224(c) prohibits any person from knowingly receiving as an inducement any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits.

To keep a producer license active, most states require the producer to:

1. Maintain membership in a fraternal benefit society or trade association
2. Re-take and pass the original state licensing examination every two years
3. Sell a minimum of $250,000 in new annual premium each calendar year
4. Complete continuing education and renew the license periodically ✓

Why: License renewal generally requires periodic continuing education; specific hours and cycles are set by each state.

A withdrawal from a nonqualified deferred annuity is taxed:

1. Principal first, with no tax until basis is gone
2. Gain first (LIFO), as ordinary income ✓
3. Only when the contract is fully surrendered
4. At long-term capital-gains rates entirely

Why: Nonqualified annuity withdrawals come out earnings-first (LIFO) and are taxed as ordinary income (plus a possible penalty before 59½).

An insurer holding a certificate of authority to transact business in a state is said to be:

1. Reciprocal
2. Admitted (authorized) ✓
3. Alien
4. Nonadmitted (unauthorized)

Why: An admitted/authorized insurer holds a certificate of authority; a nonadmitted insurer does not.

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.

Self-insurance (retention) is a risk-handling method in which a business:

1. Shares the risk with other businesses by contract
2. Sets aside its own funds to pay for potential losses ✓
3. Transfers the risk entirely to an insurer
4. Avoids the activity that creates the risk

Why: Retention/self-insurance means bearing the loss with one's own funds; transfer (insurance), avoidance, and sharing are the alternatives.

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.

Under Section 3201, no life or annuity policy form may be delivered or issued for delivery in New York unless what has occurred?

1. It has been registered with the national association of insurance commissioners and assigned a national form identification number
2. It has been filed with and approved by the superintendent as conforming to the chapter and not inconsistent with law ✓
3. It has been certified by a licensed actuary as actuarially sound and filed with the department for informational purposes only
4. It has been published for public comment for thirty days and cleared by the legislature's standing insurance committee

Why: Section 3201(b)(1) bars delivery of a policy form unless filed with and approved by the superintendent as conforming to the chapter and not inconsistent with law.

A person accepts a brokerage fee for negotiating insurance in New York but never obtained the required license. What is the maximum penalty under the acting-without-a-license provision?

1. A penalty not to exceed two hundred fifty dollars for each transaction, with no limit on the aggregate
2. Restitution of three times the commission received together with a one-year bar from applying for any producer license
3. A penalty not to exceed five hundred dollars for each transaction, except for reinsurance-intermediary violations ✓
4. Automatic revocation of any other insurance license the person holds, plus forfeiture of the fee received

Why: Section 2102(g) sets a penalty not to exceed five hundred dollars for each transaction, except the reinsurance-intermediary penalty in subsection (a)(2).

What stated statutory purpose does the insurance broker licensing section identify?

1. To give domestic insurers a competitive advantage over nonadmitted carriers
2. To limit the number of licensed brokers doing business in any one county of the state to a figure that the superintendent sets each year
3. To protect the public by requiring and maintaining professional standards of conduct on the part of all insurance brokers ✓
4. To raise revenue for the department through the biennial license fees paid by every broker

Why: Section 2104(a)(2) states the purpose is to protect the public by requiring and maintaining professional standards of conduct of insurance brokers.

Under the uniform individual health provisions, written notice of a claim must generally be given within:

1. 6 months after the insured has fully recovered from the loss
2. One year, but only if the insurer specifically requests it
3. 48 hours of the event, regardless of the circumstances
4. 20 days after the loss (or as soon as reasonably possible) ✓

Why: Notice of claim is required within 20 days (or as soon as reasonably possible); the insurer must then supply claim forms, with proof of loss due within 90 days.

A comprehensive major medical plan is distinguished by the fact that it:

1. Responds only to catastrophic bills above a very high corridor deductible set by the insurer
2. Pays only after all other coverage is exhausted
3. Pays a fixed daily indemnity regardless of actual charges
4. Combines basic first-dollar and major medical coverage under one deductible ✓

Why: Comprehensive major medical integrates basic and major medical benefits into a single plan with one deductible and coinsurance, simplifying the structure.

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.

The 'reduced paid-up' nonforfeiture option uses the policy's cash value to:

1. Pay the entire surrender value to the owner in one lump sum
2. Buy a smaller, fully paid-up permanent policy ✓
3. Convert the coverage into an immediate lifetime income annuity
4. Keep the full face amount in force as term insurance for a limited time

Why: Reduced paid-up uses the net cash value as a single premium to purchase a smaller amount of fully paid-up permanent insurance; extended term instead keeps the full face for a limited period.

Under the collateral assignment method of a split-dollar plan:

1. The policy must be annually renewable term with no cash value component
2. A trustee holds title to the policy for the company's shareholders
3. The employee owns the policy and assigns it to the employer as security for premiums advanced ✓
4. The employer owns the policy and endorses a portion of the death benefit to the employee's named beneficiary

Why: In collateral assignment split-dollar the employee owns the policy and assigns it to the employer as collateral for the premiums it advances; the endorsement method has the employer own the policy.

Under Section 4305, which of the following may a corporation use as a basis for establishing eligibility rules in a group hospital, surgical or medical expense contract?

1. Bona fide employment classifications unrelated to any health status-related factor ✓
2. The applicant's claims experience under any prior hospital or medical expense contract
3. The applicant's genetic information, including the result of any genetic test of a family member
4. The applicant's medical history as disclosed on the written application or a physician's statement

Why: Section 4305(k)(1) prohibits eligibility rules based on health status-related factors including health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability; classifications unrelated to those factors are not barred.

Single-premium whole life insurance is funded by:

1. Flexible deposits that the owner may raise or lower in any given year
2. A modest first-year premium followed by much larger renewal premiums for life
3. A single large premium that fully pays up the policy at issue ✓
4. Level annual premiums paid until the insured reaches sixty-five years of age

Why: One lump-sum premium creates a fully paid-up permanent policy with no further premiums due.

A child is covered under both parents' health plans. Under the 'birthday rule,' the primary plan is the one belonging to the parent whose:

1. Birthday falls earlier in the calendar year ✓
2. Income is higher among the two parents
3. Plan has been in force for the longer time
4. Coverage was purchased most recently

Why: The birthday rule makes primary the plan of the parent whose birthday (month and day) comes first in the calendar year.

May a person who was properly licensed at the time of a sale receive renewal commissions on that business after the license has lapsed?

1. No, all compensation must stop the moment the license lapses, whatever the person's licensing status was when the business was originally written and delivered
2. Only if the person retakes and passes the qualifying examination within sixty days after the lapse and pays the reinstatement fee set by the superintendent
3. Yes, but the renewal commissions paid after the lapse may not exceed twenty-five hundred dollars in the aggregate
4. Yes, renewal or deferred commissions may be paid if the person was required to be licensed at the time of the sale and was so licensed at that time ✓

Why: Section 2102(e)(2) permits renewal or deferred commissions where the person was required to be licensed and was so licensed at the time of the sale, solicitation or negotiation.

A business has an insurable interest in a key employee because:

1. Every employer is legally required to insure all of its workers
2. Insurable interest exists between any two parties at any time
3. The firm would suffer a financial loss if that employee died ✓
4. The employee personally requested the coverage in writing

Why: A business has insurable interest in employees whose death would cause it economic loss, supporting key person and buy-sell coverage.

An applicant who smokes a pack of cigarettes daily will most likely be classified as:

1. A preferred risk
2. A standard risk with no adjustment
3. An automatically declined risk
4. A substandard (rated) risk ✓

Why: Tobacco use raises mortality risk, typically placing the applicant in a substandard/rated class with a higher premium.

Under § 2114, an activity is NOT a compensable 'service' that triggers the licensing requirement when it is:

1. Completing the insurance application on behalf of the applicant and submitting it to the insurer for underwriting
2. A referral of a person to a licensed agent that does not discuss specific policy terms and where compensation is not based on the purchase of insurance ✓
3. Comparing the substantive benefits of competing policies for a prospect and recommending that the prospect purchase one of them, for compensation paid on the sale
4. Delivering the issued policy to the buyer and collecting the initial premium payment for the insurer

Why: Section 2114(a)(4) excludes from 'services' a referral that does not include a discussion of specific policy terms and where compensation is not based on the purchase of insurance.

Under § 2123, an incomplete comparison of policies is prohibited when made for what purpose?

1. To document the suitability of a recommendation in the producer's file
2. Inducing or tending to induce a person to lapse, forfeit, or surrender an insurance policy or HMO contract ✓
3. For the purpose of satisfying the continuing-education requirement that Article 21 imposes on licensed insurance producers
4. For the purpose of helping a prospective client understand and compare the premium quotes offered by competing carriers

Why: Section 2123(a)(2) prohibits making any incomplete comparison of policies for the purpose of inducing, or tending to induce, a person to lapse, forfeit, or surrender an insurance policy or HMO contract.

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.

Where a pre-existing condition provision is still permitted (§ 3232(f) bars one in hospital, medical, surgical or prescription drug expense policies), under § 3232(b), a pre-existing condition provision may not exclude coverage for a period in excess of how long following the enrollment date, and may relate only to conditions for which advice or treatment was recommended or received within the six months ending on the enrollment date?

1. Eighteen months
2. Twelve months ✓
3. Six months
4. Twenty-four months

Why: Section 3232(b) caps any pre-existing condition exclusion at twelve months following the enrollment date and limits it to conditions for which medical advice, diagnosis, care or treatment was recommended or received in the six-month look-back period. Note that § 3232(f) bars any pre-existing condition exclusion in individual or group hospital, medical, surgical or prescription drug expense policies.

Before the superintendent may revoke a producer's license (other than by summary revocation), what procedure is required under § 2110?

1. Approval of the revocation by a majority vote of the industry advisory board the superintendent appoints
2. A thirty-day public comment period after the proposed revocation is published in the State Register
3. A hearing held not less than ten days after notice to the licensee and every sub-licensee ✓
4. The written consent of every insurer that has filed a certificate of appointment for the producer

Why: Section 2110(b) requires notice to the licensee and every sub-licensee and a hearing not less than ten days after notice (except summary revocation under subsection (f)).

Basic hospital expense coverage differs from major medical coverage because basic coverage typically:

1. Carries a large deductible and shares costs through coinsurance with the insured
2. Includes broad coverage for almost every type of medical service
3. Pays first-dollar benefits but only up to limited amounts ✓
4. Has very high lifetime maximums covering catastrophic illnesses

Why: Basic hospital/surgical/medical plans pay first-dollar (no deductible) but with limited benefits; major medical adds deductibles, coinsurance, and high limits.

'Medicaid spend-down' refers to the process by which an individual:

1. Exhausts a long-term care policy's lifetime benefit pool before any facility claim is paid
2. Reduces income or assets to become eligible for Medicaid ✓
3. Pays the Part A hospital deductible each benefit period
4. Pays off the Part D late-enrollment penalty

Why: Spend-down is depleting excess income/assets (e.g., on care) to meet Medicaid's means test for eligibility.

Under § 7802, a person who, for compensation, solicits, negotiates or offers to negotiate a life settlement contract is defined as a:

1. Life settlement provider
2. Life settlement intermediary
3. Financing entity
4. Life settlement broker ✓

Why: Section 7802(j) defines a "life settlement broker" as a person who, for compensation, solicits, negotiates or offers to negotiate a life settlement contract. A "life settlement provider" under § 7802(m) is the person who enters or offers to enter into the contract with the owner.

Under Section 3204, when is an application for a New York life, accident, health, or annuity contract admissible in evidence?

1. Whenever the insurer can authenticate it, attached or not
2. Only if it was filed with the superintendent before issuance
3. Only if a true copy was attached to the policy or contract when issued ✓
4. Only if the applicant later signs a separate consent to its use

Why: Section 3204(a)(2) provides that no application is admissible in evidence unless a true copy was attached to the policy or contract when issued.

The Social Security 'blackout period' refers to the time when a surviving spouse's benefits:

1. Rise by a cost-of-living adjustment in each month the youngest child is under 16
2. Are redirected to the deceased worker's surviving parents until the children reach 18
3. Are doubled while the surviving spouse is caring for a child under age 16
4. Stop until the surviving spouse reaches age 60 (age 50 if disabled) ✓

Why: The blackout period is the gap when a surviving spouse receives no Social Security survivor benefit (after the youngest child turns 16, until the spouse reaches age 60).

The reinstatement provision of a lapsed life policy generally allows the owner to restore coverage by:

1. Surrendering a different policy they own with the insurer
2. Waiting until the original contestable period has expired
3. Paying back premiums with interest and proving insurability ✓
4. Simply notifying the insurer that they wish to continue it

Why: Reinstatement typically requires payment of overdue premiums with interest, repayment or reinstatement of any loan, and evidence of insurability, usually within a set period after lapse.

A group contract holder must give a terminated member written notice of the conversion privilege. What is the baseline deadline under Section 4305?

1. Within sixty days after the date of termination of coverage
2. At least thirty days before the date of termination of coverage
3. Within fifteen days after the date of termination of coverage ✓
4. Within ninety days after the date of termination of coverage

Why: Section 4305(d)(3)(A) requires written notice of the conversion privilege and its duration within fifteen days after termination of coverage; later notice can extend the conversion window.

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.

Under § 3231, 'community rated' means a rating methodology in which the premium for all persons covered by a policy form is the same, without regard to which set of factors?

1. The county of residence and the number of dependents covered
2. The benefit plan design and the contract's effective date
3. Geographic region and the composition of the insured family
4. Age, sex, health status, tobacco usage or occupation ✓

Why: Section 3231(a)(4) defines community rated as the same premium for all persons covered by a policy form based on the entire pool's experience, without regard to age, sex, health status, tobacco usage or occupation.

A plan has a $250 deductible and 70/30 coinsurance. On a $3,250 covered bill, the insured pays:

1. $1,150 ✓
2. $900
3. $1,400
4. $975

Why: Deductible $250 + 30% of the remaining $3,000 ($900) = $1,150 paid by the insured.

Under the 'one-year term' (fifth) dividend option, the dividend is used to:

1. Permanently convert the policy into an extended-term form
2. Purchase one year of term insurance, often equal to the cash value ✓
3. Reduce the policy's death benefit for the following policy year
4. Surrender the policy and take its full cash value in cash

Why: The one-year term option buys a year of term coverage (commonly equal to the cash value), increasing the total death benefit for that year.

A foreign health service corporation applies to do business in New York. How must the Department treat the application under Article 43?

1. Deny it, because no foreign or alien health service corporation may be authorized to do business in this state ✓
2. Approve it for the individual direct payment market only and bar it from writing group contracts
3. Approve it after a public hearing at which the superintendent finds the entry serves the public interest
4. Approve the foreign health service corporation's application to do business once it deposits securities with the superintendent equal to its New York reserves

Why: Section 4301(f) states no foreign or alien medical expense indemnity, dental expense indemnity, health service, or hospital service corporation shall be authorized to do business in this state.

An insurer incorporated in another U.S. state but doing business in this state is a(n) ____ insurer.

1. Foreign ✓
2. Alien
3. Admitted
4. Domestic

Why: Domestic = incorporated in this state; foreign = another state; alien = another country.

Under § 2120, in what capacity must an insurance broker hold funds received as a broker?

1. As a general creditor of the insured until the premium has been remitted to the insurer
2. In a fiduciary capacity, not mingling such funds with his own without the express consent of his principal ✓
3. As trustee of an escrow account supervised by the court in the county where the broker's office is located
4. As the broker's own property once the commission on the policy has been earned

Why: Section 2120(a) makes the broker responsible in a fiduciary capacity for funds received and bars mingling them without the principal's express consent.

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 disability policy has a 90-day elimination period and a $3,000 monthly benefit. If the insured is totally disabled for 8 months, the approximate total paid is:

1. $15,000 ✓
2. $24,000
3. $9,000
4. $21,000

Why: The first ~3 months (90-day elimination) pay nothing; benefits are paid for the remaining 5 months × $3,000 = $15,000.

Premiums an individual pays for their own personal life insurance are:

1. Deductible up to an annual IRS-set dollar limit
2. Not deductible for federal income-tax purposes ✓
3. Fully deductible as an itemized personal expense
4. Deductible only if the policy is term insurance

Why: Personal life insurance premiums are a personal expense and are not income-tax deductible.

A woman who is pregnant on the enrollment date buys an individual policy of hospital and medical expense insurance. Under § 3232(f), may the insurer exclude the pregnancy as a pre-existing condition?

1. Yes, for up to ten months, subject to credit for prior creditable coverage
2. Yes, for up to twelve months following the enrollment date
3. Only if she had no creditable coverage in the prior sixty-three days
4. No; no such exclusion is allowed in this kind of policy at all ✓

Why: Section 3232(f) provides that an insurer shall not impose any pre-existing condition exclusion in an individual or group policy of hospital, medical, surgical or prescription drug expense insurance, so the ten-month pregnancy rule in § 3232(b)(3) does not operate for this policy.

An individual health policy that the insurer cannot cancel and on which it cannot raise the premium before a stated age is:

1. Conditionally renewable
2. Optionally renewable
3. Noncancelable ✓
4. Guaranteed renewable

Why: Noncancelable guarantees both renewal and a fixed premium to a stated age; guaranteed renewable allows class premium increases.

A New York participating cash-value life policy must state on its policy data page that dividends are not guaranteed. What else must that statement disclose under Section 3203?

1. That dividends are payable only after the contestable period ends
2. That the insurer has the right to change the dividend amount, which may yield lower cash values than illustrated ✓
3. That dividends are guaranteed during the first ten policy years
4. That the dividends actually paid will in all events at least equal the amounts shown in the illustration

Why: Section 3203(a)(15) requires the data page to state that dividends are not guaranteed and that the insurer may change the dividend, which may result in lower dividend cash values than illustrated.

Agreements among insurers to restrain trade or force someone out of business are the unfair practices known as:

1. Defamation of a competitor
2. Boycott, coercion, and intimidation ✓
3. Rebating and commission sharing
4. Twisting and churning of policies

Why: Boycott, coercion, and intimidation are unfair trade practices involving combinations or threats that restrain or monopolize the business of insurance.

Under § 3229, a long term care partnership plan must include arrangements through the insurance plan for managed care that include:

1. Premiums guaranteed to remain level for the life of the insured under the partnership plan
2. Automatic conversion to a Medicare supplement contract at age sixty-five
3. A waiver of the nonforfeiture benefit requirements that otherwise apply to long term care policies sold in this state
4. Preauthorized assessment and referral programs, utilization controls, and use of approved providers ✓

Why: Section 3229(a)(4) requires arrangements through the insurance plan for managed care, including preauthorized assessment and referral programs, utilization controls, and use of approved providers.

An investigative consumer report differs from an ordinary consumer report in that it:

1. Contains only verified factual data drawn from public records
2. May be obtained without ever notifying the insurance applicant
3. Is based on interviews about the applicant's character and lifestyle ✓
4. Can legally be used only for property and casualty underwriting

Why: An investigative consumer report gathers information through interviews about reputation, character, and habits; the applicant must be notified it may be obtained.

Under a Section 162 executive bonus plan, the employer:

1. Owns the policy and keeps all of the cash value for corporate purposes
2. Pays a bonus equal to the premium, which the employee owns and is taxed on ✓
3. Borrows against the executive's personal policy to fund operations
4. Defers the executive's salary into a nonqualified retirement account

Why: The employer pays a deductible bonus equal to the premium; the employee owns the policy and reports the bonus as taxable income.

An insured stops paying premiums and wants the largest amount of continued coverage for the shortest time, with no further premiums. The nonforfeiture option is:

1. Reduced paid-up insurance
2. A policy loan
3. Extended term insurance ✓
4. Cash surrender

Why: Extended term keeps the full face amount in force as term for a limited period; reduced paid-up gives a smaller amount but for life.

Under a term insurance 're-entry' option, the insured can obtain lower 'select' renewal rates by:

1. Automatically renewing without any proof of good health
2. Converting the policy to whole life at the original age
3. Paying a single lump-sum premium for the entire new term
4. Providing new evidence of insurability at the end of the term ✓

Why: Re-entry term lets an insured requalify with fresh evidence of insurability for lower select rates; without requalifying, higher rates apply.

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.

'Misrepresentation' as an unfair trade practice means:

1. Returning part of an unearned premium to a policyowner who cancels coverage before the end of the policy period
2. Making false statements about a policy's terms or benefits to induce action ✓
3. Recommending the lowest-cost policy an applicant qualifies for after comparing the rates of several insurers
4. Charging an applicant in poor health a higher premium that reflects the substandard rate class underwriting assigned

Why: Misrepresentation is issuing or circulating untrue statements about the terms, benefits, or nature of a policy.

A worker's 'primary insurance amount' (PIA) is:

1. The ceiling on the annual earnings that are subject to Social Security tax
2. The total of all FICA taxes the worker and the employer paid into the system
3. The benefit payable at full retirement age, the basis for other benefits ✓
4. A one-time death payment of $255

Why: The PIA is the monthly benefit at full retirement age; survivor and disability benefits are figured as percentages of it.

A convertible term policyholder converts to whole life before the conversion deadline. They:

1. Can only convert to another term policy
2. Need not provide new evidence of insurability ✓
3. Forfeit all prior premiums paid
4. Must pass a new medical exam

Why: A conversion privilege lets the insured switch term to permanent coverage without new evidence of insurability.

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.

When a covered employee leaves the company, the group life conversion privilege generally allows them to:

1. Continue the identical group term certificate at the employer's group rate for up to 18 months under COBRA
2. Convert within 60 days, but only after passing a paramedical exam and blood profile
3. Convert to an individual permanent policy within 31 days without evidence of insurability ✓
4. Receive a cash surrender value equal to the employer's share of past premiums

Why: On termination, the employee may convert group coverage to an individual permanent policy (usually within 31 days) without proving insurability, though at individual rates.

A mortgage protection (mortgage redemption) policy is usually written as decreasing term, and its death benefit is paid to:

1. The insured's family or estate ✓
2. The producer who arranged the original mortgage loan
3. The lending bank as the named first-position beneficiary on the policy contract
4. The state insurance guaranty fund

Why: Mortgage protection is owned by the borrower and pays the family/estate (who then choose to pay off the loan); credit life, by contrast, pays the creditor directly.

Concealment in an insurance application is best defined as:

1. A guarantee written into the policy that proves to be false
2. A statement the applicant believes to be true but is not
3. An innocent misstatement of the applicant's exact birth date
4. The failure to disclose a known material fact ✓

Why: Concealment is the intentional withholding of a material fact the applicant knows; if material, it can void the contract.

A single-premium whole life policy is funded with one lump sum and:

1. Provides only temporary protection that expires after one year
2. Is immediately paid up, though it is usually classified as a MEC ✓
3. Carries no cash value until the insured reaches retirement age
4. Requires continued annual premiums for the next twenty years

Why: A single-premium whole life policy is paid up at issue with a high cash value; because it is heavily funded, it is generally a Modified Endowment Contract.

A client wants to move funds from an old annuity into an LTC insurance policy tax-free. Under Section 1035, this is:

1. Treated as a full surrender, with the gain taxed as ordinary income
2. Allowed only when the receiving contract is a term life policy
3. Barred, because an annuity may be exchanged only for another annuity
4. Permitted (annuity-to-LTC is a valid 1035 exchange) ✓

Why: Section 1035 permits tax-free exchanges from an annuity to a qualified long-term care policy.

Under the 'three-year rule,' if an insured gives away a life insurance policy but dies within three years, the proceeds are:

1. Treated as fully tax-free regardless of the timing of the gift
2. Pulled back into the insured's taxable estate ✓
3. Forfeited entirely back to the issuing insurance company
4. Taxed as ordinary income to the person who received the gift

Why: If an insured transfers a policy and dies within three years, the death proceeds are included in the gross estate for federal estate-tax purposes.

A worker dies, leaving a spouse caring for their 10-year-old child. Social Security survivor benefits are:

1. Payable only after the spouse turns 65
2. Payable to the surviving spouse and child ✓
3. Limited to a one-time lump sum only
4. Not available for dependent children

Why: Survivor benefits are payable to a surviving spouse caring for the deceased's young child and to the dependent child, if the worker was insured.

For group term life insurance, the cost of employer-provided coverage exceeding $50,000 is:

1. Taxed only when the employee eventually leaves the company
2. Exempt from tax because all group life is a tax-free benefit
3. Imputed as taxable income to the covered employee ✓
4. Fully deductible by the employee on their personal return

Why: Employees are taxed (imputed income, via IRS Table I) on the cost of employer-paid group term coverage above $50,000.

A plan has a $500 deductible, 80/20 coinsurance, and a $2,500 out-of-pocket maximum. On a $25,000 bill, the insured pays:

1. $2,500 ✓
2. $5,400
3. $4,900
4. $500

Why: Deductible $500 + 20% of $24,500 = $5,400, but the $2,500 out-of-pocket maximum caps the insured's cost at $2,500.

Under the fixed-amount settlement option, the insurer pays:

1. A guaranteed income for the entire remaining lifetime of the payee
2. A set dollar amount each period until the proceeds and interest run out ✓
3. Only the interest earned, leaving the principal untouched indefinitely
4. Equal payments over a fixed number of years stated in advance by the owner

Why: Fixed-amount pays a chosen dollar amount each period until the proceeds plus interest are exhausted; fixed-period instead fixes the duration.

A 66-year-old just enrolled in Part B applies for a Medigap policy two months later. The insurer must:

1. Offer only its most comprehensive plan, at the highest premium
2. Decline the application, since Medigap open enrollment closed at age 65
3. Require a health questionnaire and an attending physician statement
4. Issue any offered plan on a guaranteed-issue basis ✓

Why: Within the 6-month Medigap open enrollment period (age 65 + Part B), coverage is guaranteed issue regardless of health.

A course is developed and sponsored by an insurer. Under § 2132, when will it qualify as approved continuing education?

1. Only if such insurer is authorized to write that class of insurance in this state ✓
2. Whenever the course content covers any branch of insurance, regardless of the insurer's authorization
3. Only if at least half of the attendees are appointed by that insurer
4. Only if the course is offered free of charge to all licensees

Why: Section 2132(e) provides that an insurer-developed or insurer-sponsored course does not meet CE standards unless the insurer is authorized to write that class of insurance in this state.

The 'unpaid premium' provision in a health policy allows the insurer to:

1. Charge double the missed premium as a late penalty fee
2. Refuse to process the claim until a new application is filed
3. Deduct any premium due and unpaid from a claim payment ✓
4. Cancel the policy retroactively to its original issue date

Why: If a premium is due and unpaid when a claim is payable, the insurer may deduct the amount owed from the claim proceeds.

In an annuity contract, the person whose life expectancy determines the income payments is the:

1. Insurer's actuary, who designs the payout schedule
2. Beneficiary, who receives any remaining value at death
3. Owner, who holds the contractual rights to the annuity in the policy
4. Annuitant, whose age and life expectancy set the payout ✓

Why: The annuitant is the measuring life; the owner holds the rights, and the beneficiary receives any death proceeds.

A flexible-premium deferred annuity allows the owner to:

1. Make varying contributions over time before payouts begin ✓
2. Fund the contract with a single premium at issue and make no further deposits, as an SPDA requires
3. Direct every dollar into FDIC-insured bank certificates
4. Start income payments within 30 days of the first deposit

Why: An FPDA accepts ongoing, variable contributions during accumulation, with income deferred to a later date.

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 § 7803, a life settlement provider license expires on:

1. The last day of the licensee's birth month
2. The anniversary date of original issuance each year
3. June thirtieth of odd-numbered years ✓
4. December thirty-first of each calendar year

Why: Section 7803(b)(2) provides that every life settlement provider license issued under the section shall expire on June thirtieth of odd-numbered years, and § 7803(g) allows renewal for the ensuing period of twenty-four months.