South Carolina Life & Health Insurance License, Practice Exams

An accident and health policy form is filed with the South Carolina department and the director takes no action to approve or disapprove it. Under section 38-71-310 the form is deemed approved once it has been on file for:

1. 10 days
2. 30 days ✓
3. 60 days
4. 90 days

Why: S.C. Code § 38-71-310(A) deems a FORM approved after thirty days of inaction, subject to the director's discretion to extend the period by up to an additional sixty days. An insurer relying on that default approval may not simply start using the form: it must first file written notice of its intent to use it, at least ten days beforehand. The ninety-day figure in this section belongs to RATES under subsection (B), and swapping the two is the commonest error here.

A court finds a person has violated the insurance fraud article for the first time. Under section 38-55-550 the civil penalty for that first offence is a fine not to exceed:

1. $1,000
2. $5,000 ✓
3. $10,000
4. $15,000

Why: S.C. Code § 38-55-550(A)(1) caps the civil penalty for a first offence at five thousand dollars. This ladder runs by the NUMBER of the offence rather than by the value obtained: a second offence is not less than five thousand and not more than ten thousand dollars, and a third and subsequent offence not less than ten thousand and not more than fifteen thousand. The criminal ladder in § 38-55-540 turns instead on the benefit received, with a second or subsequent violation a felony regardless of amount. The civil penalty applies IN ADDITION to any criminal liability.

A '20-pay whole life' policy:

1. Requires premium payments every year for the insured's entire lifetime
2. Is paid up after twenty years of premiums but covers the insured for life ✓
3. Provides level coverage for exactly twenty years, then terminates
4. Builds no cash value at all because the premium period ends early

Why: Limited-pay whole life concentrates premiums into a set period (here 20 years) while coverage lasts for life.

Under the 'paid-up additions' dividend option, dividends are used to:

1. Pay the policyowner the dividend directly in cash each year
2. Reduce the premium due on the next policy anniversary date
3. Purchase one-year term insurance equal to the cash value
4. Buy small amounts of additional paid-up whole life coverage ✓

Why: Paid-up additions use dividends to buy single-premium whole life, increasing both death benefit and cash value with no new underwriting.

A policy lapses for non-payment and has not been surrendered for cash. Under section 38-63-220 it may be reinstated at any time within:

1. Five years after the date of default
2. Two years after the date of default
3. One year after the date of default
4. Three years after the date of default ✓

Why: S.C. Code § 38-63-220(j) gives three years from the date of DEFAULT, and blocks reinstatement in two cases: where the policy has been surrendered for its cash value, or where the extended term insurance has expired. The insured must give evidence of insurability satisfactory to the insurer and pay all overdue premiums and any other indebtedness, with interest on both at a rate not exceeding eight percent a year compounded annually.

In an indexed universal life policy, the interest credited to cash value is:

1. Determined each year solely by the policyowner's own elections
2. Based entirely on separate-account mutual fund performance and risk
3. Guaranteed at a fixed rate set for the life of the contract
4. Tied to a stated market index, subject to a cap and a guaranteed floor ✓

Why: Indexed UL credits interest linked to an external index (e.g., S&P 500) with a cap/participation rate and a guaranteed minimum floor.

An accelerated death benefit is typically payable when the insured:

1. Misses a single scheduled premium payment during the policy's grace period
2. Decides to surrender the policy in exchange for its accumulated cash value
3. Reaches the policy's stated maturity age while still living
4. Is diagnosed with a qualifying terminal or chronic illness ✓

Why: It advances part of the death benefit on diagnosis of a qualifying terminal or chronic condition.

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.

A family income policy combines whole life with:

1. A separate variable account invested in the insurer's stock portfolio
2. An annuity that begins paying the children at their age of majority
3. Decreasing term that pays a monthly income through the end of the period ✓
4. Level term coverage that automatically increases with inflation each year

Why: A family income policy adds decreasing term to whole life; if the insured dies during the period, it pays monthly income to the end of the period, then the face amount.

A person generally becomes eligible for Medicare at:

1. Any age, as long as they have private health insurance
2. Age 70, once delayed retirement credits stop accruing
3. Age 62, the earliest age for Social Security retirement benefits
4. Age 65, or earlier after 24 months of Social Security disability ✓

Why: Eligibility begins at 65, or earlier for those receiving Social Security disability for 24 months, or with ESRD/ALS.

The 'insuring clause' of a health or life policy is the part that:

1. Permits the insurer to raise premiums for the entire class of insureds
2. Lists every condition and circumstance the policy will not cover
3. Allows the policyowner to examine and return the policy for a refund
4. States the insurer's basic promise to pay benefits ✓

Why: The insuring clause (insuring agreement) sets out the insurer's fundamental promise to pay covered benefits.

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 section 38-72-60, a South Carolina long term care policy may not provide coverage for skilled nursing care only, nor provide significantly more coverage for skilled care in a facility than it provides for:

1. Care given outside the State
2. Lower levels of care ✓
3. Care following a hospital stay
4. Care given by a family member

Why: S.C. Code § 38-72-60(B)(3) attacks the design that made early long term care policies close to worthless: skilled nursing care is the level of care the fewest claimants ever need, so a policy weighted towards it looked generous and paid rarely. The prohibition is on the DESIGN, not on any particular benefit amount, and it works alongside subsection (N), which requires every insurer to offer a home and community care option at the same daily benefit level the policy would pay in a facility.

An insurer's practice is to offer far less than a claim is worth, so that claimants must sue to recover what is due. Under section 38-59-20 that practice is measured against:

1. The insurer's own reserve for the claim
2. The average settlement in the county where the claim arose
3. What the claimants ultimately recover ✓
4. The policy limit applicable to the claim

Why: S.C. Code § 38-59-20(5) makes the eventual outcome the yardstick: compelling policyholders or claimants to institute suits to recover amounts reasonably due by offering SUBSTANTIALLY LESS than the amounts ultimately recovered through the suits they bring, or through settlements with attorneys they had to employ because they could not settle reasonably with the insurer. Paragraph (6) attacks the same tactic from the other side - offering less because the claimant would have to incur attorneys' fees to get the rest.

A disability policy has a 30-day elimination period and a $4,000 monthly benefit. If the insured is disabled for 5 months, the total benefit paid is about:

1. $16,000 ✓
2. $20,000
3. $12,000
4. $8,000

Why: The first month (30-day elimination) pays nothing; 4 months are paid × $4,000 = $16,000.

A producer gives a client an incomplete comparison of two life policies, hoping she will surrender the one she holds. Under section 38-63-20 the prohibition bites where the representation is merely capable of inducing that result, because it reaches conduct that:

1. Actually causes the policy to be surrendered
2. Is made in writing and signed by the producer
3. Results in the sale of a replacement policy
4. May tend to induce a lapse, surrender or conversion ✓

Why: S.C. Code § 38-63-20 covers a purpose OR a tendency - representations made for the purpose of inducing, or WHICH MAY TEND TO INDUCE. The listed outcomes are wide too: lapse, forfeit, surrender, terminate, RETURN or convert a life policy. And the conduct caught is not only misleading representations but INCOMPLETE or fraudulent comparisons, so a comparison that omits what matters is within the section even if every word of it is true.

Compared with individual insurance, group insurance generally features:

1. Coverage that each member negotiates and owns personally
2. A separate master contract issued to each covered employee
3. Lower cost and little or no individual underwriting ✓
4. Higher premiums and a full medical exam for every member

Why: Group coverage spreads risk over many lives, so it is typically cheaper and issued with little or no individual evidence of insurability.

An individual South Carolina accident and health policy pays periodically for a continuing loss. Under the required PROOFS OF LOSS provision of section 38-71-340 written proof must be given within how long after the end of each period for which the insurer is liable?

1. 30 days
2. 60 days
3. 90 days ✓
4. 180 days

Why: S.C. Code § 38-71-340(7) sets ninety days for a periodic-payment loss and the same ninety days for any other loss. Late proof is excused where it was not reasonably possible to file in time, but the provision then sets a hard ceiling that candidates routinely miss: no later than ONE YEAR from the time specified, unless the claimant was legally incapacitated. The group equivalent at § 38-71-735(i) runs its ninety days from the commencement of the period for a loss-of-time claim.

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.

Which is NOT among the duties section 38-3-110 places on the Director?

1. Supervising and regulating the rates and service of every insurer in this State
2. Seeing that the insurance laws of this State are faithfully executed
3. Prosecuting criminal violations of the insurance laws personally ✓
4. Instituting civil actions relative to the business of insurance

Why: S.C. Code § 38-3-110(3) has the Director REPORT criminal violations of the insurance laws to the Attorney General or other appropriate law enforcement officials; it does not make him the prosecutor. Civil actions are different: under item (4) he may institute those either through his own office or through the Attorney General.

An agent binding an insurer to a risk the company did not intend to cover is an example of which type of authority?

1. Express authority granted explicitly in the agency contract
2. Fiduciary authority arising from handling client premium funds
3. Apparent authority ✓
4. Implied authority needed to carry out expressly granted duties

Why: Apparent authority is the appearance of authority a reasonable client perceives; express and implied are actually granted, so the distractors describe legitimate authority.

An insured becomes totally disabled and, after the waiting period, the life policy's waiver of premium applies. The insured:

1. Owes no premiums while disabled, and coverage stays in force ✓
2. Receives an accelerated payout of the death benefit in cash
3. Must keep paying premiums, but the insurer refunds half each year
4. Loses coverage until premium payments resume after recovery

Why: Waiver of premium keeps the policy in force without premium payments during the insured's continued total disability.

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).

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.

An insurer wishes to print a symbol derived from the Seal of South Carolina on its brochures. Under section 38-57-45 it may do so only with the approval of:

1. The Director of Insurance
2. The Secretary of State
3. The State Budget and Control Board ✓
4. The Attorney General

Why: S.C. Code § 38-57-45(A) reaches insurance agencies, insurers AND health maintenance organizations, and covers the Seal itself or any symbol containing, including or derived from it, in a newspaper, magazine or other solicitation material. Approval rests with the State Budget and Control Board, not the department - a Code Commissioner's note preserves that reference despite the 2014 Restructuring Act until the General Assembly acts.

If an annuitant dies during the accumulation phase of a deferred annuity, the contract typically pays the beneficiary:

1. Nothing, because annuities have no death benefit before payout
2. At least the premiums paid (or current value, if greater) ✓
3. Triple the account value as a guaranteed accidental death bonus
4. Only the surrender value after deducting all future charges

Why: Most deferred annuities guarantee the beneficiary the greater of premiums paid or current account value if the owner dies before annuitization.

An accelerated death benefit (living benefit) provision allows the insured to:

1. Receive part of the death benefit early if terminally or chronically ill ✓
2. Convert the death benefit into a lifetime annuity at no extra charge
3. Increase the total death benefit after a qualifying critical illness
4. Borrow the full face amount at a guaranteed zero-interest policy rate

Why: An accelerated death benefit pays a portion of the face amount while living upon a qualifying terminal or chronic illness; it reduces the death benefit later.

The Medicare General Enrollment Period (GEP) runs:

1. On a single fixed date set individually by each state
2. From October 15 to December 7 every year
3. January 1 through March 31 each year ✓
4. Only during the week of the beneficiary's birthday

Why: Those who miss their IEP can sign up during the GEP (Jan 1–Mar 31), with coverage beginning later and a possible late penalty.

A group policyholder is late paying a premium other than the first. Under section 38-65-210 the policy must give a grace period of:

1. Thirty-one days, during which coverage is suspended
2. Thirty-one days, during which death benefit coverage continues ✓
3. Thirty days, during which death benefit coverage continues
4. Sixty days, during which death benefit coverage continues

Why: S.C. Code § 38-65-210(1) keeps the death benefit in force through the grace period, with one qualification - unless the policyholder has already given the insurer written notice of discontinuance in advance and in accordance with the policy. The policy may also make the policyholder liable for a PRO RATA premium for the time it was in force during the grace period, so continued cover is not free cover.

A member insurer that has become insolvent had assumed business under a contract of reinsurance. Under section 38-29-40 the association covers a policy or contract of reinsurance:

1. Only where the ceding insurer is also a member insurer
2. Only to the extent of the reinsurer's unearned premium
3. Only where assumption certificates have been issued under it ✓
4. In no circumstances at all

Why: S.C. Code § 38-29-40(2)(b)(ii) excludes reinsurance UNLESS assumption certificates have been issued pursuant to it, and the reason is that an assumption certificate converts a reinsurance arrangement into a direct promise to the individual policyholder. Reinsurance in its ordinary form is a contract between two insurers, and the association exists to protect policyholders rather than to stand behind one insurer's contract with another.

Pledging a life insurance policy to a bank as security for a loan is a:

1. Change of ownership
2. Viatical settlement
3. Collateral assignment ✓
4. Absolute assignment

Why: A collateral assignment transfers limited rights to a lender as security; an absolute assignment transfers all ownership rights.

A newly formed insurer is a subsidiary of an admitted life insurer. Under section 38-67-30 the director may consider the qualification requirements met if:

1. The subsidiary alone meets them
2. The parent guarantees the subsidiary's obligations in writing
3. Either it or the parent or affiliate meets them ✓
4. The subsidiary has been licensed here for three years

Why: S.C. Code § 38-67-30's closing paragraph covers a subsidiary of an admitted life insurer OR an insurer affiliated with one through common management or ownership, and lets the requirements be satisfied by the insurer itself, the parent, or the affiliated insurer. It is a discretion - the director MAY consider the section met - not an entitlement, and it does not touch the separate requirement that the company be licensed and organised to do life insurance or annuity business in this State.

A blanket health policy is designed to cover:

1. One named individual and that person's immediate dependents only
2. Retirees already enrolled in both Medicare Parts A and B who want their Part A deductible paid
3. Only those employees who have passed a full individual medical examination paid for by the employer
4. A group of people who are not individually named, such as passengers or students ✓

Why: A blanket policy covers a constantly changing group of unnamed people defined by a relationship (airline passengers, students, sports teams).

A Buyer's Guide and a Policy Summary are provided to a life insurance applicant to:

1. Help the consumer understand and compare the coverage before buying ✓
2. Take the place of the written application when the producer delivers them
3. Serve as the binding contract until the policy is issued
4. Guarantee the lowest premium available for that coverage in the state

Why: The Buyer's Guide explains types of policies generically and the Policy Summary gives specific cost/benefit figures, aiding informed comparison.

A life insurer proposes a plan dividing policyholders into classes, with a special fund paying a benefit to the longest-standing surviving member of each class. Under section 38-55-90 the plan is:

1. Permitted if the fund is separately reserved
2. Permitted if disclosed in the policy
3. Prohibited as a tontine arrangement ✓
4. Permitted only for fraternal benefit associations

Why: S.C. Code § 38-55-90 names the mechanism rather than the label: dividing policyholders or members into divisions and classes so that benefits come from special funds created for the purpose and are paid to the OLDEST member of the class, or to the member whose policy has been in force longest, on the death of a member. It binds life insurers, mutual aid associations and fraternal benefit associations alike - the fraternal form is caught, not exempted.

A person performs an act in South Carolina for which title 38 requires a licence, without holding one. Under section 38-2-30 he is guilty of a misdemeanor and, on conviction, may be fined not more than:

1. $2,500
2. $5,000
3. $10,000 ✓
4. $15,000

Why: S.C. Code § 38-2-30 punishes acting without a required licence with a fine of up to ten thousand dollars or imprisonment for two years, or both - a criminal penalty imposed by a court, not an administrative one imposed by the Director. Do not confuse it with § 38-2-20, the general misdemeanor provision for this title, which carries a fine of not more than two thousand five hundred dollars and the same two years, unless another penalty is specifically provided. Both are separate from the administrative fines in § 38-2-10, which subsection (B) of that section says apply in addition to any criminal penalty.

Three children are named 'per stirpes.' One child dies before the insured, leaving two children. Each surviving child gets 1/3, and the deceased child's 1/3 is:

1. Split between that child's two children ✓
2. Kept by the insurer
3. Divided among the two surviving children
4. Paid to the insured's estate

Why: Per stirpes passes a deceased beneficiary's share to that beneficiary's descendants — here, the deceased child's two children split the 1/3.

Total indebtedness on a policy, including accrued interest, comes to equal the loan value. Under section 38-63-220 the policy may provide that it terminates, but not until the insurer has mailed notice of at least:

1. Fifteen days
2. Thirty days ✓
3. Forty-five days
4. Ninety days

Why: S.C. Code § 38-63-220(l) requires the thirty days' notice to go to the last known address of the insured or policy owner AND to that of any assignee of record on file with the insurer - the assignee is easy to forget and is named expressly. The same subsection lets unpaid loan interest be added to the existing indebtedness and bear interest at the same rate, which is the mechanism that drives a policy towards this point in the first place.

A 401(k) plan is a qualified plan that primarily allows employees to:

1. Withdraw funds before age 59 1/2 with no tax or penalty
2. Contribute after-tax dollars only, with no employer match
3. Defer part of their salary on a pre-tax basis, often with an employer match ✓
4. Receive a guaranteed monthly pension based on years of service, not contributions

Why: A 401(k) is a defined-contribution plan funded by pre-tax salary deferrals (Roth option aside), commonly with an employer match.

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.

Adverse selection refers to the tendency of:

1. Agents to recommend only the most expensive available policies
2. Policyowners to let their coverage lapse during economic downturns
3. Higher-than-average risks to seek or keep insurance more than others ✓
4. Insurers to decline every applicant who has any health condition

Why: Adverse selection is the inclination of poorer-than-average risks to apply for and retain coverage, which insurers manage through underwriting.

A disability income policy with a benefit period 'to age 65' will:

1. Pay benefits for a qualifying disability until the insured turns 65 ✓
2. Stop all benefits exactly five years after the disability begins
3. Begin paying benefits only after the insured reaches age 65
4. Refund every premium paid once the insured turns age 65

Why: A 'to age 65' benefit period pays for a continuing disability until the insured reaches 65, a common long-term disability design.

Under a 'noncancelable' health insurance policy, the insurer:

1. Cannot cancel the policy or raise the premium before a stated age ✓
2. Renews the policy only if certain stated conditions are met each year
3. May raise the premium for the whole class but must always renew
4. Can cancel the coverage at any time by giving advance written notice

Why: Noncancelable means premiums are fixed and the policy cannot be cancelled (renewable to a stated age); guaranteed renewable allows class-wide premium increases.

Under the Uniform Simultaneous Death Act, if the insured and the primary beneficiary die together and the order of death is unknown, it is presumed that:

1. Both parties forfeit the proceeds back to the issuing insurance company
2. The beneficiary survived the insured and the proceeds go through that person's estate
3. The proceeds are split equally between both estates by the probate court
4. The insured survived the beneficiary ✓

Why: The Act presumes the insured outlived the beneficiary, so proceeds pass to the contingent beneficiary or the insured's estate, not the deceased beneficiary's estate.

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.

An investor with no relationship to the insured arranges and funds a policy intending to profit from the death benefit. This is:

1. An ordinary collateral assignment of the policy to a secured lender
2. A key person arrangement, valid because the investor funds the premiums
3. Stranger-originated life insurance (STOLI), which is illegal ✓
4. A viatical settlement, permitted once the insured is terminally ill

Why: STOLI lacks insurable interest and is illegal; policies must be founded on a genuine insurable interest at inception.

A settlement option that continues income to two people until the second one dies is the:

1. Life income option
2. Interest-only option
3. Joint and survivor option ✓
4. Fixed-period option

Why: The joint and survivor option pays as long as either of two people is alive.

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

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

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

A split-dollar life insurance arrangement is best described as:

1. A policy split equally among several unrelated business partners at death
2. A term policy divided into two smaller policies for tax purposes
3. An annuity that pays half of its income to two different beneficiaries
4. A plan in which an employer and employee share the policy's costs and benefits ✓

Why: In split-dollar, the employer and employee share premium costs and policy benefits under an agreement.

An employee of an insurer handles underwriting and claims investigation and receives no commission. Under section 38-43-20 that employee:

1. Requires a licence for each line the insurer writes
2. Requires a licence unless directly supervised by one
3. Requires a limited lines licence only
4. Does not require a producer licence ✓

Why: S.C. Code § 38-43-20(D)(1)(b) exempts an officer, director or employee whose function relates to underwriting, loss control, inspection, or the processing, adjusting, investigating or settling of a claim. The exemption is conditional on receiving NO COMMISSION on policies written or sold to insure South Carolina risks - that condition governs every branch of paragraph (1).

A member insurer that wrote health benefit plans in South Carolina becomes insolvent. Under section 38-29-40 the association's obligation for health benefit plan benefits with respect to any one life is capped at:

1. $100,000
2. $300,000
3. $500,000 ✓
4. $1,000,000

Why: S.C. Code § 38-29-40(3)(b)(i)(B) splits health insurance into three bands with two different figures: three hundred thousand for coverages that are NOT disability income, health benefit plans or long-term care; three hundred thousand each for disability income and for long-term care; and five hundred thousand for health benefit plans. The health benefit plan figure is the only one in the whole subsection above three hundred thousand for a single life, and subitem (iii) carries it through to the aggregate cap as well.

An insurer charges two insureds of the same class, whose risks involve the same hazards, different premiums. Under section 38-55-50 this is:

1. Prohibited discrimination, subject to the exceptions the section names ✓
2. Permitted, rating being a matter for the insurer
3. Permitted if the difference is disclosed in the policy
4. Prohibited only where the difference exceeds ten percent

Why: S.C. Code § 38-55-50 bars discrimination in favour of individuals between insureds of the same class and risk involving the same hazards - in premiums or rates, in dividends or other benefits payable, or in any other term or condition - except as provided in §§ 38-57-140, 38-65-310 and 38-71-1110. The same section adds a rule worth remembering separately: no insurer, agent or broker may make a contract of insurance or an agreement about one OTHER THAN AS PLAINLY EXPRESSED IN THE POLICY ISSUED.

Hospice care under Medicare Part A is intended for:

1. Healthy beneficiaries who want annual preventive screenings
2. Anyone needing indefinite long-term custodial nursing care
3. Terminally ill patients, focusing on comfort rather than cure ✓
4. Patients recovering from routine elective outpatient surgery

Why: Medicare hospice provides palliative (comfort) care for terminally ill beneficiaries, generally with a limited life expectancy, rather than curative treatment.

A 'nondisabling injury' benefit in a disability income policy pays:

1. Double the monthly benefit for any disabling accident
2. A lump-sum death benefit if the insured dies from the injury
3. Medical expenses for an injury that does not cause disability ✓
4. The insured's full salary during a brief hospital stay

Why: This benefit reimburses medical costs of an injury that requires treatment but does not actually disable the insured, up to a stated limit.

Group life insurance is most commonly written as:

1. A single-premium endowment that is paid up at issue
2. Annually renewable term that renews each year ✓
3. Decreasing term tied to a mortgage balance
4. A paid-up whole life policy with no premiums

Why: Employer group life is typically annually renewable term; individual evidence of insurability is usually not required up to a guaranteed-issue limit.

The key distinction between an agent and a broker is that an agent:

1. May write only one line of insurance, while a broker may write several
2. Represents the applicant's interests, while a broker is the insurer's appointed representative
3. Is paid a salary only, while a broker earns commission on placed coverage
4. Legally represents the insurer, while a broker represents the client ✓

Why: An agent is the insurer's legal representative (acting under an agency contract); a broker represents the insurance buyer in seeking coverage.

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.

Policy dividends paid on a participating life policy become taxable only when:

1. The insured reaches the age of fifty-nine and one-half
2. Cumulative dividends received exceed the total premiums paid ✓
3. The dividends are used to purchase paid-up additional insurance
4. The policy is first issued and the initial dividend is declared

Why: Dividends are treated as a return of premium and are not taxable until cumulative dividends exceed the policyowner's cost basis (premiums paid).

A South Carolina health policy reimburses a service that is within the scope of practice of a licensed optometrist. Under section 38-71-200, where that service is performed by the optometrist rather than by a physician, the insured:

1. Is entitled to payment only where the policy expressly names optometrists among its covered providers
2. Is entitled to payment at a reduced non-physician rate
3. Must obtain a physician referral before the service is reimbursable
4. Is entitled to payment at the usual and customary fee, and may choose the provider ✓

Why: S.C. Code § 38-71-200 overrides any policy provision to the contrary and names four professions together - licensed podiatrist, oral surgeon, optometrist and doctoral psychologist. The right to choose the provider belongs to the policyholder, insured or beneficiary. The section opens with the general rule the provider clause serves: discrimination between individuals of the same class in premiums, benefits, terms or conditions is prohibited, except as §§ 38-57-140 and 38-71-1110 allow.

An employee has $100,000 of employer-paid group term life. The amount subject to imputed income is:

1. $50,000 ✓
2. $100,000
3. $0
4. $25,000

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

A policyowner stops paying premiums but wants to keep some permanent coverage with no further premiums due. The best nonforfeiture option is:

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

Why: Reduced paid-up uses the cash value to buy a smaller, fully paid-up permanent policy — permanent coverage with no further premiums.

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.

Section 38-71-46 requires health insurance policies and health maintenance organizations in South Carolina to cover the treatment of diabetes mellitus. Besides equipment, supplies and FDA-approved medication indicated for the treatment of diabetes, the section requires coverage of:

1. Outpatient self-management training and education ✓
2. Inpatient hospitalisation for glycaemic stabilisation
3. An annual endocrinology consultation
4. Any drug prescribed by any licensed practitioner, without a formulary

Why: S.C. Code § 38-71-46(A) requires coverage of equipment, supplies, FDA-approved medication indicated for the treatment of diabetes, and outpatient self-management training and education, conditioned on medical necessity and a prescription from a health care professional legally authorised to prescribe who adheres to the minimum standards of care published by the Diabetes Initiative of South Carolina. The section expressly does NOT stop an insurer using a formulary or a network. Coverage may not be denied unless the professional shows a persistent pattern of failure to meet those standards and the insurer has first given him written notice that coverage will be denied if he does not.

Section 38-59-20 lists the kinds of insurance business its improper claim practices apply to. Which is NOT among them?

1. Accident and health insurance
2. Surety insurance
3. Life insurance ✓
4. Title insurance

Why: S.C. Code § 38-59-20 applies to an insurer doing accident and health, property, casualty, surety, marine or title insurance business. Life insurance is not in that list. By contrast, § 38-59-50 expressly reaches life, endowment, accident, health and hospitalization policies when it bars payment or settlement of benefits in merchandise or services.

An applicant deliberately withholds a known heart condition from the application. This is:

1. Concealment of a material fact ✓
2. An innocent misrepresentation
3. A permissible omission
4. A warranty of good health

Why: Intentionally withholding a known material fact is concealment, which can void the contract.

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.

A person knowingly causes a false claim for twelve thousand dollars to be presented to a health maintenance organization doing business in this State. Under section 38-55-170 the offence is a:

1. Felony, punishable by up to ten years ✓
2. Felony, punishable by up to five years
3. Misdemeanour triable in magistrates court
4. Civil violation attracting a penalty only

Why: S.C. Code § 38-55-170 grades the offence by the AMOUNT OF THE CLAIM in three tiers: ten thousand dollars or more is a felony carrying imprisonment for not more than ten years or a fine of not more than five thousand dollars, or both; more than two thousand but less than ten thousand is a felony carrying a fine at the court's discretion or up to five years, or both; two thousand or less is a misdemeanour triable in magistrates or municipal court, carrying a fine of not more than one thousand dollars or up to thirty days, or both. The section reaches claims presented to an insurer, to a health maintenance organization, or to any person providing health care benefits in this State including the State itself, and catches assisting, soliciting or conspiring as well as presenting.

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.

A self-funded employer buys aggregate stop-loss insurance. It pays once total claims for the year exceed a set amount, protecting the employer from:

1. A single catastrophic individual claim only
2. The administrative fees of the plan
3. Higher-than-expected total claims ✓
4. The cost of routine preventive care

Why: Aggregate stop-loss caps the employer's exposure to total claims exceeding an attachment point; specific stop-loss covers individual large claims.

A life policy has premiums payable weekly. Under section 38-63-60 it qualifies as industrial life insurance only if it also:

1. Has a face amount of less than five thousand dollars
2. Is sold by an agent licensed for the industrial line
3. Provides for collection at the policyholder's home
4. Carries industrial policy in bold on its face ✓

Why: S.C. Code § 38-63-60 defines industrial life insurance by two things together - premiums payable weekly or monthly under an individual contract, and the words INDUSTRIAL POLICY in bold print upon the face of the policy AS PART OF THE TITLE. The definition matters because of the sentence that follows it: no life policy delivered or issued for delivery in South Carolina may use INDUSTRIAL MORTALITY TABLES unless it is an industrial life insurance policy.

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.

When a sale involves replacing an existing life policy, the producer must:

1. Guarantee in writing that the replacement policy will always cost the client less
2. Give the applicant the required replacement notice ✓
3. Personally surrender the client's existing policy before submitting the new application
4. Wait until the new policy is issued before mentioning the existing coverage at all

Why: Replacement rules require delivering a replacement notice/disclosure and following defined procedures.

A client deposits a single $100,000 premium and wants income to start in 15 years. The product is a:

1. Variable life insurance policy
2. Single-premium immediate annuity
3. Flexible-premium deferred annuity
4. Single-premium deferred annuity ✓

Why: One lump sum with income deferred to a future date is a single-premium deferred annuity (SPDA).

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

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

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

A South Carolina producer licensed for accident and health wants to sell long term care insurance. Under section 38-72-69 the one-time training course must be no less than eight hours, and thereafter ongoing training of no less than four hours must be completed every:

1. 24 months ✓
2. 36 months
3. 48 months
4. 60 months

Why: S.C. Code § 38-72-69 requires an accident and health or life licence PLUS the training, and the training may be approved as continuing education under § 38-43-106, so it need not be additional to a producer's CE burden. What it may not contain is as tested as what it must: no insurer-specific or product-specific content, and no sales or marketing material beyond what state or federal law requires. The insurer must obtain verification of the training before letting a producer sell its long term care products.

Life insurance is generally a 'valued' (not indemnity) contract because it pays:

1. A benefit reduced by other coverage in force
2. Nothing unless the beneficiary documents expenses
3. Only the actual financial loss the family proves
4. A stated face amount, not the measured economic loss ✓

Why: Life insurance pays the agreed face amount regardless of proven loss; medical expense insurance instead indemnifies actual costs.

A health insurer denies a service on the ground that the plan contract excludes it. Under section 38-59-25 that coverage decision:

1. Is the practice of medicine unless made by a physician
2. Is not the practice of medicine ✓
3. Is the practice of medicine in every case
4. Is not a coverage decision at all

Why: S.C. Code § 38-59-25 takes three kinds of decision outside the practice of medicine: a denial based on a finding that the service is included or excluded as a covered benefit under the plan contract, an approval of a covered benefit, and a denial of a covered benefit for diagnosis, treatment, cure or relief - the third only where a licensed physician issued it without wilfully or recklessly ignoring nationally recognised protocols. A good faith request for records or further information is not a delay for the section's purposes.