Vermont Life, Accident & Health Insurance License, Practice Exams

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.

What right does the PHYSICAL EXAMINATIONS AND AUTOPSY provision required by 8 V.S.A. 4029(10) give the insurer?

1. The right, at its own expense, to examine the insured as often as it may reasonably require while a claim is pending, and to make an autopsy in case of death where that is not forbidden by law in the place concerned. ✓
2. The right, at the claimant's expense, to examine the insured as often as it may reasonably require while a claim is pending, and to make an autopsy in case of death where that is not forbidden by law.
3. The right, at its own expense, to examine the insured once only in the course of any claim, and to make an autopsy in case of death only with the written consent of the personal representative of the insured.
4. The right, at its own expense, to examine the insured as often as it may reasonably require while a claim is pending, but no right to an autopsy, which the provision leaves to the law of the place of death alone.

Why: 8 V.S.A. 4029(10) gives the insurer, at its own expense, the right and the opportunity to examine the person of the insured when and as often as it may reasonably require during the pendency of a claim, and to make an autopsy in case of death where it is not forbidden by law.

An industrial policy's facility of payment clause may operate in favour of whom, under 8 V.S.A. 3731(11)?

1. The executor or administrator of the insured alone, the subdivision permitting payment to a relative or to a person who incurred expense for the maintenance, medical attention or burial of the insured only where the insured left no estate to be administered at all.
2. Any person the insurer chooses, up to a ceiling of five thousand dollars, the subdivision setting a dollar limit on the facility of payment rather than describing the classes of person to whom a payment under it may properly be made by the insurer.
3. The executor or administrator; a relative by blood, adoption or civil marriage; or a person who appears equitably entitled as a named beneficiary or by paying for the insured's care or burial. ✓
4. The policyholder who paid the premiums on the policy, whoever that may have been in the particular case that comes before the insurer for payment under the policy after the death of the insured.

Why: 8 V.S.A. 3731(11): where the designated beneficiary does not claim or surrender the policy with due proof of death within the period stated, or is the estate, a minor, predeceases the insured or is not legally competent to give a valid release, THE INSURER MAY MAKE ANY PAYMENT TO THE EXECUTOR OR ADMINISTRATOR OF THE INSURED, OR TO ANY RELATIVE OF THE INSURED BY BLOOD OR LEGAL ADOPTION OR CONNECTION BY CIVIL MARRIAGE, OR TO ANY PERSON APPEARING TO THE INSURER TO BE EQUITABLY ENTITLED by reason of having been named beneficiary or of having INCURRED EXPENSE FOR THE MAINTENANCE, MEDICAL ATTENTION OR BURIAL of the insured. Vermont sets no dollar ceiling on this clause.

When does the spendthrift protection in 8 V.S.A. 3705 apply to a beneficiary's interest?

1. In every case where proceeds are retained by the company for a beneficiary, whether or not the contract so provides, the section imposing the restriction on commutation and on the claims of creditors as a matter of law rather than of agreement between the parties.
2. Where the contract so provides: the beneficiary may not commute, anticipate, encumber, alienate or assign the principal or interest, and if the contract so provides neither is subject to the claims of that beneficiary's creditors. ✓
3. Where the Commissioner has approved the spendthrift clause on the insurer's filing of the contract form, and only as against creditors whose claims arose after the date of the contract.
4. Where the beneficiary is a minor or is otherwise not competent to give a valid release, the protection falling away once that beneficiary becomes competent to give one.

Why: 8 V.S.A. 3705: where a contract of annuity, a policy or other contract of a life insurance company is entered into with a person FOR THE BENEFIT OF ANOTHER AND SUCH CONTRACT SO PROVIDES, the beneficiary entitled to proceeds retained by the company MAY NOT COMMUTE, ANTICIPATE, ENCUMBER, ALIENATE OR ASSIGN the principal or interest; and IF SUCH CONTRACT SO PROVIDES, no part is subject to the CLAIMS OF CREDITORS of that beneficiary. Contracts so providing are valid and enforceable.

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.

What must a contract providing benefits payable in variable amounts contain under 8 V.S.A. 3856?

1. A statement of the essential features of the procedures the insurer will follow in determining the dollar amount of the variable benefits, and, where benefits vary with investment experience, a statement in the outline of coverage that the benefits are on a variable basis.
2. A statement of the essential features of the procedures the insurer will follow in determining the dollar amount of the variable benefits, and, where benefits vary with investment experience, a statement on the first page that the benefits are on a variable basis. ✓
3. A full description of the investments held in the separate account supporting the contract, and, where benefits vary with investment experience, a statement on the first page that the benefits are on a variable basis and that the insurer guarantees no particular rate of return.
4. A statement of the essential features of the procedures the insurer will follow in determining the dollar amount of the variable benefits alone; a group contract and any certificate issued under it are outside the section and need carry no statement of any kind about variability.

Why: 8 V.S.A. 3856 requires a statement of the essential features of the procedures to be followed by the insurer in determining the dollar amount of the variable benefits. Where the benefits vary to reflect investment experience, the contract, including a group contract and any certificate evidencing variable benefits issued under it, must state that the dollar amount will so vary and must carry on its first page a statement that the benefits are on a variable basis.

What does 8 V.S.A. 3855(b) provide about the corporate charter of a domestic life insurer?

1. It is deemed amended to authorize the company to do anything the section provides for. ✓
2. It must be amended by a vote of the shareholders before the company establishes any separate account.
3. It must be amended with the approval of the Commissioner before any separate account is established by it.
4. It is unaffected; a company whose charter does not authorize separate accounts may not establish one.

Why: 8 V.S.A. 3855(b) deems the corporate charter of every domestic life insurance company amended to authorize it to do anything provided for in the section. No shareholder vote or charter amendment is needed before a domestic life insurer establishes a separate account.

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.

Mental health parity requirements generally provide that a group plan's mental health benefits must be:

1. Excluded entirely unless the employer chooses to add them
2. Paid only after the insured exhausts all other available coverage
3. No more restrictive than its medical and surgical benefits ✓
4. Limited to a maximum of three covered visits each calendar year

Why: Parity rules require that financial requirements and treatment limits on mental health/substance use benefits be no more restrictive than those on medical/surgical benefits.

Preauthorization (precertification) is a managed-care cost control that requires:

1. The insured to pay double coinsurance on all elective surgeries
2. An automatic second opinion from a state-appointed physician
3. Providers to accept a fixed monthly payment per enrolled member
4. Approval before certain services or hospitalizations ✓

Why: Preauthorization requires the plan's approval before specified non-emergency procedures or admissions for them to be covered.

How may the notice of a conversion right be given under 8 V.S.A. 3823?

1. By written notice presented to the individual in person only; a notice mailed by the policyholder or by the insurer to the last known address does not satisfy the section, which requires actual receipt of the notice.
2. By written notice presented to the individual, or mailed by the policyholder to the individual's last known address, or mailed by the insurer to the last known address as furnished by the policyholder. ✓
3. By written notice mailed by the insurer to the individual's last known address only; a notice presented in person, or one mailed by the policyholder, does not start the additional period.
4. By any means the policyholder considers reasonable, including a notice posted at the place of employment or circulated in a newsletter to the staff of the employer concerned.

Why: 8 V.S.A. 3823: notice may be given by WRITTEN NOTICE PRESENTED TO THE INDIVIDUAL, OR MAILED BY THE POLICYHOLDER TO THE LAST KNOWN ADDRESS OF THE INDIVIDUAL, OR MAILED BY THE INSURER TO THE LAST KNOWN ADDRESS OF THE INDIVIDUAL AS FURNISHED BY THE POLICYHOLDER. Any of the three will do.

What does 8 V.S.A. § 3541(a) NOT apply to?

1. Surety bonds; specially rated inland marine risks; and unique forms for a particular subject, or forms on distribution of benefits or reservation of rights under life or disability policies used at the holder's request. ✓
2. Forms used in surplus lines placements and forms used by captive insurers, the subsection confining the approval requirement to the admitted market in which the Department sets the terms on which the public may buy.
3. Forms used for a single policyholder, the subsection exempting any manuscript wording from approval provided the insurer files a copy of it with the Department within thirty days of issuing the policy on which it has been used and identifies the policyholder for whom the wording was written.
4. Reinsurance agreements, forms used with risks located outside this State, and forms already approved by the insurance regulator of the insurer's state of domicile under a filing which that regulator has certified to the Commissioner.

Why: 8 V.S.A. § 3541(a). ALL CERTIFICATES delivered here must still be filed for approval IF THE GROUP POLICY DOES NOT QUALIFY under subdivision 3368(a)(4) at the time of delivery.

Eligibility for Medicaid is based primarily on:

1. Enrollment in a private health plan
2. Financial need (limited income and assets) ✓
3. Reaching age 65 regardless of income
4. Having paid 40 quarters into the system

Why: Medicaid is a means-tested, joint federal-state program for low-income individuals; eligibility varies by state.

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.

What may a person insured under a Vermont GROUP life policy assign under 8 V.S.A. 3713(b), and what limit is there on that right?

1. All or any part of the incidents of ownership, including the right to designate a beneficiary and the right to an individual policy on termination of employment or of the group policy; and neither the insurer nor the group policyholder may prohibit or restrict such an assignment, the subsection overriding any policy provision that purports to do so.
2. The right to designate a beneficiary alone; the right to an individual policy on termination of employment or of the group policy is personal to the insured person and may not be assigned under the subsection, whatever the policy provisions may say about the assignment of the other incidents of ownership under the group coverage.
3. All or any part of the incidents of ownership, including the right to designate a beneficiary and the right to an individual policy on termination of employment or of the group policy; but the insurer and the group policyholder may prohibit or restrict such an assignment by appropriate policy provisions. ✓
4. Nothing at all; group life insurance is not assignable in Vermont, the subsection confining assignment to individual policies and to annuity contracts issued in this State, and leaving the incidents of ownership under a group policy personal to the insured.

Why: 8 V.S.A. 3713(b): NOTWITHSTANDING ANY PROVISION OF LAW, a person whose life is insured under any policy of GROUP life insurance MAY MAKE AN ASSIGNMENT OF ALL OR ANY PART OF HIS OR HER INCIDENTS OF OWNERSHIP, INCLUDING ANY RIGHT TO DESIGNATE A BENEFICIARY AND ANY RIGHT TO HAVE AN INDIVIDUAL POLICY ISSUED IN LIEU of the group coverage UPON TERMINATION EITHER OF EMPLOYMENT OR OF THE POLICY - PROVIDED THAT THE INSURER AND THE GROUP POLICY HOLDER MAY PROHIBIT OR RESTRICT SUCH AN ASSIGNMENT BY APPROPRIATE POLICY PROVISIONS.

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.

Before recommending an annuity, a producer learns the client needs the money within a year for living expenses. The producer should:

1. Recommend the annuity with the highest surrender charges
2. Recommend it only if the client signs a liability waiver
3. Conclude the annuity is likely unsuitable and not recommend it ✓
4. Sell the annuity anyway to meet a monthly sales quota

Why: Suitability rules require matching the product to the client's situation; an annuity (with surrender charges and a long horizon) is unsuitable for funds needed immediately.

Accelerated death benefits paid to a terminally ill insured are generally:

1. Fully taxable to the insured as ordinary earned income for the year
2. Subject to a mandatory flat 20% federal income-tax withholding
3. Taxed as a long-term capital gain on the policy's accumulated cash value
4. Received income-tax-free ✓

Why: They are generally received income-tax-free, similar to a death benefit, when the insured is terminally ill.

Within what period may a lapsed Vermont life policy be reinstated under 8 V.S.A. 3731(9)?

1. Within three years from the date of premium default in every case, no separate period being set for an industrial policy.
2. Within three years from the date of premium default, or two years in the case of an industrial life insurance policy. ✓
3. Within five years from default, or three years for an industrial policy, for written application and evidence of insurability.
4. Within one year from the date of premium default, whatever kind of life insurance policy has lapsed.

Why: 8 V.S.A. 3731(9): the policy will be reinstated AT ANY TIME WITHIN THREE YEARS (OR TWO YEARS IN THE CASE OF INDUSTRIAL LIFE INSURANCE POLICIES) FROM THE DATE OF PREMIUM DEFAULT.

What does 8 V.S.A. § 4724(7)(B) forbid, and what does it preserve?

1. Any use of sex or marital status in insurance, including in the actuarial classification of risks, the subdivision removing those characteristics from the rating process altogether in this State.
2. Unfair discrimination on the basis of sex, sexual orientation, gender identity or marital status in underwriting standards, eligibility requirements or rates. ✓
3. Discrimination in rates alone. Underwriting standards and eligibility requirements are business judgments for the insurer, and the subdivision reaches only the price charged once the risk has been accepted by the company.
4. Discrimination on the basis of sexual orientation or gender identity, sex and marital status remaining ordinary rating factors which an insurer may use freely without any actuarial justification at all.

Why: 8 V.S.A. § 4724(7)(B)(i) and (ii). The proviso is confined to RATES and requires REASONABLE CLASSIFICATIONS ON RELEVANT ACTUARIAL DATA under § 4686.

What is the position after a long-term care policy has been in force for two years, under 8 V.S.A. 8094(c)?

1. It is not contestable upon the grounds of misrepresentation alone, but may be contested only on a showing that the insured knowingly and intentionally misrepresented relevant facts relating to the insured's health. ✓
2. It is not contestable upon any ground at all, the two-year period operating as an absolute bar to a rescission or to the denial of a claim however the misrepresentation came to be made by the insured person of the insured.
3. It remains contestable upon a showing of misrepresentation material to the acceptance for coverage, the two-year period going only to the insurer's power to recover benefits already paid out after the two years have run.
4. It is not contestable upon the grounds of misrepresentation alone, but may be contested on a showing that the insured failed to disclose a condition for which benefits are now being sought under the policy.

Why: 8 V.S.A. 8094(c) makes the policy or certificate not contestable on the grounds of misrepresentation alone after two years in force; it may be contested only upon a showing that the insured knowingly and intentionally misrepresented relevant facts relating to the insured's health.

What does 8 V.S.A. § 3661(a)(2) allow, and what fine follows?

1. The Commissioner may refer the violation to the State's Attorney for the county in which it occurred, who must bring a prosecution, the offender being liable to a fine of not more than $5,000 on conviction.
2. The Commissioner may report each violation, with any information he or she has about it, to the Attorney General, who shall prosecute if he or she deems it advisable. On such a prosecution the offender shall be fined not more than $2,000. ✓
3. The Commissioner may bring a civil action in the name of the State in the Washington Superior Court and recover a penalty of not more than $2,000 for each violation, together with the costs of the investigation, the Attorney General appearing for the Department in the action if the Commissioner requests it.
4. The Commissioner may report the violation to the Attorney General, who must then prosecute it, the offender being liable to a fine of not more than $2,000 for a first violation and not more than $10,000 for any later one.

Why: 8 V.S.A. § 3661(a)(2). THE DISCRETION IS THE ATTORNEY GENERAL'S - IF HE OR SHE DEEMS IT ADVISABLE - and this is a FINE ON A PROSECUTION, not an administrative penalty.

An 'own-occupation' definition in a disability income policy pays benefits when the insured cannot perform:

1. activities of daily living
2. The duties of their own occupation ✓
3. household chores
4. Any job for which they are reasonably suited

Why: Own-occupation pays if the insured cannot do their own job, even if able to work elsewhere; it is more generous than any-occupation.

Dependants' coverage ends because the employee's employment has terminated. What does 8 V.S.A. 3811(3) give the spouse?

1. The right to have an individual policy issued by the insurer on furnishing evidence of insurability satisfactory to it, with whatever supplementary benefits the coverage carried.
2. The right to have the dependants' coverage continued under the group policy for a further thirty-one days at the group rate, after which it ends and no individual policy is available.
3. The right to have an individual policy of life insurance issued by the insurer without evidence of insurability and without disability or other supplementary benefits. ✓
4. No right at all; dependants' coverage ends with the employee's coverage and the subdivision provides no conversion for the spouse or for any child of that employee.

Why: 8 V.S.A. 3811(3): upon termination of the insurance with respect to the family of any employee or member by reason of that person's TERMINATION OF EMPLOYMENT, TERMINATION OF MEMBERSHIP in an eligible class, OR DEATH, THE SPOUSE SHALL BE ENTITLED TO HAVE ISSUED BY THE INSURER, WITHOUT EVIDENCE OF INSURABILITY, AN INDIVIDUAL POLICY OF LIFE INSURANCE, WITHOUT DISABILITY OR OTHER SUPPLEMENTARY BENEFITS.

What does 8 V.S.A. 4051(e) require of the Department of Financial Regulation?

1. Collaboration with health insurers, advocates for older Vermonters and other Medicare-eligible adults, and the Office of the Health Care Advocate to educate the public about the benefits and limitations of Medicare supplement policies and Medicare Advantage plans. ✓
2. Collaboration with health insurers alone to educate the public about the benefits and limitations of Medicare supplement insurance policies; Medicare Advantage plans are federal products and fall outside the subsection as the legislature has drawn it for this State.
3. Publication of a buyer's guide to Medicare supplement insurance in a form the Commissioner prescribes, to be distributed by every health insurer offering such policies to each applicant at the time of solicitation rather than at the time the policy is delivered to that applicant.
4. Collaboration with the Department of Disabilities, Aging, and Independent Living to operate a counselling service for Medicare-eligible adults, the subsection saying nothing about health insurers or about the Office of the Health Care Advocate in the educational work it requires.

Why: 8 V.S.A. 4051(e) requires the Department of Financial Regulation to collaborate with health insurers, advocates for older Vermonters and for other Medicare-eligible adults, and the Office of the Health Care Advocate to educate the public about the benefits and limitations of Medicare supplement insurance policies and Medicare Advantage plans, including information on coverage, costs and provider networks.

What follows a disapproval under 8 V.S.A. 4108(c), and how may approval be withdrawn under 4108(d)?

1. The notice states the reason and that a hearing will be granted within sixty days after a written request by the insurer; approval may be withdrawn after a hearing held not less than sixty days after written notice stating the reason for the proposed withdrawal.
2. The notice states the reason and no hearing is available, the insurer's only remedy being judicial review; approval may be withdrawn at any time on written notice, without any hearing and without any statement of the reason for the withdrawal.
3. The notice states the reason and that a hearing will be granted within twenty days after a written request by the insurer; approval may be withdrawn after a hearing held not less than twenty days after written notice stating the reason for the proposed withdrawal. ✓
4. The notice states the reason and that a hearing will be granted within twenty days after a written request by the insurer; approval once given may not be withdrawn at all, the Commissioner being bound by the approval for as long as the form remains in use.

Why: 8 V.S.A. 4108(c) makes it unlawful to issue or use a disapproved form, requires the notice to specify the reason and to state that a hearing will be granted within twenty days after a written request by the insurer, and bars issue or use of a filed form until thirty days after filing unless the Commissioner gives prior written approval. 4108(d) allows withdrawal of approval at any time after a hearing held not less than twenty days after written notice stating the reason for the proposed withdrawal.

How quickly must payment be mailed under Regulation I-1979-02, section 6.G?

1. Within fifteen business days of the settlement being agreed, the insurer being entitled to a further fifteen days where the payment must be made jointly to the claimant and a lienholder whose interest must first be verified.
2. Within thirty calendar days of the claimant signing a release, the regulation running the period from the release rather than from the agreement so that the insurer is not obliged to pay before it has the document which protects it against a further claim for the same loss by the same claimant.
3. Immediately on the agreement being reached, the regulation allowing no interval at all and treating any delay in mailing a payment which has been agreed as a separate violation for each day it continues.
4. After settlement has been agreed upon, the insurer must mail payment in the amount agreed to the claimant and/or loss payee within 10 business days, unless a further delay is mandated under an order by a court of competent jurisdiction or required by law. ✓

Why: Regulation I-1979-02, section 6.G. TEN BUSINESS DAYS, and the only excuses are A COURT ORDER OR THE LAW.

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

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

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

For which services does 8 V.S.A. 4042(b)(4) forbid any co-payment, coinsurance or deductible?

1. Preventive services with an A or B rating in the current recommendations of the U.S. Preventive Services Task Force alone; immunizations and the preventive care and screenings for children and for women remain subject to whatever cost sharing the group policy imposes on them.
2. Every service the group policy covers where it is delivered by a provider in the insurer's own network, cost sharing being permitted only on services obtained outside that network, whether or not those services are preventive in character under the federal recommendations.
3. Preventive services of every description, whatever rating they carry in the recommendations of the U.S. Preventive Services Task Force, and whether or not any federal body has recommended them, the subdivision making no reference to a rating of any kind at all.
4. Preventive services with an A or B rating in the current recommendations of the U.S. Preventive Services Task Force, routine immunizations recommended by the Advisory Committee on Immunization Practices, and the stated preventive care for children and for women. ✓

Why: 8 V.S.A. 4042(b)(4)(A) bars cost sharing for preventive services with an A or B rating from the U.S. Preventive Services Task Force, immunizations for routine use recommended by the Advisory Committee on Immunization Practices, evidence-informed preventive care and screenings for infants, children and adolescents under HRSA guidelines, and the corresponding care and screenings for women. 4042(b)(4)(B) applies the bar to a high-deductible health plan only so far as it would not disqualify the plan from health savings account eligibility.

Who may establish separate accounts under 8 V.S.A. 3855(a), and for what purpose?

1. A domestic life insurer, allocating amounts to provide for life insurance or annuities and benefits incidental to them, payable in fixed or variable amounts or both. ✓
2. Any life insurer licensed in this State, allocating amounts to provide for life insurance or annuities and benefits incidental to them, payable in variable amounts alone.
3. A domestic life insurer, allocating amounts to provide for annuities alone, life insurance benefits being outside the separate account provisions of this subchapter.
4. A domestic or foreign life insurer with the written approval of the Commissioner in each case, allocating amounts to provide for life insurance or annuities on a variable basis.

Why: 8 V.S.A. 3855(a) allows a domestic life insurer to establish one or more separate accounts and to allocate to them amounts, including proceeds applied under optional modes of settlement or under dividend options, to provide for life insurance or annuities and benefits incidental to them, payable in fixed or variable amounts, or both.

A 10% IRS early-distribution penalty on a traditional IRA is generally waived if the owner:

1. Becomes totally disabled ✓
2. Simply decides they would prefer to access the funds early
3. Changes employers and rolls the balance into a new account
4. Has held the account for at least five consecutive years

Why: Exceptions to the 10% penalty include death, total disability, certain medical/first-home/education amounts, and substantially equal periodic payments.

To whom are benefits under a blanket health policy payable under 8 V.S.A. 4052(b)(3)?

1. To the policyholder in every case, who accounts for them to the person insured or to that person's designated beneficiary or estate; where the person insured is a minor they may be paid to a parent, guardian or other person actually supporting the minor.
2. To the person insured, that person's designated beneficiary or estate in every case, including benefits for hospital and physician service or surgical benefits; where the person is a minor they must be paid into court for that minor's benefit.
3. To the person insured, that person's designated beneficiary or estate, unless the benefits are for hospital and physician service or surgical benefits; where the person is a minor they may be paid to a parent, guardian or other person supporting the minor. ✓
4. To the person insured or that person's designated beneficiary, unless the benefits are for hospital and physician service or surgical benefits; the section makes no provision for the estate of the person insured and none for a person insured who is a minor.

Why: 8 V.S.A. 4052(b)(3) makes all benefits under a blanket health policy payable to the person insured, or to that person's designated beneficiary or beneficiaries, or to the person's estate, unless they are for hospital and physician service or surgical benefits; and where the person insured is a minor, the benefits may be made payable to the minor's parent, guardian or other person actually supporting the minor.

A 50-year-old withdraws $10,000 of gain from a nonqualified deferred annuity. Besides ordinary income tax, the IRS penalty is:

1. $1,000 ✓
2. $2,000
3. $500
4. $0

Why: A premature distribution before 59½ incurs a 10% penalty: 10% × $10,000 = $1,000, on top of ordinary income tax on the gain.

What protection does 8 V.S.A. 3708(a) give to group life and group disability proceeds?

1. They are not liable, after payment only, to be applied by any process to pay a debt of the insured individual or the beneficiary; before payment the proceeds remain within the reach of the creditors of whichever of those persons is entitled to receive them under the group policy as it stands at the death of the individual insured under it.
2. They are not liable to be applied to pay a debt of the insured individual; a debt of the beneficiary or of another person with a right under the policy is outside the subsection, and the proceeds form part of the estate of the insured in every case where no named beneficiary survives.
3. They are exempt from the debts of the insured only where the group policy so provides, the subsection leaving the whole question to the terms of the contract the parties have made, and giving the proceeds no protection of its own against the creditors of the insured or of the beneficiary.
4. They are not liable, before or after payment, to be applied by any process to pay a debt of the insured individual, the beneficiary or any other person with a right under the policy; and where not payable to a named beneficiary or to a third person under a facility-of-payment clause they do not form part of the insured's estate for debts. ✓

Why: 8 V.S.A. 3708(a): a policy of group life or group disability insurance, OR THE PROCEEDS payable to the individual insured or the beneficiary, SHALL NOT BE LIABLE, EITHER BEFORE OR AFTER PAYMENT, to be applied by any process to pay any debt of the insured individual, the beneficiary, OR ANY OTHER PERSON HAVING A RIGHT UNDER THE POLICY. The proceeds, WHEN NOT MADE PAYABLE TO A NAMED BENEFICIARY OR TO A THIRD PERSON PURSUANT TO A FACILITY-OF-PAYMENT CLAUSE, DO NOT CONSTITUTE PART OF THE ESTATE of the individual insured for payment of debts.

A policy was funded faster than the 7-pay limit, making it a MEC. A subsequent policy loan is:

1. Completely free of any income tax
2. Considered a tax-free return of the premiums the owner originally paid into the policy
3. Deductible by the owner as interest expense
4. Taxed on a gains-first (LIFO) basis, with a possible penalty ✓

Why: In a MEC, living distributions and loans are taxed gains-first (LIFO) and may carry a 10% penalty before age 59½.

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).

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.

What do 8 V.S.A. 4109(a) and (d) require about premium rates and charges?

1. Schedules of premium rates filed with the Commissioner, with a nonrefundable fee of $100.00 per schedule, no policy being issued at a rate above the filed schedule; and a charge by the creditor to the debtor of not more than one hundred and ten per cent of the insurer's premium.
2. Schedules of premium rates filed with the Commissioner for information only, the insurer remaining free to issue a policy at whatever rate it agrees with the creditor; and no charge by the creditor to the debtor exceeding the premiums charged by that insurer for the coverage concerned.
3. Schedules of premium rates approved by the Commissioner before use, with a nonrefundable fee of $50.00 per schedule, no policy being issued at a rate above the approved schedule; and no charge by the creditor to the debtor at all, the premium being payable by the creditor in every case.
4. Schedules of premium rates filed with the Commissioner, with a nonrefundable fee of $50.00 per schedule, no policy being issued at a rate above the filed schedule; and no charge by the creditor to the debtor exceeding the premiums charged by the insurer. ✓

Why: 8 V.S.A. 4109(a) requires each insurer to file its schedules of premium rates with the Commissioner, and any revisions, forbids issuing a policy at a premium rate exceeding the schedules then on file, and requires a nonrefundable fee of $50.00 per schedule of premium rates. 4109(d) forbids the creditor to charge the debtor more than the premiums charged by the insurer, computed at the time the charge to the debtor is determined.

What must an insurer show to rescind a long-term care policy in force for at least six months but less than two years, under 8 V.S.A. 8094(b)?

1. Misrepresentation that is material to the acceptance for coverage, whether or not it pertains to the condition for which benefits are sought.
2. That the insured knowingly and intentionally misrepresented relevant facts relating to the insured's own state of health.
3. Misrepresentation that pertains to the condition for which benefits are sought, whether or not it was material to acceptance.
4. Misrepresentation that is both material to the acceptance for coverage and pertains to the condition for which benefits are sought. ✓

Why: 8 V.S.A. 8094(b) raises the bar for a policy or certificate in force for at least six months but less than two years: the misrepresentation must be both material to the acceptance for coverage and pertain to the condition for which benefits are sought.

Respite care, often covered by long-term care policies, is intended to:

1. Pay the insured a cash bonus for staying out of a nursing home
2. Provide permanent placement in a skilled nursing facility
3. Cover the cost of prescription drugs used during a hospital stay
4. Give a temporary break to the insured's regular unpaid caregiver ✓

Why: Respite care provides short-term relief for a family member or other informal caregiver.

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.

A policy loan taken against a non-MEC life insurance policy that remains in force is:

1. Treated as a fully taxable capital gain regardless of the policy's basis
2. Taxed immediately as ordinary income in the year the loan is taken out
3. Not subject to income tax ✓
4. Deductible by the policyowner as a personal interest expense

Why: Loans from a policy in force are not taxable; tax can arise only if the policy lapses or is surrendered with a gain (or is a MEC).

A SIMPLE IRA retirement plan is intended for:

1. Government workers not covered by Social Security, who defer pay through a 457(b) plan instead
2. Small employers, with employee salary deferrals and an employer match ✓
3. Self-employed individuals who have no employees at all other than a spouse on the payroll
4. Large corporations with thousands of unionized employees

Why: A SIMPLE IRA is for small employers (generally up to 100 employees) and combines employee salary-reduction contributions with required employer contributions.

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.

What does 8 V.S.A. 4042(a)(1) require about statements made by applicants?

1. All statements made by an applicant are warranties of the truth of the matters stated, and any statement may avoid the insurance or reduce benefits whether or not it is contained in a written application a copy of which is attached to the policy.
2. All statements made by an applicant are, in the absence of fraud, representations and not warranties, and any such statement may avoid the insurance or reduce benefits whether or not a copy of the application containing it is attached to the policy.
3. All statements made by an applicant are, in the absence of fraud, representations and not warranties, and no statement avoids the insurance or reduces benefits unless it is contained in a written application a copy of which is attached to the policy. ✓
4. All statements made by an applicant are representations and not warranties in every case, including a statement made fraudulently, and no statement of any kind may avoid the insurance or reduce the benefits the group policy provides to the person.

Why: 8 V.S.A. 4042(a)(1) makes the policy, the policyholder's application where attached and the individual applications of employees or members the entire contract, provides that all statements by an applicant are in the absence of fraud representations and not warranties, and bars the use of any such statement to avoid the insurance or reduce benefits unless it is contained in a written application of which a copy is attached to the policy.

How does 8 V.S.A. 4173(b)(2)(C) limit coverage of a policy by reference to Moody's Corporate Bond Yield Average?

1. A portion is excluded where the rate averaged over the four years before impairment or insolvency exceeds Moody's for that period less three percentage points, and, on and after that date, the most recent Moody's figure less two points.
2. A portion is excluded where the rate at the date of impairment or insolvency exceeds the most recent Moody's figure by two percentage points, no averaging being required by the subdivision over any earlier period of the policy's life.
3. A portion is excluded where the rate averaged over the four years before impairment or insolvency exceeds Moody's averaged for that period less two percentage points, and, on and after that date, the most recent Moody's figure less three points. ✓
4. A portion is excluded where the rate exceeds Moody's averaged over the ten years before impairment or insolvency by any margin at all, the subdivision setting no fixed number of percentage points at all for the comparison it requires.

Why: 8 V.S.A. 4173(b)(2)(C) works in two stages. Averaged over the four years before the member insurer becomes impaired or insolvent, whichever is earlier, the rate must not exceed Moody's Corporate Bond Yield Average for the same period less two percentage points; on and after that date it must not exceed the most recently available Moody's figure less three percentage points.

A Medicare Special Enrollment Period (SEP) without penalty is available to a person who:

1. Simply forgot to sign up during their initial enrollment window
2. Has decided to drop Medicare entirely and rely on Medicaid
3. Delayed Part B because of active employer group coverage past age 65 ✓
4. Wishes to switch from one Medigap letter plan to a different one

Why: Those who kept employer group coverage (their own or a spouse's) past 65 may enroll later during a SEP without a late penalty.

Preadmission certification is a managed-care control that requires:

1. The insured to pay the full bill and seek reimbursement
2. Approval before a non-emergency hospital admission ✓
3. A second surgeon to perform every elective operation
4. Providers to accept a fixed monthly capitation payment

Why: Preadmission (precertification) requires the plan's approval of a planned hospital stay before admission for it to be covered.

The agent's report attached to a life insurance application is:

1. A required disclosure that must be given to the applicant at delivery
2. A legally binding warranty made by the proposed insured
3. The agent's confidential observations, which are not part of the contract ✓
4. The medical history section the applicant completes personally

Why: The agent's report conveys the producer's observations to the underwriter; it is not part of the entire contract and is not shown to the applicant.

What does the CHANGE OF BENEFICIARY provision required by 8 V.S.A. 4029(12) reserve to the insured?

1. The right to change the beneficiary in every case, including where an irrevocable designation has been made, the beneficiary's consent not being requisite to a surrender or assignment of the policy or to any other change in it.
2. The right to change the beneficiary unless an irrevocable designation has been made, but the written consent of the named beneficiary is requisite to a surrender or assignment of the policy or to any other change in its terms.
3. The right to change the beneficiary unless an irrevocable designation has been made, the beneficiary's consent not being requisite to a surrender or assignment of the policy, to a change of beneficiary or to any other change in it. ✓
4. No right to change the beneficiary at all once the designation has been made and endorsed on the policy, the provision reserving that right to the insurer acting with the consent of the insured and of the beneficiary alike.

Why: 8 V.S.A. 4029(12) reserves the right to change the beneficiary to the insured unless the insured has made an irrevocable designation, and provides that the consent of the beneficiary is not requisite to a surrender or assignment of the policy, to a change of beneficiary, or to any other change in the policy. The first clause, on irrevocable designation, may be omitted at the insurer's option.

What limits do 8 V.S.A. 8085(b)(8), (b)(9) and (b)(10) place on a long-term care policy?

1. No deductible or elimination period in excess of one hundred days for any covered benefit; no requirement to pay premiums more frequently than monthly; and no representation of the premium as level or fixed where it may in fact be increased. ✓
2. No deductible or elimination period in excess of ninety days for any covered benefit; no requirement to pay premiums more frequently than quarterly; and no representation of the premium as level or fixed where it may in fact be increased.
3. No deductible or elimination period in excess of one hundred days for any covered benefit; no requirement to pay premiums more frequently than monthly; and no increase in the premium at all once the policy has been issued to the insured.
4. No deductible or elimination period of any length for a covered benefit; no requirement to pay premiums more frequently than monthly; and no representation of the premium as level or fixed unless the Commissioner has approved the wording.

Why: 8 V.S.A. 8085(b)(8) caps any deductible or elimination period at one hundred days, computed as the Commissioner prescribes by rule. 8085(b)(9) forbids requiring premiums more frequently than monthly. 8085(b)(10) forbids representing the premium as level, fixed or by similar words if it is not in fact fixed and may be increased.

A Medicare Supplement (Medigap) policy is designed to:

1. Pay only for outpatient prescription drug costs
2. Cover gaps like deductibles and coinsurance in Original Medicare ✓
3. Provide long-term custodial nursing-home care benefits for an indefinite period of time
4. Replace Original Medicare with a private network plan

Why: Medigap fills cost-sharing gaps in Original Medicare and is sold in standardized plans.

What does 8 V.S.A. 3855(a)(3) say about guaranteed reserves and funds?

1. Reserves for benefits guaranteed as to dollar amount and duration, and funds guaranteed as to principal amount or stated rate of interest, must always be maintained in a separate account, the guaranteed nature of the benefits requiring their segregation.
2. Reserves for benefits guaranteed as to dollar amount and duration may be maintained in a separate account without any approval; only funds guaranteed as to principal amount or stated rate of interest require the approval of the Commissioner for that purpose.
3. Reserves for benefits guaranteed as to dollar amount and duration, and funds guaranteed as to principal amount or stated rate of interest, may never be maintained in a separate account, the Commissioner having no power to approve such an arrangement.
4. Reserves for benefits guaranteed as to dollar amount and duration, and funds guaranteed as to principal amount or stated rate of interest, may not be maintained in a separate account except with the Commissioner's approval and on prescribed conditions. ✓

Why: 8 V.S.A. 3855(a)(3) forbids maintaining reserves for benefits guaranteed as to dollar amount and duration, and funds guaranteed as to principal amount or stated rate of interest, in a separate account, except with the approval of the Commissioner and under such conditions as to investments and other matters as the Commissioner may prescribe, which must recognize the guaranteed nature of the benefits provided.

A 68-year-old retiree wants income payments to begin next month from a lump sum. The suitable product is a(n):

1. 20-year level term policy
2. Variable universal life policy
3. Single-premium immediate annuity ✓
4. Flexible-premium deferred annuity

Why: A single-premium immediate annuity converts a lump sum into income beginning within one payment period.

What must a life settlement broker do on a rescission under 8 V.S.A. 3843(c)?

1. Refund all commissions and compensation to the policy owner within five business days following receipt of a written demand accompanied by the notice of rescission or of the insured's death during the period.
2. Refund all commissions and compensation to the life settlement provider within thirty calendar days following receipt of a written demand accompanied by the notice of rescission or of the insured's death.
3. Retain the commissions and compensation already received, the rescission affecting only the position between the policy owner and the life settlement provider under the contract that has been rescinded.
4. Refund all commissions and compensation to the life settlement provider within five business days following receipt of a written demand accompanied by the notice of rescission or of the insured's death. ✓

Why: 8 V.S.A. 3843(c) requires a life settlement broker who has been paid commissions or other compensation in connection with a rescinded transaction to refund all of it to the life settlement provider within five business days following receipt of a written demand, which must be accompanied by the policy owner's notice of rescission or notice of the death of the insured within the rescission period.

How is the minimum payout adjusted under 8 V.S.A. 3843(g)(3), (g)(4) and (g)(6)?

1. Increased by fifty per cent of any net cash surrender value; reducible by the minimum premium needed to keep the contract in force and by the broker's fees, both of which are placed in trust; and computed including the death benefit value of any accidental death benefit rider attached to the policy.
2. Increased by one hundred per cent of any net cash surrender value; reducible by whatever expenses and broker's fees the provider has actually incurred in the transaction; and computed without the death benefit value of any accidental death benefit rider.
3. Increased by one hundred per cent of any net cash surrender value; reducible only by the minimum premium needed to keep the contract in force for the remaining life expectancy, which is placed in trust; and computed without the death benefit value of any accidental death benefit rider. ✓
4. Left unadjusted for cash surrender value, which belongs to the provider on the transfer; reducible only by the minimum premium needed to keep the contract in force; and computed including the death benefit value of any accidental death benefit rider.

Why: 8 V.S.A. 3843(g)(3) increases the payout by one hundred per cent of any net cash surrender value at the time the contract is issued. 3843(g)(4) allows a reduction only by the minimum premium required to keep the contract in force for the remaining life expectancy, with no other retention for expenses or broker's fees, and requires that sum to be placed in trust. 3843(g)(6) excludes the death benefit value of any accidental death benefit rider from the computation, and requires no minimum percentage for the transfer of such a rider.

Which of these purposes does 8 V.S.A. 4724(8)(C)(iv)(II) list for a value-added product or service?

1. Enhancing health and enhancing financial wellness alone; post-loss service and behavioural change programmes are outside the limb and may not be offered at no or reduced cost by an insurer in this State.
2. Enhancing health; enhancing financial wellness through education or financial planning services; providing post-loss service; and incenting behavioural changes to improve health or reduce the risk of death or disability. ✓
3. Enhancing health; enhancing financial wellness; and providing a cash payment to the insured on the anniversary of the policy in an amount reflecting the insured's compliance with a wellness programme.
4. Reducing claim costs and providing loss mitigation alone; a product or service directed at the health or the financial wellness of the insured falls outside the limb and is treated as a rebate in this State.

Why: 8 V.S.A. 4724(8)(C)(iv)(II) requires the value-added product or service to be primarily designed to satisfy one or more of nine listed purposes. Alongside loss mitigation, reduction of claim costs, education about risk, risk monitoring and assistance with benefit administration, the list includes enhancing health, enhancing financial wellness through items such as education or financial planning services, providing post-loss service, and incenting behavioural changes to improve health or reduce the risk of death or disability.

What does the optional CANCELLATION provision in 8 V.S.A. 4030(8) allow?

1. The insurer to cancel on written notice stating when, not less than thirty days after the notice, cancellation is effective; and the insured to cancel at any time, the earned premium being computed pro rata in either case whoever gave the notice of cancellation under the policy.
2. The insurer to cancel on written notice stating when, not less than five days after the notice, cancellation is effective; and the insured to cancel after the original term, the earned premium being computed on the short-rate table in both cases under the policy as written.
3. The insurer to cancel on written notice stating when, not less than five days after the notice, cancellation is effective; and the insured to cancel after the original term, the insured's earned premium being computed on the short-rate table and the insurer's pro rata. ✓
4. The insurer to cancel without notice at any time before the end of the original term of the policy; and the insured to cancel only at a policy anniversary, the unearned premium being retained by the insurer in either case as a charge for the cancellation of the cover itself.

Why: 8 V.S.A. 4030(8) lets the insurer cancel by written notice delivered or mailed to the insured's last address, stating when, not less than five days thereafter, cancellation is effective; and lets the insured cancel after the policy has been continued beyond its original term. Where the insured cancels, earned premium is computed on the short-rate table; where the insurer cancels, pro rata. Cancellation is without prejudice to a claim originating before its effective date.

The four essential elements required to form a valid insurance contract are offer and acceptance, competent parties, legal purpose, and:

1. A guaranteed minimum interest rate
2. A medical examination of the applicant
3. Approval by the state insurance commissioner
4. Consideration ✓

Why: A valid contract requires agreement (offer/acceptance), consideration, competent parties, and a legal purpose.

What do 8 V.S.A. 4072(c)(2) and (c)(4) require of a health insurance plan?

1. That it not exclude from its network any licensed mental health or substance use disorder provider in the coverage area willing to meet its terms; and that at least one medication in each therapeutic class approved for substance use disorder sit on the lowest cost-sharing tier. ✓
2. That it not exclude from its network any licensed mental health or substance use disorder provider in the coverage area, whether or not that provider is willing to meet the insurer's terms of participation; and that every approved substance use disorder medication sit on the lowest tier.
3. That it contract with at least one licensed mental health provider in each county of the State; and that methadone, buprenorphine and naltrexone be supplied without any cost-sharing at all to a covered individual receiving treatment for an opioid use disorder under the plan.
4. That it not exclude from its network any licensed mental health provider in the coverage area willing to meet its terms; the subdivision on prescription drugs applies only where the plan has elected to provide a prescription drug benefit at the specialty tier of its own formulary.

Why: 8 V.S.A. 4072(c)(2) forbids exclusion from the network or list of authorized providers of any licensed mental health or substance use disorder treatment provider located within the plan's geographic coverage area who is willing to meet the terms and conditions for participation. 4072(c)(4) requires a plan providing prescription drug coverage to ensure that at least one medication in each therapeutic class approved for the treatment of substance use disorder, including methadone, buprenorphine and naltrexone for opioid use disorder, is available on the lowest cost-sharing tier of the formulary.

What does 8 V.S.A. 8086(d) forbid an insurer to do?

1. Use an application form designed to elicit the complete health history of an applicant, or underwrite on the basis of the answers given on it in accordance with its established underwriting standards.
2. Decline to cover a preexisting condition during the waiting period where that condition was disclosed on the application, disclosure putting the condition outside the exclusion the policy would otherwise apply.
3. Use a waiver or rider to exclude a specifically named preexisting disease or physical condition at any time, whether during or after the waiting period described in subsection (b) of that section.
4. Use a waiver or rider of any kind to exclude, limit or reduce coverage or benefits for a specifically named or described preexisting disease or physical condition beyond the waiting period in 8086(b). ✓

Why: 8 V.S.A. 8086(d) preserves the insurer's right to use an application eliciting a complete health history and to underwrite on the answers, and leaves a preexisting condition uncovered until the 8086(b) waiting period expires whether or not it was disclosed. What it forbids is the use of waivers or riders of any kind to exclude, limit or reduce coverage for specifically named or described preexisting diseases or physical conditions beyond that waiting period.

What does 8 V.S.A. 4804(a)(8)(A)(iii) forbid?

1. Soliciting the sale of Medicare products door-to-door, whether invited or not at all.
2. Soliciting any insurance product door-to-door without a written invitation to call.
3. Soliciting the sale of Medicare products by telephone without an invitation to do so.
4. Soliciting the sale of Medicare products door-to-door before a consumer invites it. ✓

Why: 8 V.S.A. 4804(a)(8)(A)(iii) makes it an unfair practice for a licensee to solicit the sale of Medicare products door-to-door prior to receiving an invitation from a consumer. The invitation is what unlocks the visit.

Under a Section 162 executive bonus plan, the employer pays the premium as a bonus. The employer:

1. Owns the policy and its cash value, with the employee named only as insured
2. Deducts the bonus, and the employee reports it as income ✓
3. Takes no deduction, and the employee owes no tax
4. Cannot deduct the bonus, because it funds life insurance

Why: The employer deducts the bonus as compensation; the employee owns the policy and includes the bonus in taxable income.

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

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

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

From what age may a minor contract for or own insurance or an annuity in Vermont, under 8 V.S.A. 3710?

1. Eighteen; a person below that age may not contract for or own an annuity or insurance in this State at all, and any such contract made by a minor is voidable at that minor's own option until the age of majority is reached.
2. Sixteen; any minor not less than sixteen years of age may contract for or own annuities or insurance, or affirm a pre-existing contract by novation or otherwise, notwithstanding that minor's minority at the date of the contract.
3. Fifteen; any minor not less than fifteen years of age may contract for or own annuities or insurance, or affirm a pre-existing contract, notwithstanding minority. ✓
4. Twelve; any minor not less than twelve years of age may contract for insurance on his or her own life with the written consent of a parent or guardian to it.

Why: 8 V.S.A. 3710(a) and (b): ANY PERSON OF COMPETENT LEGAL CAPACITY MAY CONTRACT FOR INSURANCE; and ANY MINOR NOT LESS THAN 15 YEARS OF AGE, NOTWITHSTANDING HIS OR HER MINORITY, MAY CONTRACT FOR OR OWN ANNUITIES OR INSURANCE OR AFFIRM BY NOVATION OR OTHERWISE PREEXISTING CONTRACTS upon his or her own life, body, health, property, liabilities or other interests, or on the person of another in whom the minor has an insurable interest.

A statement on an application later proves untrue but was immaterial to the risk. The insurer generally:

1. May deny the pending claim while leaving the rest of the policy in force
2. Cannot void the policy, because the misstatement was not material ✓
3. Must reunderwrite the risk and charge a substandard rate going forward
4. May rescind the contract during the two-year contestable period regardless of materiality

Why: Only a material misrepresentation (one that would have affected underwriting) permits rescission; immaterial errors do not.

What limits does 8 V.S.A. 4051(b)(4)(A) place on approving a Medicare supplement rate increase?

1. It must comply with the statutory standards in sections 4026, 4513, 4584 and 5104, and may never rest on any change in loss ratio from the previous year, the Commissioner having no power to make findings excusing such a change.
2. It must be approved as requested or denied in full, the Commissioner having no power to approve a rate increase in an amount different from the increase the health insurer has requested in its filing under this section.
3. It must comply with the statutory standards in sections 4026, 4513, 4584 and 5104, and on an appeal by the health insurer the burden of proof lies on the Department to justify the rate that it has approved.
4. It must comply with the statutory standards in sections 4026, 4513, 4584 and 5104, and may not rest on an unreasonable change in loss ratio from the previous year unless the Commissioner makes written findings that the change is necessary. ✓

Why: 8 V.S.A. 4051(b)(4)(A) forbids approval unless the increase complies with the statutory standards in sections 4026, 4513, 4584 and 5104, and provides that an approved increase shall not be based on an unreasonable change in loss ratio from the previous year unless the Commissioner makes written findings that the change is necessary to prevent a substantial adverse impact on the insurer's financial condition. The Commissioner may deny, approve as requested, or approve a different amount; on an appeal the burden of proof lies on the health insurer.

On what conditions does a nonresident receive a Vermont producer license under 8 V.S.A. § 4813h(a)?

1. That the person passes the Vermont examination, pays the fees and designates the Commissioner for service of process, a nonresident being treated in every respect as a resident applicant once those three things are done.
2. That the person is licensed as a resident and in good standing at home, has requested licensure and paid the section 4800 fees, has submitted the home state application or a uniform application, and the home state reciprocates as well. ✓
3. That the person holds a license in any state and maintains an office in this State at which the Department may inspect the records of business written here, reciprocity being unnecessary where a physical presence is maintained.
4. That the person is licensed and in good standing in the home state and pays the fees, the Commissioner having no discretion to refuse such an application and reciprocity not being a condition of the license under the producer licensing model.

Why: 8 V.S.A. § 4813h(a)(1) to (4). Reciprocity is the fourth condition, and § 4804 - the denial, suspension and revocation section - overrides the whole of it.

Which further transactions do 8 V.S.A. § 3368(a)(5), (7), (8) and (9) exempt?

1. Contracts issued by fraternal benefit societies, insurance on property owned by the State or a municipality, and any policy issued before the enactment of the chapter in which this section appears.
2. Contracts of a charitable organization issued without profit, insurance on watercraft of any description, insurance on rolling stock wherever it is operated, and policies issued before the date on which this State first required a certificate of authority of any insurer doing business within its borders.
3. Contracts issued to a college or university, ocean marine insurance of every kind, insurance on commercial aircraft only, and any policy which has been continuously renewed since before the section took effect.
4. Contracts of a nonprofit company serving educational institutions; wet marine and transportation insurance; aircraft or railroads in interstate commerce; and policies issued before July 1, 1968 (July 1, 1980 for subdivision (8)). ✓

Why: 8 V.S.A. 3368(a)(5), (7), (8) and (9). Subdivision (9) exempts transactions on a policy or annuity contract issued before July 1, 1968 as regards subdivisions (1) to (7), and before July 1, 1980 as regards subdivision (8), the aircraft and railroad exemption.

What does 8 V.S.A. 4107(d) require where the policy or certificate is not delivered when the indebtedness is incurred?

1. A copy of the application or a notice of proposed insurance, signed by the debtor with the stated particulars, delivered then and kept separate from the credit documents unless they set it out prominently; the policy follows within thirty days, and the notice states cover runs from the date of the debt. ✓
2. A copy of the application or a notice of proposed insurance, signed by the debtor and carrying the stated particulars, delivered then; which may be incorporated in the loan or sale agreement in every case without any separate document; with the policy delivered within sixty days of the indebtedness being incurred.
3. Nothing at the time; the insurer must simply deliver the individual policy or group certificate within thirty days of the date on which the indebtedness is incurred, and the insurance takes effect on the date of that delivery rather than on the date the debtor became obligated to the creditor concerned.
4. A copy of the application or a notice of proposed insurance, signed by the creditor rather than the debtor, delivered then; referring exclusively to insurance and separate from the credit documents; with the policy delivered within thirty days and the insurance taking effect from the date of its delivery.

Why: 8 V.S.A. 4107(d) requires a copy of the application or a notice of proposed insurance, signed by the debtor and setting out the insurer's name and home office address, the debtor's name, the premium separately for each coverage and the amount, term and a brief description of the coverage, to be delivered when the indebtedness is incurred. It must refer exclusively to insurance and be separate and apart from the credit statement, instrument or agreement unless the required information is prominently set out in them. On acceptance, and within thirty days of the date the indebtedness is incurred, the insurer must cause the policy or certificate to be delivered, and the notice must state that the insurance becomes effective as of the date the indebtedness is incurred.

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.

How is the Board of Directors of the Association constituted under 8 V.S.A. 4177(a)?

1. Not less than seven nor more than eleven member insurers, selected by member insurers subject to the Commissioner's approval, at least one being an officer, director or employee of an insurer incorporated in this State. ✓
2. Not less than five nor more than nine member insurers appointed by the Commissioner without any vote of the member insurers, at least one being an officer or director of an insurer incorporated under the laws of this State.
3. Not less than seven nor more than eleven members, of whom a majority must be public members who are not connected with any member insurer, selected by the member insurers subject to the approval of the Commissioner.
4. Not less than nine nor more than fifteen member insurers selected by the member insurers alone, the Commissioner having no power to approve the selections or to appoint any member of the Board at any stage.

Why: 8 V.S.A. 4177(a) sets the Board at not less than seven nor more than eleven member insurers, selected by member insurers subject to the approval of the Commissioner. At least one director must be an officer, director or employee of an insurance company incorporated under the laws of this State, unless there is no such member insurer. If the initial Board is not selected within sixty days of notice of the organizational meeting, the Commissioner may appoint the initial insurer members.

Who may negotiate a life settlement contract without a broker licence under 8 V.S.A. 3836(b)(2)?

1. A licensed attorney or certified public accountant retained to represent the policy owner, whether or not the compensation is paid directly or indirectly by the provider.
2. A licensed life insurance producer retained to represent the policy owner whose compensation is not paid directly or indirectly by the life settlement provider.
3. A licensed attorney or certified public accountant retained to represent the policy owner whose compensation is not paid directly or indirectly by the life settlement provider. ✓
4. A licensed attorney retained to represent the life settlement provider whose compensation is paid by that provider rather than by the policy owner concerned.

Why: 8 V.S.A. 3836(b)(2) exempts a person licensed as an attorney or certified public accountant who is retained to represent the policy owner and whose compensation is not paid directly or indirectly by the life settlement provider. Such a person may negotiate life settlement contracts on behalf of the policy owner without a life settlement broker licence.

What must accompany a claim payment under 8 V.S.A. 4724(9)(I)?

1. A statement setting forth the amount of the premium remaining unpaid on the policy.
2. A release to be signed by the insured or beneficiary before the payment is cashed.
3. A statement setting forth the coverage under which the payment is made to them. ✓
4. A statement setting forth the insurer's calculation of the remaining policy limits.

Why: 8 V.S.A. 4724(9)(I) names making claim payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are made.

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

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

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

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.

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.