Virginia Life & Health Insurance License, Practice Exams

For a long-term care policy in force less than six months, on what basis may an insurer rescind the policy or deny a claim?

1. For any misstatement in the application, whether or not it was material
2. Only upon clear proof that the applicant intended to defraud the insurer
3. Upon a showing of misrepresentation that is material to the acceptance of coverage ✓
4. It may not be contested at all during the first six months

Why: § 38.2-5209(1) allows rescission or claim denial for a policy in force less than six months upon a showing of misrepresentation that is material to the acceptance of coverage.

Under § 38.2-1818, an agent holding a nonresident Virginia license who moves into Virginia may continue to operate under that nonresident license while applying for a resident license for up to:

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

Why: Section 38.2-1818(A) allows up to 90 calendar days of continued operation under the nonresident license while applying for the resident license; appointments convert if a resident license is obtained in that period.

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

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

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

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.

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

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

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

A 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.

An applicant who regularly scuba dives in caves is most likely to be:

1. Declined outright, as no insurer covers a hazardous hobby
2. Charged a higher (rated) premium or have the avocation excluded ✓
3. Required to buy an annuity rather than life insurance
4. Offered the preferred rate class, since diving is a sport

Why: Hazardous avocations increase risk; insurers respond with a rating, an exclusion rider, or a higher premium.

What is the free-look (right to return) period for a Virginia long-term care insurance policy or certificate?

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

Why: § 38.2-5208 requires a prominent notice stating the policyholder or insured may return the policy or certificate within thirty days of delivery for a refund if not satisfied.

Under § 38.2-510, an act becomes an unfair claim settlement practice only when a person commits or performs it:

1. With such frequency as to indicate a general business practice ✓
2. Only after the Commission receives 10 written complaints
3. Only if a court first finds the insurer acted in bad faith
4. Even once, without regard to frequency

Why: Section 38.2-510(A) lists prohibited claim acts but applies only when a person commits or performs them with such frequency as to indicate a general business practice.

Under § 38.2-608, when an individual's recorded personal information is in coded form, the entity must:

1. Provide an accurate translation in plain language in writing ✓
2. Send the coded material only to an attorney the individual designates
3. Charge a reasonable decoding fee of up to $25 before releasing it
4. Refuse the request, treating coded underwriting data as proprietary

Why: Section 38.2-608(A)(2) requires that, where the recorded personal information is in coded form, an accurate translation in plain language be provided in writing.

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

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

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

A Medicare Part D late enrollment penalty generally results in:

1. A complete and permanent denial of any future drug coverage
2. A one-time flat fee paid at the first prescription fill
3. A reduction in the beneficiary's Social Security retirement check
4. A permanently higher monthly premium for prescription drug coverage ✓

Why: Going without creditable drug coverage after eligibility generally adds a permanent surcharge to the Part D premium.

An employee has $150,000 of employer-paid group term life. How much of that coverage is subject to imputed taxable income?

1. $100,000 ✓
2. $150,000
3. $50,000
4. $0

Why: The first $50,000 of employer-paid group term life is tax-free; the cost of the remaining $100,000 is imputed income (per IRS Table I).

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

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

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

To protect against unwanted intrusion, contacts with the insured to determine health status after a viatical settlement are limited, for an insured with a life expectancy of more than one year, to:

1. Once per week
2. Once per month
3. Once every three months ✓
4. Once per year

Why: Section 38.2-6008 F limits health-status contacts to once every three months for insureds with a life expectancy of more than one year, and no more than once per month for those with a life expectancy of one year or less.

Reinstating a lapsed life policy generally starts a new:

1. Contestable period based on the reinstatement application ✓
2. Suicide exclusion period of ten years running from the reinstatement date
3. Schedule of guaranteed dividends recalculated from the reinstatement date
4. Free-look period of 30 days in which the owner may cancel for a full refund

Why: Reinstatement typically begins a new contestable period (often two years) covering statements made on the reinstatement application.

An HMO member sees an out-of-network specialist for a non-emergency without a referral. The plan typically:

1. Pays 80% after the deductible
2. Pays the full billed amount anyway
3. Pays only the specialist's travel costs
4. Pays nothing for that out-of-network visit ✓

Why: HMOs generally cover only in-network, referred care; non-emergency out-of-network care without a referral is not covered.

The National Association of Insurance Commissioners (NAIC) primarily:

1. Sets and enforces nationwide insurance premium rates
2. Directly licenses every insurance producer in the United States
3. Develops model laws and standards that states may choose to adopt ✓
4. Pays claims when an insurance company becomes insolvent

Why: The NAIC is a coordinating body of state regulators that drafts model laws and promotes uniformity; it has no direct regulatory authority of its own.

Insurance contracts are 'unilateral' because:

1. The insured alone is obligated to pay all future claims
2. Either party may cancel the agreement without any notice
3. Both parties are equally bound to perform specific duties
4. Only the insurer makes a legally enforceable promise ✓

Why: Only the insurer makes an enforceable promise (to pay covered claims); the insured is not legally compelled to continue paying premiums.

'Rebating' generally refers to:

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

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

Which type of coverage is EXCLUDED from the individual guaranteed-renewability requirement of § 38.2-3514.2?

1. Major medical expense coverage
2. Hospital expense coverage
3. Long-term care insurance ✓
4. Surgical expense coverage

Why: § 38.2-3514.2(B) exempts short-term travel, accident-only, disability income, limited/specified disease, long-term care, certain short-term nonrenewable policies, and individual health coverage under § 38.2-3431.

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

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

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

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.

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 pre-existing condition provision in a health policy refers to a condition for which the insured:

1. Received advice or treatment before the policy's effective date ✓
2. Must pay a permanently rated-up premium for as long as the policy stays in force
3. Automatically qualifies for an accelerated benefit equal to part of the face amount
4. Will never be covered under the policy, no matter how many years pass

Why: A pre-existing condition is one for which the insured received diagnosis, advice, or treatment within a stated period before the coverage took effect.

An insured dies in the third policy year and the insurer discovers a non-fraudulent misstatement on the application. The insurer must:

1. Void the policy back to its original issue date
2. Reduce the death benefit by one half as a penalty
3. Deny the claim and refund the premiums paid to date
4. Pay the claim, because the contestable period has passed ✓

Why: After the two-year contestable period, the insurer cannot contest the policy for non-fraudulent misstatements, so the claim is paid.

Provision 13 (CANCELLATION BY INSURED), which applies to policies issued or renewed on or after January 1, 2001, gives the insured the right to do what?

1. Cancel the policy at any time by written notice, with prompt return of the pro rata unearned premium ✓
2. Cancel the policy only on a policy anniversary, by written notice given 30 days in advance
3. Cancel only with the insurer's written consent endorsed on the policy
4. Cancel at any time and recover every premium ever paid under the policy, without regard to claims already paid

Why: Provision 13 of § 38.2-3503 lets the insured cancel at any time by written notice; the insurer must promptly return the unearned premium computed pro rata, without prejudice to prior claims.

Distributions from a qualified annuity (funded with pre-tax dollars) are:

1. Entirely income-tax-free in all circumstances
2. Taxed only on the portion above the cost basis
3. Fully taxable as ordinary income when received ✓
4. Subject to capital-gains rates on the whole amount

Why: Because a qualified annuity has no after-tax cost basis, the entire distribution is taxable as ordinary income; required minimum distributions also apply.

Nonforfeiture provisions in an annuity guarantee the owner:

1. A doubling of the account value after ten years
2. Free withdrawals of the entire balance in the first year
3. A minimum surrender value if the contract is cashed in ✓
4. The full original premium back with no charges at any time

Why: Annuity nonforfeiture laws guarantee a minimum cash surrender value, protecting the owner's accumulated funds.

A reciprocal insurer is:

1. An unincorporated group of members who insure each other through an attorney-in-fact ✓
2. A federal chartering agency that licenses insurers under the McCarran-Ferguson Act
3. A stock company whose shareholders elect the board and receive taxable dividends
4. A fraternal benefit society organized in lodges that sells only to its own members

Why: A reciprocal is an unincorporated association whose subscribers exchange insurance among themselves, managed by an attorney-in-fact.

Under § 38.2-604.1, a policyholder (other than of a title insurance policy) must generally be provided notice of financial information collection and disclosure practices:

1. Once every five years after the initial sale
2. Not less than once in each calendar year ✓
3. Only upon the policyholder's written request
4. Only at the initial sale

Why: Section 38.2-604.1(A)(3) requires that a policyholder, other than a title insurance policyholder, be provided the financial-information notice not less than once in each calendar year, subject to the section's exceptions.

Under § 38.2-605, when an insurer or agent asks questions designed to obtain information solely for marketing or research purposes from an individual, it must:

1. Pay the individual a fee
2. Avoid asking such questions altogether
3. Obtain Commission approval first
4. Clearly specify those questions ✓

Why: Section 38.2-605 requires an insurance institution or agent to clearly specify those questions designed to obtain information solely for marketing or research purposes in connection with an insurance transaction.

Under § 38.2-1833(D), the prescribed appointment processing fee for each appointment notification must be:

1. Not less than $10 nor more than $20
2. Not less than $7 nor more than $25 ✓
3. Not less than $20 nor more than $100
4. Exactly $25

Why: Section 38.2-1833(D) sets the appointment processing fee at not less than $7 nor more than $25.

A whole life policyowner borrows against the cash value and does not repay it. At death, the death benefit is:

1. Paid in full, with the loan forgiven
2. Forfeited entirely because of the loan
3. Replaced by a refund of premiums
4. Reduced by the outstanding loan and interest ✓

Why: An unpaid policy loan plus interest is subtracted from the death benefit paid to the beneficiary.

Under § 38.2-225, all FINES recovered for criminal violations of Title 38.2 (or of rules, regulations, or orders issued under it) are paid into the state treasury to the credit of:

1. The General Fund
2. The Literary Fund ✓
3. The Virginia Life, Accident and Sickness Insurance Guaranty Association
4. The Bureau of Insurance operating account

Why: Section 38.2-225(A) directs that all fines recovered for criminal violations of the title or of rules, regulations, or orders issued under it be paid into the state treasury to the credit of the Literary Fund.

Under § 38.2-1809, a licensee who refuses to permit the Commission to make an examination of his records may be subject to:

1. Only a verbal warning from the Bureau of Insurance, because record examinations under Chapter 18 are voluntary
2. An automatic Class 1 felony charge, which the Commission must refer to the local Commonwealth's Attorney
3. Denial, suspension, or revocation of his license after notice and an opportunity to be heard ✓
4. A mandatory $10,000 fine for each day the records are withheld, imposed without notice or hearing

Why: Section 38.2-1809 provides that a licensee who refuses to permit examination may, after notice and an opportunity to be heard, be subject to penalties including denial, suspension, or revocation of his license.

Under § 38.2-1800, 'solicit' means:

1. Exchanging a completed contract of insurance for money or its equivalent on behalf of an insurer
2. Conferring directly with a purchaser about the substantive terms of a contract
3. Attempting to sell insurance or asking or urging a person to apply for a particular class of insurance ✓
4. Collecting premiums and remitting them to the insurer from a fiduciary account

Why: Section 38.2-1800 defines 'solicit' as attempting to sell insurance or asking or urging a person to apply for a particular class of insurance from one or more insurers.

A 67-year-old kept employer group coverage past 65 and now retires. They enroll in Medicare Part B during a:

1. Period available only to those on Medicaid
2. One-time birthday enrollment window
3. Special enrollment period, with no late penalty ✓
4. General enrollment period, with a permanent penalty

Why: Maintaining active employer coverage past 65 provides a Special Enrollment Period to take Part B later without penalty.

Under the uniform individual health policy provisions, written proof of loss must generally be furnished within:

1. 10 days after the loss occurs in every situation
2. The same period allowed for the notice of claim
3. One full year regardless of the circumstances
4. 90 days after the date of the loss ✓

Why: The standard provision requires proof of loss within 90 days of the loss (or as soon as reasonably possible).

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.

Many states and federal law require that group health plans covering dependents include newborn children:

1. Beginning at the start of the next plan year following the birth
2. From the moment of birth, with a short window to formally add them ✓
3. Only after the child reaches thirty days of age and is examined
4. Solely if the newborn passes an individual medical underwriting review

Why: Newborns must be covered from birth (including congenital conditions), with a limited period (often 31 days) to notify the insurer and add the child.

Under § 38.2-1825.1(B), what happens to a non-exempt agent's license if the agent fails to satisfy the applicable continuing education requirements?

1. It is renewed but placed on probation
2. It is renewed for a one-year grace period
3. The license shall not be renewed ✓
4. Only the appointment is terminated

Why: Section 38.2-1825.1(B) provides that a non-exempt agent's license shall not be renewed if the agent has failed to satisfy the applicable continuing education requirements.

Before a beneficiary's retained asset account is established, the insurer must disclose that the account funds are:

1. Not FDIC insured but guaranteed by the state guaranty association, subject to coverage limits ✓
2. Insured by the FDIC up to $250,000 per beneficiary, exactly as a bank deposit account would be
3. Guaranteed in full by the federal government, without regard to the insurer's financial condition
4. Exempt from federal and state income taxation

Why: Section 38.2-3117.4(10) requires disclosure that retained asset account funds are not insured by the FDIC but are guaranteed by the state guaranty association, with advice to learn about coverage limitations.

A variable life insurance policy typically guarantees:

1. A fixed cash value that can never decline in any market
2. That the policy can never become a modified endowment contract
3. A level premium that is invested entirely in government bonds
4. A minimum death benefit regardless of separate-account performance ✓

Why: Variable life guarantees a minimum death benefit, but the cash value (and any benefit above the minimum) varies with the separate accounts the owner directs.

Under § 38.2-219, after a hearing the Commission may, upon finding a violation, issue an order directing the person to:

1. Reimburse the Commission's legal fees
2. Surrender its certificate of authority automatically
3. Cease and desist from the violation ✓
4. Pay treble damages to all claimants

Why: Section 38.2-219 authorizes the Commission, after a hearing, to issue an order reciting its findings and directing the person to cease and desist from the violation, with punishment as provided in § 38.2-218.

Under the ACA, in-network preventive services such as immunizations and screenings must be covered:

1. Only after the deductible is fully met
2. With no cost-sharing to the insured ✓
3. At 50% coinsurance in every plan
4. Only for insureds under age 40

Why: ACA-compliant plans must cover specified preventive services in-network with no copay, coinsurance, or deductible.

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

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

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

Under § 38.2-1825.1(D), the prescribed nonrefundable renewal application processing fee per line of authority must be:

1. Not less than $7 nor more than $25
2. Not less than $20 nor more than $100
3. Not less than $10 nor more than $20 ✓
4. Exactly $15

Why: Section 38.2-1825.1(D) sets the renewal application processing fee at not less than $10 nor more than $20 per line of authority.

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.

Because an insurance policy is drafted entirely by the insurer and the applicant simply accepts it, it is legally a contract of:

1. Aleatory exchange, in which the dollar amounts traded by the parties are unequal
2. Indemnity
3. Adhesion ✓
4. Warranty

Why: A contract of adhesion is written by one party and offered on a take-it-or-leave-it basis, so ambiguities are construed against the drafter (the insurer).

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

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

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

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

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

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

Proceeds from a viatical settlement paid to a terminally ill insured are generally:

1. Fully taxable as ordinary income in the year of the sale
2. Subject to a flat 20% federal excise tax at the time of payment
3. Received income-tax-free, similar to accelerated death benefits ✓
4. Taxed as a long-term capital gain on the entire amount received

Why: For a terminally ill insured, viatical proceeds are treated like tax-free death benefits under federal law (subject to defined conditions).

Under § 38.2-1834.1(A), if an insurer terminates an agent's relationship for a reason set forth in § 38.2-1831, the insurer must certify the reason in writing to the Commission within:

1. 15 calendar days after the termination
2. 30 calendar days following the termination ✓
3. 45 calendar days after the termination
4. 60 calendar days after the termination

Why: Section 38.2-1834.1(A) requires the insurer to certify in writing to the Commission the reason for a for-cause termination within 30 calendar days following the termination.

In a cross-purchase buy-sell agreement funded with life insurance:

1. A bank holds the policies in trust until an owner retires fully
2. Each owner buys a policy on each of the other owners ✓
3. The business entity itself owns one policy on every individual owner
4. The policies must always be term insurance with no cash value

Why: In a cross-purchase plan, each owner owns a policy on each other owner; in an entity plan, the business owns the policies.

A policyowner names their estate as beneficiary. A drawback is that the proceeds:

1. Become taxable income to the heirs at their own ordinary income tax rates
2. Are automatically forfeited to the state
3. May be subject to probate and the insured's creditors ✓
4. Cannot be paid at all by the insurer

Why: Naming the estate exposes proceeds to probate and creditor claims; naming a person avoids that.

If a deceased insured held any incidents of ownership in their life policy at death, the death benefit is generally:

1. Excluded from the gross estate and received income-tax-free
2. Subject to a 10% early-distribution penalty if death occurs before age 59
3. Included in the insured's taxable estate for estate-tax purposes ✓
4. Taxable as ordinary income to the beneficiary at that person's marginal rate

Why: Incidents of ownership (e.g., right to change the beneficiary) cause the proceeds to be included in the insured's taxable estate.

Under § 38.2-1819(C), no resident license requiring an examination may be issued later than how many calendar days from the date the applicant satisfies the prelicensing examination requirements?

1. 90 calendar days
2. 120 calendar days
3. 365 calendar days
4. 183 calendar days ✓

Why: Section 38.2-1819(C) bars issuance later than 183 calendar days after the applicant satisfies the prelicensing examination requirements; applicants failing this must satisfy all prelicensing requirements again.

The guaranteed insurability rider allows the insured to:

1. Exchange the life policy for an immediate income annuity at any time without a surrender charge
2. Elect the cash dividend option each year
3. Buy more coverage at set option dates without proving insurability ✓
4. Stop premium payments during a period of total disability

Why: It guarantees the right to purchase more coverage at set option dates without re-proving insurability.

If a long-term care policyholder declines the offered nonforfeiture benefit, the insurer must instead provide:

1. A full refund of all premiums paid under the policy, less any benefits already received, when the policy lapses
2. Automatic inflation protection increasing benefits by five percent compounded annually
3. A waiver of all future premiums once the insured has held the policy for ten consecutive years and reached age 75
4. A contingent benefit upon lapse available for a specified period following a substantial premium increase ✓

Why: § 38.2-5210 provides that if the nonforfeiture benefit is declined, the insurer shall provide a contingent benefit upon lapse available for a specified period following a substantial increase in premium rates.

Each individual life policy must contain a table showing nonforfeiture options available each year on default during at least what period?

1. The first 10 policy years following the date of issue
2. Every policy year for as long as the policy remains in force
3. The first 20 policy years, or the premium-paying period if shorter ✓
4. The first five policy years, and nothing beyond that

Why: Section 38.2-3310 requires a table of loan values and options available each year on default during at least the first twenty years of the policy, or the premium-paying period if it is less than twenty years.

A client exchanges an existing cash-value life insurance policy directly for an annuity contract. Under IRC Section 1035, this is:

1. Taxed only on the cash value
2. A tax-free exchange ✓
3. An illegal transaction
4. A fully taxable surrender

Why: A life-to-annuity exchange qualifies for tax-free treatment under Section 1035 (an annuity-to-life exchange would not).

Under § 38.2-325, when parties have agreed to conduct business by electronic means and the insurer provides certain termination-type notices to the named insured, an electronic notification must also be provided to the named insured's agent of record (if any), transmitted as soon as practicable but in no case more than:

1. 24 hours after electronic notice is transmitted to the named insured
2. 48 hours after electronic notice is transmitted to the named insured
3. 72 hours after electronic notice is transmitted to the named insured ✓
4. 5 business days after electronic notice is transmitted to the named insured

Why: Section 38.2-325(C) requires that the electronic notification to the agent of record be transmitted as soon as practicable, but in no case more than 72 hours after electronic notice is transmitted to the named insured.

For a structured settlement annuity, the Virginia Guaranty Association's coverage of each payee is limited, in the aggregate, to what present value of annuity benefits?

1. $100,000
2. $250,000 ✓
3. $300,000
4. $500,000

Why: Section 38.2-1700 D 2 c limits coverage for each payee of a structured settlement annuity to $250,000 in present value annuity benefits in the aggregate, including net cash surrender and withdrawal values.

Modified whole life insurance is characterized by:

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

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

A collateral assignment of a life insurance policy transfers:

1. The right to change the insured named in the contract
2. Some rights temporarily to a lender as security for a loan ✓
3. The death benefit to the state's insurance guaranty fund
4. Complete and permanent ownership of the policy to another person

Why: A collateral assignment is a partial, temporary transfer; the lender is entitled only to the amount of the debt, with the balance going to the named beneficiary.

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 licensed life and annuities agent wants to pay part of a commission to an unlicensed friend who referred a client and helped discuss the policy's specific terms. Under § 38.2-1812, this is:

1. Permitted if the friend signs a written disclosure of the payment that the client acknowledges at delivery
2. Permitted up to 25% of the first-year commission, the cap Chapter 18 sets on referral payments
3. Prohibited, because the friend is not licensed for the class of insurance involved ✓
4. Permitted, since a flat referral fee is exempt

Why: Section 38.2-1812 bars sharing commissions with any person not licensed for the class involved; the limited referral exception in § 38.2-1821.1 does not permit discussing specific policy terms.

A policy is sold to an unrelated investor for valuable consideration. Under the transfer-for-value rule, the death benefit is:

1. Partly taxable (the amount above the buyer's basis), with exceptions ✓
2. Income-tax-free only where the policy purchased is term rather than permanent
3. Entirely income-tax-free to the buyer, as with any death benefit under IRC 101(a)
4. Fully taxable to the buyer as a long-term capital gain in the year of death

Why: Transfer for value makes the death benefit above the buyer's cost taxable, unless an exception (e.g., transfer to the insured, a partner, or the insured's corporation) applies.

Which type of life insurance provides lifelong coverage with a level premium and a guaranteed cash value?

1. Annually renewable term
2. Whole (ordinary) life ✓
3. Level term to age 65
4. Credit life

Why: Whole life is permanent coverage with a level premium and a guaranteed, tax-deferred cash value. Term provides only temporary coverage with no cash value.

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

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

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

An insured with a $6,000 monthly benefit has a residual disability with a 40% income loss. The residual benefit is:

1. $2,400 ✓
2. $6,000
3. $3,600
4. $1,200

Why: Residual benefit is proportional to income lost: 40% × $6,000 = $2,400.

A recurrent disability provision treats the return of the same disability within a stated period as:

1. An entirely new disability that requires a fresh, full elimination period
2. A continuation of the original claim ✓
3. A partial disability payable at only half of the original monthly amount
4. Grounds to cancel the policy and deny any further disability benefits

Why: If the same disability recurs within the stated period, it is treated as a continuation, so no new elimination period applies.

How does Title 38.2 define "life insurance"?

1. Insurance against loss resulting from sickness or bodily injury
2. Insurance upon the lives of human beings ✓
3. Any agreement to make periodic payments for a stated period or for life
4. Insurance indemnifying a creditor against a debtor's death

Why: Section 38.2-102 defines "life insurance" as insurance upon the lives of human beings, and includes policies providing endowment benefits, accidental-death/dismemberment benefits, disability protection, and optional modes of settlement.

An insured loses sight in both eyes. Under a presumptive disability provision, the insurer:

1. Pays only the medical expenses related to the loss
2. Requires a six-month waiting period before any benefit
3. Pays nothing unless the insured stops working entirely
4. Pays full benefits even if the insured can still work ✓

Why: Presumptive disability presumes total disability for specified losses (sight, hearing, speech, two limbs), paying full benefits regardless of work ability.

An employee is injured on the job and needs medical care and wage replacement. The coverage that responds is:

1. Workers' compensation ✓
2. Medicare Part B
3. A Medicare Supplement policy
4. An individual disability income policy only

Why: Workers' compensation is the state-mandated, no-fault coverage for job-related injuries and occupational disease.

Per § 38.2-1800, the term 'negotiate' means the act of conferring directly with or offering advice directly to a purchaser concerning the substantive benefits, terms, or conditions of a contract, but only if the person doing so also:

1. Holds a nonresident license in at least one other state where the insurer is admitted
2. Is an officer or salaried employee of the insurer whose contract is discussed
3. Sells insurance or obtains insurance from insurers for purchasers ✓
4. Has completed the continuing education hours required for the class discussed

Why: Section 38.2-1800 defines 'negotiate' and conditions it on the person either selling insurance or obtaining insurance from insurers for purchasers.