Washington Life & Health Insurance License, Practice Exams

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

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

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

A medicare supplement policy must be guaranteed renewable. All of the following are true EXCEPT:

1. The issuer may nonrenew for nonpayment of premium
2. The issuer may nonrenew for the insured's poor health ✓
3. The issuer may nonrenew for material misrepresentation
4. It must include a renewal or continuation provision

Why: RCW 48.66.090 (Guaranteed renewable) prohibits cancellation or nonrenewal solely for deterioration of health; permitted grounds are nonpayment or material misrepresentation.

Under RCW 48.43.535, an enrollee may seek review of a coverage denial by a certified independent review organization:

1. Only for claims involving experimental treatments
2. Only if the disputed amount exceeds one thousand dollars
3. Before filing any complaint with the carrier
4. After exhausting the carrier's grievance process ✓

Why: RCW 48.43.535(2) allows an enrollee to seek external review by a certified independent review organization after exhausting the carrier's grievance process and receiving an unfavorable decision (or after the carrier exceeds the grievance timelines).

A business partner takes a life policy on a co-owner to fund a buy-sell agreement. Insurable interest:

1. Does not exist, because business associates are strangers under insurable interest law
2. Exists only if the two partners are also related by blood, marriage, or legal adoption
3. Must be re-proven at each policy anniversary
4. Exists, because the partner would suffer financial loss at the co-owner's death ✓

Why: Business partners have an insurable interest in each other for buy-sell purposes; insurable interest need only exist at policy inception.

Under RCW 48.15.090, a surplus line broker may place business with a foreign unauthorized insurer only if its capital and surplus equals the greater of this state's minimum or:

1. At least $4.5 million in capital
2. At least $10 million in surplus
3. At least $15 million ✓
4. At least $25 million

Why: RCW 48.15.090 requires a foreign unauthorized insurer to have capital and surplus equal to the greater of Washington's minimum requirements or fifteen million dollars.

Which of the following is included within the definition of an "insurance transaction" under RCW 48.01.060?

1. Only the physical delivery of the executed insurance policy to the insured
2. Nothing occurring before an application has been formally accepted by the insurer
3. Only matters that arise after a claim has been submitted to the insurer
4. Solicitation, negotiations preliminary to execution, and the execution of the contract ✓

Why: RCW 48.01.060 defines an insurance transaction to include solicitation, negotiations preliminary to execution, execution of the contract, matters subsequent to execution, and insuring.

An employee's group life coverage ends when she leaves employment. To exercise the conversion right, she must apply for the individual policy and pay the first premium:

1. Within 31 days after termination ✓
2. Within 15 days after termination
3. Within 60 days after termination
4. Within 90 days after termination

Why: RCW 48.24.180 conditions the conversion right on application and payment of the first premium within thirty-one days after the termination of eligibility.

A 'moral hazard' in underwriting refers to:

1. A tendency toward dishonesty that increases the chance of a loss ✓
2. A physical condition of property that makes a loss more likely to occur
3. The actual cause of a loss, such as a fire, accident, or illness
4. Indifference or carelessness because insurance exists to cover losses

Why: A moral hazard arises from dishonesty (e.g., misrepresentation or fraud); a morale hazard is carelessness, a physical hazard is a tangible condition, and a peril is the cause of loss.

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.

A fraternal society operates on the lodge system when it has a supreme governing body and subordinate lodges required to hold regular meetings at least:

1. Once each week
2. Once each quarter
3. Once each month ✓
4. Once each year

Why: RCW 48.36A.020 requires subordinate lodges to hold regular meetings at least once each month in furtherance of the society's purposes.

A retiree with limited income and assets needs nursing-home care Medicare won't cover long term. The program that may help is:

1. Medicare Part B outpatient benefits
2. A Medicare Supplement policy covering Part A coinsurance
3. Social Security disability income
4. Medicaid (after meeting its means test) ✓

Why: Medicaid covers long-term custodial care for those who meet its income/asset limits, sometimes after a spend-down.

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

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

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

A point-of-service (POS) plan member who self-refers out of network will typically:

1. Pay higher cost-sharing than for in-network, gatekept care ✓
2. Pay the same $20 copay as for in-network care
3. Be disenrolled from the plan for bypassing the primary care gatekeeper
4. Receive no benefits at all for that visit

Why: A POS plan combines HMO and PPO features: in-network care needs a gatekeeper referral, while out-of-network self-referral is allowed at higher cost.

A nonqualified annuity owner (age 45) surrenders the contract for a $30,000 gain. The tax consequence is:

1. Ordinary income tax on the $30,000 plus a 10% penalty ✓
2. Tax-free treatment, because the entire surrender is a return of premiums already taxed to the owner
3. A 10% penalty but no income tax
4. Capital-gains tax on the $30,000 only

Why: Annuity gain is ordinary income; surrender before 59½ also triggers the 10% premature-distribution penalty.

A worker enrolled in a qualified high-deductible plan opens an HSA. Contributions are:

1. Taxed when contributed and again when withdrawn for care
2. Tax-deductible, and qualified withdrawals are tax-free ✓
3. Never deductible, though qualified withdrawals come out tax-free
4. Made with after-tax dollars, like a Roth, with tax-free withdrawals

Why: HSAs offer a triple tax advantage: deductible contributions, tax-deferred growth, and tax-free qualified withdrawals.

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

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

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

A $500,000 death benefit is paid to a surviving spouse. For federal estate tax, the amount qualifies for the:

1. Annual gift tax exclusion
2. Transfer-for-value exception
3. Three-year ownership rule
4. Unlimited marital deduction ✓

Why: Transfers to a surviving (citizen) spouse qualify for the unlimited marital deduction, passing estate-tax-free.

In group underwriting, a 'guaranteed issue' limit is the amount of coverage that:

1. Members can obtain without providing individual evidence of insurability ✓
2. Is automatically doubled for any employee who enrolls one or more dependents in the plan
3. The employer is required to buy for every eligible employee, whatever the resulting rate
4. Each member must pay for entirely out of pocket

Why: Up to the guaranteed issue limit, members are covered without individual medical evidence; amounts above it require proof of insurability.

In a disability income policy, the 'benefit period' is:

1. The waiting time after a disability before any benefit is payable
2. The maximum length of time benefits will be paid for a disability ✓
3. The number of days the insured has to file written proof of loss
4. The period after issue during which sickness claims are excluded

Why: The benefit period is the maximum duration benefits are paid (e.g., 2 years, 5 years, to age 65); the elimination period is the waiting time before they start.

A policy has an accidental death benefit rider. The insured dies in a car accident. The beneficiary receives:

1. Nothing, since auto accidents are excluded
2. Only the policy's accumulated cash value at the date of death
3. The face amount plus the additional accidental death benefit ✓
4. The face amount reduced by half because the death was accidental, with no additional benefit

Why: For accidental death within the rider's terms, the beneficiary receives the face amount plus the extra accidental death benefit.

Policy dividends paid on a participating life policy are best described as:

1. A penalty the insurer pays for poor investment performance during the year
2. Taxable investment income that the insurer guarantees every single year
3. A return of premium that was overcharged ✓
4. Interest credited at a rate set by the state insurance department

Why: Dividends are a non-guaranteed return of overpaid premium and are generally not taxable until they exceed the total premiums paid.

A disability policy has a 30-day probationary period for sickness. An insured who becomes ill on day 20 of coverage:

1. Receives only accident benefits for it
2. Has no benefit for that sickness ✓
3. Is fully covered like any other claim
4. Must restart the entire policy

Why: The probationary period excludes sicknesses that begin during the initial waiting span (here, the first 30 days); accidents are usually covered immediately.

Under RCW 48.80.020, a "claim" under the health care false claim act means:

1. any attempt to cause a payer to make a health care payment ✓
2. a written demand for arbitration of a denied benefit
3. a provider's request to join a payer's network
4. an insured's grievance about the quality of service

Why: RCW 48.80.020(1) defines a claim as any attempt to cause a health care payer to make a health care payment.

For an industrial life policy whose premiums are payable other than monthly, the required grace period for paying any premium after the first is:

1. Ten days
2. Four weeks ✓
3. Two months
4. Sixty days

Why: RCW 48.25.050 requires a grace period of four weeks (one month, but not less than thirty days, for monthly-premium policies).

Harold turns 65 and his Medicare Part B coverage is effective April 1. His medicare supplement open enrollment period, during which he cannot be denied for health reasons, extends through:

1. June 30
2. September 30 ✓
3. October 31
4. March 31 the next year

Why: RCW 48.66.025 provides a six-month open enrollment period; six months from April 1 ends September 30.

All of the following are exempt from the producer licensing requirement under RCW 48.17.062 EXCEPT:

1. an insurer's clerical employee who receives no policy commission
2. an employer administering its own employees' benefit program
3. a person whose activity is limited to non-solicitation advertising
4. a person paid commissions on personal auto policies they sell ✓

Why: RCW 48.17.062 exempts specified employees, employers, and advertisers who receive no commission; a person who sells policies and is paid commissions is not exempt and must be licensed.

To reinstate a lapsed life insurance policy, the insurer generally requires the owner to:

1. Purchase an entirely new policy at the insured's original issue age
2. Simply request reinstatement, with no further conditions of any kind
3. Wait a mandatory five years before any reinstatement is allowed
4. Provide evidence of insurability and pay overdue premiums with interest ✓

Why: Reinstatement typically requires proof of insurability, payment of back premiums plus interest (and loan repayment), within the allowed period; a new contestable period begins.

A 'usual, customary, and reasonable' (UCR) limit means a plan will pay a provider's charge only up to:

1. A reasonable amount for that service in the geographic area ✓
2. The full amount the provider chooses to bill, whatever that charge happens to be
3. Twice the Medicare-approved amount for the same procedure code, nationwide
4. The portion of the annual deductible the insured has already satisfied

Why: UCR caps payment at the prevailing reasonable charge for the service in the area; amounts above may be balance-billed.

For a weekly premium individual disability policy, the standard grace period provision requires a grace period of at least:

1. 5 days
2. 7 days ✓
3. 10 days
4. 31 days

Why: RCW 48.20.062 (Grace period) sets a minimum grace period of 7 days for weekly premium policies.

Life insurance used to fund a 'one-way' buy-sell agreement for a sole proprietorship typically lets:

1. Creditors seize the business ahead of the owner's heirs
2. A key employee buy the business from the owner's estate at death ✓
3. The state liquidate the business and distribute the proceeds
4. The owner's spouse automatically take over daily management duties

Why: In a one-way (unilateral) buy-sell, a chosen successor (often a key employee) uses insurance proceeds to purchase the business from the deceased owner's estate.

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

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

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

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

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

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

A terminally ill insured uses the policy's accelerated death benefit. The amount received:

1. Is added on top of the full death benefit at death
2. Must be repaid with interest before the insured dies
3. Converts the policy into a long-term care annuity
4. Reduces the death benefit later paid to the beneficiary ✓

Why: Accelerated benefits advance part of the face amount to a qualifying insured; the death benefit payable later is reduced accordingly (and the advance is generally tax-free).

Under RCW 48.17.480, premiums and return premiums received by an insurance producer are received in what capacity?

1. As a loan from the insurer
2. As the producer's own income
3. In a fiduciary capacity ✓
4. In a contingent capacity

Why: RCW 48.17.480(2) provides that funds representing premiums or return premiums received by a producer are received in the producer's fiduciary capacity and must be promptly accounted for and paid to the party entitled.

Under RCW 48.43.005, a "health plan" or "health benefit plan" is a policy, contract, or agreement offered by a:

1. self-insured governmental employee benefit trust
2. licensed insurance producer or broker of record
3. provider network organized as a group practice
4. health carrier to pay for health care services ✓

Why: RCW 48.43.005(33) defines a health plan as any policy, contract, or agreement offered by a health carrier to provide, arrange, reimburse, or pay for health care services.

'Controlled business' refers to insurance a producer writes:

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

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

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

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

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

A producer licensed in Idaho establishes legal residence in Washington. Under RCW 48.17.175, she must apply to become a resident licensee within:

1. 30 days of establishing residence
2. 60 days of establishing residence
3. 90 days of establishing residence ✓
4. 180 days of establishing residence

Why: RCW 48.17.175 requires a producer licensed in another state who moves to Washington to apply within ninety days of establishing legal residence to become a resident licensee.

When recommending an annuity in Washington, the producer must act in the best interest of the consumer. This means the producer may not:

1. Place the producer's or the insurer's financial interest ahead of the consumer's interest ✓
2. Recommend an annuity whose surrender charge schedule runs seven years, when that annuity is in the consumer's interest
3. Receive cash compensation from the issuing insurer
4. Recommend an annuity issued by an insurer the producer is appointed to represent, after disclosing the products offered

Why: RCW 48.23.015(3) requires a producer making an annuity recommendation to act in the best interest of the consumer under the circumstances known at the time, without placing the producer's or the insurer's financial interest ahead of the consumer's interest. Cash compensation is expressly excluded from a material conflict of interest, and representing a particular insurer after disclosure is not prohibited.

Adjustable life insurance allows the policyowner to:

1. Change the premium, face amount, or coverage type as needs change ✓
2. Receive the death benefit in cash while the insured is still living
3. Invest the cash value directly in mutual funds they personally select
4. Skip underwriting entirely no matter how much coverage is added

Why: Adjustable life lets the owner modify the premium, face amount, and protection period (shifting between term and permanent) as circumstances change.

For each individual in a 401, 403(b), or 457 governmental retirement plan covered by an unallocated annuity contract, the association's aggregate coverage in present value annuity benefits is:

1. $100,000 ✓
2. $500,000
3. $250,000
4. $5,000,000

Why: RCW 48.32A.025(3) limits coverage to one hundred thousand dollars in present value annuity benefits per individual under a covered governmental-plan unallocated annuity.

An applicant pays the initial premium and receives a conditional receipt, then dies before the policy is issued — but would have been insurable. The insurer:

1. Pays the death claim ✓
2. Denies the claim because no policy issued
3. Pays half pending an investigation
4. Refunds the premium and pays nothing

Why: Under a conditional receipt, coverage is effective as of the receipt (or exam) date if the applicant was insurable as applied for, so the claim is paid.

Compared with a life-only annuity, an installment refund annuity:

1. Stops all payments the moment the annuitant dies, leaving nothing to anyone
2. May be purchased only with a single lump-sum premium paid at retirement
3. Guarantees total payments at least equal to the premium ✓
4. Always pays a higher monthly amount than every other available payout option

Why: A refund annuity guarantees that payments (to the annuitant plus beneficiary) total at least the premium paid; life-only pays the most but stops at death.

Under RCW 48.30.133, a producer may give a person a gift for the referral of insurance business only if the gift does not exceed, per person in any consecutive twelve-month period:

1. $500 in value
2. $100 in value ✓
3. $50 in value
4. $25 in value

Why: RCW 48.30.133(1) permits a producer to give prizes, goods, gift cards, or merchandise not exceeding $100 in value per person in any consecutive twelve-month period for the referral of insurance business, if not conditioned on the referred person obtaining insurance.

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

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

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

Under RCW 48.17.600, each willful violation of the premium-fund separation requirement constitutes:

1. A felony
2. A misdemeanor ✓
3. A civil penalty only
4. A gross misdemeanor

Why: RCW 48.17.600(4) provides that each willful violation of the premium-fund separation section constitutes a misdemeanor.

A producer tells a client her current whole life policy is "worthless," using distorted figures, solely to get her to surrender it and buy a new one. This conduct is best classified as:

1. rebating under RCW 48.30.140
2. defamation under RCW 48.30.080
3. twisting under RCW 48.30.180 ✓
4. false advertising under RCW 48.30.040

Why: Using misrepresentations to induce an insured to surrender and replace a policy is twisting under RCW 48.30.180.

In a variable annuity, the assumed interest rate (AIR) is used to:

1. Benchmark whether each payout rises or falls during the annuity period ✓
2. Set the surrender charge percentage that applies in each year of the withdrawal charge period
3. Guarantee the separate account a fixed minimum return in every year of the payout period
4. Determine the commission credited to the selling registered representative each year

Why: The AIR is a benchmark: if separate-account performance exceeds the AIR, the next variable payment rises; if it lags, the payment falls.

For one owner of multiple nongroup life insurance policies, the association's benefits are capped, regardless of the number of policies, at:

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

Why: RCW 48.32A.025(3) limits the association to five million dollars in benefits for one owner of multiple nongroup life policies, regardless of the number held.

A "health maintenance agreement" under RCW 48.46.020 is an agreement between a registered HMO and:

1. enrolled participants to provide comprehensive health services ✓
2. participating providers to reimburse them at contracted rates
3. the commissioner to guarantee the HMO's solvency reserves
4. an insurer to underwrite the HMO's uncovered expenditures

Why: RCW 48.46.020(12) defines a health maintenance agreement as an agreement between a registered HMO and its enrolled participants providing comprehensive health services.

Reinsurance is best described as:

1. One insurer transferring part of its risk to another insurer ✓
2. A state fund that pays claims when an insurer becomes insolvent
3. The process of reinstating a policy that previously lapsed for nonpayment
4. An insured purchasing a second policy from a competing company

Why: Reinsurance lets the original (ceding) insurer transfer some risk to a reinsurer, stabilizing results and increasing capacity.

A group disability contract that covers dependents must offer each member the option of covering any dependent under age:

1. 19
2. 21
3. 23
4. 26 ✓

Why: RCW 48.21.157 requires the insurer to offer each participating member the option of covering any dependent under the age of twenty-six.

A deferred income (longevity) annuity is designed to:

1. Begin income at an advanced age to guard against outliving assets ✓
2. Return every premium dollar to an owner who remains in good health
3. Start income payments one month after the single premium is deposited
4. Provide only a lump-sum death benefit, with no income option at all

Why: A longevity/deferred income annuity starts payments at an advanced age (e.g., 80+), hedging the risk of outliving one's savings.

Within how many days of a complete filing must the commissioner issue an HMO its certificate of registration, absent a notice of deficiency?

1. 30 days
2. 60 days ✓
3. 90 days
4. 120 days

Why: RCW 48.46.040 requires the commissioner to issue the certificate within sixty days of filing unless the applicant is notified the application is incomplete or of other stated grounds.

A consumer who buys insurance through a producer representing the buyer (not the insurer) is working with a(n):

1. Adjuster
2. Underwriter
3. Captive agent
4. Broker ✓

Why: A broker legally represents the insurance buyer; an agent represents the insurer.

A Washington life policy lapsed two years ago for nonpayment and was never surrendered for cash value. Under RCW 48.23.120, the owner may still seek reinstatement because the deadline is:

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

Why: RCW 48.23.120 allows reinstatement within three years after default, on evidence of insurability and payment of overdue premiums, unless the policy was surrendered or extended insurance expired.

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

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

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

A producer who holds client premiums must keep them in a fiduciary capacity, which means the producer must:

1. Report each premium directly to the federal tax authorities
2. Lend the premiums to other clients who are short on funds
3. Invest the premiums for personal profit until they are remitted
4. Keep those funds separate and not mix them with personal money ✓

Why: As a fiduciary, the producer holds premiums in trust for the insurer and must not commingle them with personal funds (doing so is commingling).

An individual disability policy (other than a single premium nonrenewable policy) must let the purchaser return the policy for a premium refund within how many days of its delivery?

1. 20 days
2. 10 days ✓
3. 30 days
4. 31 days

Why: RCW 48.20.013 (Return of policy) requires a notice permitting return within ten days of delivery for a full premium refund.

The difference between a copayment and coinsurance is that a copayment is:

1. The total amount the insured pays before any benefits begin
2. A fixed dollar amount paid at the time of a covered service ✓
3. The yearly cap on what the insured can pay out of pocket
4. A percentage of the covered charge the insured shares with the plan

Why: A copay is a set dollar amount per service; coinsurance is a percentage of the charge shared after the deductible.

A 'period certain only' annuity option pays income:

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

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

A producer offers to give a prospect part of the first-year commission if they buy the policy. This is:

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

Why: Offering an inducement not stated in the policy (such as sharing commission) to persuade a purchase is rebating, illegal in most states.

Under RCW 48.18.190, an agreement modifying or extending an insurance policy is valid only if it is:

1. Approved orally by a supervising agent
2. Filed with the state within ten days
3. In writing and made part of the policy ✓
4. Signed only by the insured party

Why: RCW 48.18.190 provides that no agreement in conflict with, modifying, or extending a policy is valid unless in writing and made part of the policy.

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.

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.

Under RCW 48.44.035, a limited health care service contractor must have and maintain a minimum net worth of:

1. $300,000 ✓
2. $150,000
3. $500,000
4. $1,000,000

Why: RCW 48.44.035(3) requires every limited health care service contractor to have and maintain a minimum net worth of three hundred thousand dollars.

Under RCW 48.14.010, the fee for the initial appointment and renewal of appointment of each insurance producer, every two years, is:

1. fifty-five dollars
2. one hundred dollars
3. fifty dollars
4. twenty dollars ✓

Why: RCW 48.14.010 sets the initial appointment and renewal of appointment of each insurance producer at twenty dollars, every two years.

Under COBRA, the maximum continuation period for an employee who loses coverage due to termination or reduced hours is generally:

1. 18 months ✓
2. 36 months
3. 12 months
4. 60 months

Why: Termination or reduced hours allows 18 months of COBRA continuation; events like divorce, death, or a child aging out allow up to 36 months.

Under RCW 48.43.005, "preexisting condition" means any medical condition, illness, or injury that:

1. existed any time prior to the effective date of coverage ✓
2. was treated within six months before the enrollment date
3. the applicant knew about when applying for the coverage
4. requires ongoing treatment after the coverage takes effect

Why: RCW 48.43.005(42) defines preexisting condition as any medical condition, illness, or injury that existed any time prior to the effective date of coverage.

'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.

A client wants the chance for higher returns and accepts market risk on the annuity's value. The best fit is a:

1. Immediate fixed annuity
2. Bank certificate of deposit
3. Variable annuity ✓
4. Fixed annuity

Why: A variable annuity invests in separate accounts where the owner bears market risk and reward; a fixed annuity guarantees a set return.

Under the capitation method of provider payment used by many HMOs, a provider receives:

1. A percentage of the total premiums the HMO collects annually
2. A fixed amount per enrolled member per month, regardless of services used ✓
3. A separate fee for each individual service actually performed
4. Reimbursement calculated from the usual, customary, and reasonable charges in the local area

Why: Capitation pays the provider a set amount per member per month (PMPM) regardless of how much care that member uses.

Under RCW 48.24.200, if a group-insured person dies during the period allowed to convert to an individual policy but before it takes effect, the amount convertible is:

1. Limited to a refund of the premiums paid in
2. Forfeited because no individual policy issued
3. Payable only if the first premium was paid
4. Payable as a claim under the group policy ✓

Why: RCW 48.24.200 requires that the amount of insurance the person would have been entitled to convert be payable as a claim under the group policy, whether or not application or first premium was made.

A state insurance guaranty association exists to:

1. Guarantee that every applicant will be approved for coverage
2. Pay covered claims of insurers that become insolvent, up to set limits ✓
3. Provide free legal representation to policyholders in disputes
4. Set the premium rates that all insurers in the state must charge

Why: Guaranty associations protect policyholders by covering claims (within statutory limits) when a member insurer becomes insolvent; their existence may not be used in advertising or sales.

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

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

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

A 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.

The 'extended term' nonforfeiture option uses the policy's cash value to:

1. Convert the policy into an immediate lifetime income annuity
2. Purchase a smaller amount of fully paid-up permanent coverage
3. Buy term insurance for the full face amount for a limited period ✓
4. Pay the policyowner the entire surrender value in cash at once

Why: Extended term (the automatic default on many policies) uses the net cash value to keep the full face amount in force as term insurance for as long as it will buy.