1. Premium payments for a Universal Life policy are NOT used for which of the following?
A. Loading cost.
B. Death protection.
C. Separate account investments. Correct
D. Cash value accumulation.
Explanation
Universal Life is a flexible premium, adjustable benefit life insurance product. Premiums are allocated to: 1) mortality charges (death protection), 2) expenses (loading), and 3) cash value accumulation (in the insurer's general account). 'Separate account investments' are characteristic of Variable Life/Universal Life, where cash value is invested in sub-accounts (like mutual funds). However, in a standard Universal Life policy, the cash value earns interest at a rate set by the insurer, not directly invested in separate accounts. Variable Universal Life (VUL) would use separate accounts.
2. All of the following apply to payment of claims on a managed care plan EXCEPT
A. the covered person normally receives reimbursement for the service direct from the insurer. Correct
B. it is generally not required that covered persons file claim forms.
C. a covered person may be responsible for an increased co-payment if they visit a non-network provider.
D. reimbursement may be denied if a covered person visits a specialist without a required referral.
Explanation
In managed care plans (like HMOs and PPOs), the provider typically bills the insurer directly, and the member pays only their copay/coinsurance at the point of service. The member does not pay the full amount and seek reimbursement. Therefore, members do not normally receive direct reimbursement from the insurer; the insurer pays the provider.
3. The Medical Information Bureau (MIB) is an organization which
A. provides a database for member companies to receive and report pertinent applicant information. Correct
B. is sponsored by physicians that maintain a database available to insurance companies and medical practitioners.
C. maintains a public database with member insurance companies reporting data.
D. is a historical database purchased by member insurance companies seeking to enforce adverse underwriting decisions.
Explanation
The MIB is a non-profit trade association that operates a confidential database used by member life and health insurance companies to share information on applicants (e.g., medical conditions, hazardous hobbies) to prevent fraud and misrepresentation. It is not public, not sponsored by physicians, and its primary purpose is information exchange, not enforcing adverse decisions.
4. During the policy delivery process, a producer discovers the policy issued has a higher premium than initially quoted due to a rating adjustment. How should the producer proceed at the time of delivery?
A. Disregard the premium change
B. Explain the rating adjustment Correct
C. Recommend canceling the policy
D. Deliver without explanation
Explanation
Ethical and legal duty requires the producer to fully disclose all policy terms, including the final premium, at delivery. The producer must explain the reason for the rating adjustment (e.g., due to underwriting findings) and obtain the applicant's informed acceptance. Delivering without explanation or disregarding the change is deceptive.
5. According to the required provisions, what MUST the insured do if the insurer does NOT furnish forms to provide proof of loss to the insured within 15 days after the insured gives notice of loss?
A. Contact the insurer to request such forms.
B. File written proof of loss. Correct
C. Refile notice of loss within 20 days.
D. No action is required.
Explanation
Standard policy provisions state that if the insurer does not provide claim forms within 15 days after receiving notice of loss, the insured can submit written proof of loss in another form (e.g., a letter detailing the loss) to satisfy the proof of loss requirement. This protects the insured from claim denial due to insurer delay.