UTAH Insurance Test With Actual
Answers.
whole life insurance - CORRECT ANSWER Contracts which provide payments based on investment
return of a segregated asset account are called:
Reinstatement provision - CORRECT ANSWER provides that when a policy lapses due to nonpayment of
premium, but the insured subsequently pays the renewal premium (which the insurer accepts without
requiring an application for a new policy), the policy will be reinstated with the same provisions and
rights as before (with the exception of coverage for sickness-related losses within the first ten days after
Section 529 Plans - CORRECT ANSWER In establishing this plan, the owner must designate a beneficiary.
This selection can be changed. The owner controls the money at all times and decides when withdrawals
are taken and for what purpose. If there is money left over or if the beneficiary does not attend college,
the owner can change the beneficiary without penalty to an eligible member of the current beneficiary's
family, which includes first cousins.
limited policy - CORRECT ANSWER ecample: Prescription drug policies may be sold as supplements to
individual policies or as stand-alone
buy-sell plans - CORRECT ANSWER offers several advantages to the partners while they are all living.
The partners know they will have a legal right to buy a deceased partner's share of the business, and the
family and heirs of the partners know that the partnership interest will be disposed of at a fair price.
Further, the money needed to purchase the deceased partner's interest will be available when needed.
unilateral contract. - CORRECT ANSWER since only one party-the insurer-makes any kind of enforceable
promise. The insurer promises to pay benefits if and when certain events, such as death or disability,
occur. The insured's act of paying the premium is given in exchange for this promise. However, the
insured is not obligated to make these payments and can let the policy lapse.
18 months - CORRECT ANSWER When an employee's coverage terminates under a group health policy,
the employee must be offered continuation coverage for:
,Graded premium whole life - CORRECT ANSWER policy in which the premium at the inception of the
policy is lower than the continuous premium whole life rate and then increases each year for the first
five years of the policy period. After five years, the premium levels off.
state guaranty associations - CORRECT ANSWER All states have established one, funds or associations. If
an insurer becomes financially unable to pay its claims, this will cover the consumers' unpaid claims.
Insurance companies fund this associations through assessments.
managed care plans - CORRECT ANSWER HMOs, PPOs, and POS plans, offer comprehensive medical
services to their members. They also apply financial incentives that encourage providers to keep both
the quantity and cost of services in check and motivate members to select cost-effective providers.
lump-sum cash payment settlement option - CORRECT ANSWER Most life insurance polices are
distributed under this. The life insurance proceeds received under this settlement option are generally
received income tax free and can be distributed between 2 or more beneficiaries in any proportion
selected by the policyowner. The proceeds paid under this it would include the base policy death
benefit, paid-up insurance additions, any accumulated dividends, and any applicable riders such as term
insurance, accidental death, etc.
When determining the amount of tax deduction that can be taken for unreimbursed medical expenses -
CORRECT ANSWER premiums paid for group AD&D coverage are not considered qualifying medical
expenses. The deduction is limited to the amount exceeding 10% of adjusted gross income,
variable life or annuity - CORRECT ANSWER Unlike conventional life insurance, which is classified as a
fixed product with a specific (guaranteed) benefit, this products provide insurance and benefits that vary
according to the investment experience of their underlying accounts. These underlying accounts, which
are separate accounts the insurer establishes and maintains, typically are made up of equities such as
stocks, the values of which rise and fall and cannot be guaranteed. A purchaser of this incurs a degree of
risk not associated with a fixed whole life policy.
needs approach - CORRECT ANSWER is not limited to fulfilling objectives in the event of death only,
such as final expenses and immediate debts that need to be paid. It also considers a family's (or
business's) living needs, such as maintenance income for the family, providing for a child's education,
and planning for the surviving spouse's retirement income. Replacement of the breadwinner's projected
increasing annual salary is a factor that is taken into account when using the human life value approach
to determine how much life insurance is needed.
, flexible spending accounts - CORRECT ANSWER benefit provided by an employer that allows an
employee to deposit a certain amount of his or her paycheck into an account before paying income
taxes. During the year, the employee is then directly reimbursed from this account for eligible health
care and dependent care expenses. Only qualified medical expenses are reimbursable, not all medical
expenses. Eligible expenses include certain medical expenses, health care plan deductibles, and co-
payments.
Joint life - CORRECT ANSWER one policy that covers two people. Using some type of permanent
insurance, it pays the death benefit when the first insured dies. The survivor then has the option of
purchasing a single individual policy without evidence of insurability.
deferred annuities - CORRECT ANSWER Surrender charge-free withdrawals are generally permitted up
to a specified percentage. (A common percentage is 10%.) Although these free withdrawals may escape
the contract's surrender charge, they are subject to income taxation. If the contract owner is younger
than age 59½, the tax may include a 10% penalty.
Group medical expense plans. - CORRECT ANSWER Prescription drug coverage can be offered as an
optional benefit under which of the following arrangement
credit life group. - CORRECT ANSWER is issued on the lives of borrowers and purchasers on credit,
require that a specified number of insureds under the policy be maintained. 100 insureds is a common
level for the number of insureds required. If participation drops below that number, the insurer may not
insure new debtors under that group policy.
Mutual Insurers - CORRECT ANSWER there are no stockholders. The ownership rests with the
policyholders. Funds not paid out after paying claims and other operating costs are returned to the
policy owners in the form of policy dividends.
deferred compensation plans - CORRECT ANSWER agreements between employers and employees
whereby the employee reduces current income by deferring the receipt of currently due salary, bonus,
commission, or salary increase until a specified future date - typically at retirement. Funded by the
employee, this arrangements are non-qualified plans that typically favor highly paid executives. Basically
a "promise" to pay future benefits to the employee, contributions to the plan are not deductible to the
employer until the employee actually begins taking distributions, at which time the employee would
begin paying taxes on those distributions.
