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Which of the following statements about Section 401(k) plans is true?
A) Elective salary deferrals to these plans are free of federal income taxation until the
funds are actually withdrawn.
B) These plans are exempt from rules that prevent discrimination in favor of highly
compensated employees.
C) There is no limit on the actual percentage of salary that can be deferred by highly
compensated employees under a qualified plan.
D) If an employee takes the funds made available to him or her in cash, the money
received is not taxable.
Which of the following statements is (are) true with respect to the financial services
industry?
I. The number of life insurers operating in the industry continues to increase at a rapid
rate.
II. The Financial Modernization Act of 1999 permits financial institutions to compete in
other financial markets outside their core business area.
A) I only
B) II only
C) both I and II
D) neither I nor II
Jan needed health insurance. She met with an agent who described the provisions of a
health insurance policy. Jan purchased the policy. When she received the policy, she
noted that several provisions were different from the provisions the agent described.
She was not satisfied with the policy and immediately sent it back to the agent with a
note stating her reasons for returning the policy. Jan is guaranteed a premium refund
because of which policy provision?
A) waiting period
B) time limit on certain defenses
C) ten-day right to examine the policy
D) waiver-of-premium provision
Which of the following statements about preferred provider organization (PPO) health
plans is (are) true?
I. A PPO plan contracts with health care providers to provide medical services to
members at reduced fees.
II. Plan members are given a financial incentive to use PPO providers rather than other
providers.
A) I only
B) II only
C) both I and II
D) neither I nor II
The price per unit of insurance is called the
A) premium.
B) loss adjustment expense.
C) rate.
D) loss reserve.
All of the following are covered autos under the liability section of the PAP EXCEPT
A) a nonowned van which is driven by the insured on a regular basis.
B) a trailer owned by the named insured.
C) a borrowed auto used by the insured as a substitute for a stolen covered auto.
D) a newly acquired auto which replaces a vehicle previously described in the policy.
A student who has skipped many classes and not studied the course material was
surprised to learn there was a test when he showed-up for class. The student's mental
uncertainty about whether or not he will pass the test is called
A) objective risk.
B) objective probability.
C) subjective probability.
D) subjective risk.
Most group health insurance plans have adopted the coordination-of-benefits rules
developed by the National Association of Insurance Commissioners. Under these rules,
if a dependent child is covered by both of the health insurance plans of the child's
married parents, which health plan is primary for the child's medical expenses?
A) always the mother's plan
B) always the father's plan
C) the plan of the parent whose birthday occurs first in the calendar year
D) the plan of the parent who works for the larger employer, based on number of total
employees
A contract in which the values exchanged are not equal because chance is involved is
called a(n)
A) contract of adhesion.
B) unilateral contract.
C) conditional contract.
D) aleatory contract.
A state law that requires individuals who have been involved in an auto accident or who
have been convicted for certain vehicle-related offenses to demonstrate the ability to
pay liability claims up to a specified dollar amount is called a(n)
A) financial responsibility law.
B) compulsory insurance law.
C) unsatisfied judgment fund law.
D) "no pay, no play" law.
The portion of a property and liability insurance contract that contains information
about the property or activity to be insured is called the
A) declarations.
B) insuring agreement.
C) exclusions.
D) conditions.
To protect policyholders, state laws place limitations on a life insurance company's
investments. The assets backing interest-sensitive products, such as variable life
insurance and variable annuities, are not subject to these restrictions. Assets backing
interest-sensitive products are placed in a special account called the life insurer's
A) policy reserve account.
B) policy loan account.
C) separate account.
D) policyholders surplus.
A comprehensive risk management program that addresses an organization's pure risks,
speculative risks, strategic risks, and operational risks is called a(n)
A) risk management information system.
B) financial risk management plan.
C) speculative risk management plan.
D) enterprise risk management plan.
Smith is Manager of ABC Department Store. Jones, ABC's Security Director, visited
Smith to ask some questions. During questioning, Smith admitted that he stole $10,000
in merchandise. He was disciplined, but not fired. The loss was not reported to the
insurer that wrote ABC's crime insurance. Six weeks later, Smith was observed on a
surveillance camera stealing over $50,000 in jewelry from ABC. ABC immediately
reported the loss to its crime insurer. Which ISO crime coverage condition may prevent
ABC from collecting for this loss?
A) termination as to any employee
B) discovery form
C) loss sustained form
D) loss sustained under prior insurance
Which of the following statements concerning defined-benefit pension plans is (are)
true?
I. The contribution rate by the employer varies from year to year.
II. The retirement benefit is not known in advance.
A) I only
B) II only
C) both I and II
D) neither I nor II
New Jersey's dollar-a-day auto insurance coverage is limited to
A) elderly individuals.
B) Medicaid recipients.
C) drivers under age 25.
D) high-risk drivers.
