All of the following provisions under the Affordable Care Act have an impact on the
current Medicare Program EXCEPT
A) free preventative care for seniors.
B) additional funding to reduce fraud in the Medicare Program.
C) free rest home care for beneficiaries over age 90.
D) rebates for the Part D coverage gap (donut hole).
Marshall is interested in determining the cost per thousand of his life insurance policy.
Which of the following will provide Marshall the most meaningful measure of the cost
per thousand dollars per year of his life insurance?
A) the needs approach
B) the traditional net cost method
C) the human life value approach
D) the surrender cost index
Which of the following statements is (are) true regarding investment returns and the
underwriting cycle?
I. Investment returns have no impact upon the underwriting cycle.
II. Investment returns can lengthen the duration of a soft market by offsetting
underwriting losses.
A) I only
B) II only
C) both I and II
D) neither I nor II
Some states have enacted laws which prohibit uninsured drivers from suing a negligent
driver for noneconomic damages, such as pain and suffering. These laws are called
A) pure no-fault laws.
B) “no pay, no play” laws.
C) financial responsibility laws.
D) unsatisfied judgment laws.
Which of the following statements about speculative risks is true?
A) They are almost always insurable by private insurers.
B) They are more easily predictable than pure risks.
C) They may benefit society even though a loss occurs.
D) They involve only a chance of loss.
Al’s Electric Service is an electric contracting company in Metro City. The owner of the
company, Al Richards, posted a bond guaranteeing that all work performed by his
company will comply with local building codes. This bond is an example of a
A) fiduciary bond.
B) license and permit bond.
C) contract bond.
D) judicial bond.
Which of the following statements about limited-payment life insurance is true?
A) It is a form of term insurance.
B) It matures at the end of the premium-payment period.
C) The premium decreases each year during the premium-payment period.
D) Its use may be appropriate if a person wants paid-up life insurance during
retirement.
The difference between the legal reserve of a whole life policy and the face amount of
insurance is the
A) cash value.
B) net amount at risk.
C) premium.
D) dividend accumulations.
An armed robber pulled a gun on a teller at the Fourth National Bank. He made off with
over $10,000 in cash. Which insuring agreement in a financial institution bond is
designed to cover such losses?
A) Insuring Agreement A – Fidelity
B) Insuring Agreement B – On Premises
C) Insuring Agreement C – In Transit
D) Insuring Agreement D – Forgery or Alteration
Which of the following statements about the continuation of group health insurance
under the COBRA law is true?
A) A continuation of coverage must be made available even if an employee voluntarily
terminates employment.
B) The length of the continuation of coverage is 90 days.
C) The option to continue coverage applies to minor children only, not to adults.
D) The employer must pay the entire cost of coverage during the continuation period.
Which of the following statements about schedule rating is (are) true?
I. It involves the determination of a basis rate for each exposure, which is then modified
by credits or debits.
II. It is based on the assumption that certain physical characteristics of the insured’s
operations will influence the insured’s future loss experience.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about the use of interest-adjusted cost data for
comparing life insurance policies is (are) true?
I. Using interest-adjusted cost data provides a more accurate measure of the cost of life
insurance than is provided if the time value of money is ignored.
II. Its use is most appropriate in deciding between policies when the cost variation is
very small.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following types of risks best meets the requirements for being insurable
by private insurers?
A) market risks
B) property risks
C) financial risks
D) political risks
Bay Gallery owns a building a Wharf Street. Bay Gallery purchased a Commercial
General Liability Policy with no endorsements. All of the following claims would be
covered under the policy EXCEPT
A) An artist sued the gallery for slander after an employee of the gallery said the artist’s
work looks like it was painted by an intoxicated monkey.
B) A customer is injured when a painting falls from the wall and strikes the customer.
C) A customer is injured after falling on a slippery floor at the gallery.
D) An employee of the gallery accidentally started a fire that caused extensive damage
to the building.
Michelle had four matching end tables in her home. A fire damaged the home,
destroying two of the end tables. Michelle’s home was covered by an unendorsed
Homeowners 3 policy. Which of the following is true with regard to the settlement for
the end tables in this case?
A) Loss to a pair or set is excluded under the policy.
B) The insurer will pay the difference in actual cash value of the property before and
after the loss.
C) The insurer will pay the replacement cost of the loss.
D) If a partial loss to a pair or set occurs, the insurer is liable for replacement of the
entire pair or set.
Which of the following statements about the financing of OASDI and Medicare is (are)
true?
I. There is a maximum taxable wage base for OASDI.
II. There is a maximum taxable wage base for Part A of Medicare.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements regarding insurance and hedging is (are) true?
I. Insurance involves the transfer of insurable risk while hedging handles risk that is
typically uninsurable.
II. Both insurance and hedging rely on the law of large numbers to reduce risk.
A) I only
B) II only
C) both I and II
D) neither I nor II
David purchased a $100,000 participating whole life policy. The annual premium is
$2,280. Projected dividends for the first 20 years are $15,624. The cash value after 20
years will be $35,260. If the premiums were invested at 5 percent for 20 years, the
premiums would grow to $79,156. If the dividends were accumulated at 5 percent for
20 years, they would grow to be $24,400. The amount to which $1 deposited annually
will accumulate in 20 years at 5 percent is $34.719. Based on this information, what is
the net payment cost per thousand per year of David’s policy over the 20-year period?
A) $5.62
B) $13.75
C) $15.77
D) $27.38
Which of the following is a reason that social insurance programs exist?
A) to compete with private insurance programs
B) to provide a base of economic security
C) to provide need-tested benefits to low-income individuals
D) to reduce involvement of the government in insurance markets
Which of the following situations would be covered by the liability section of an
unendorsed PAP if the insured is legally liable?
A) The insured injures a pedestrian while operating a friend’s new motorcycle.
B) The insured backs into and damages the garage door of his rented house.
C) A friend’s suitcase and laptop computer were damaged in an auto accident while the
insured and the friend were vacationing together.
D) The insured damages a parked car while driving a dump truck for his or her
employer.