Free Life & Health Insurance Practice Questions

Explanation: The entire contract provision specifies that the policy, a copy of the application, and any attached riders or amendments constitute the entire contract between the insurer and the insured. No other documents or verbal statements can be incorporated by reference.

Study Tip: Remember this provision protects the policyholder from unwritten agreements.

Explanation: Universal life insurance is characterized by its flexibility. Policyholders can adjust their premium payments and death benefit amounts to suit their changing financial needs, unlike whole life or term life policies which have fixed premiums and death benefits.

Study Tip: Think “Universal” = Flexible.

Explanation: An HDHP is a health insurance plan with a high minimum deductible for medical expenses, which must be paid before the plan begins to cover costs. It is often paired with an HSA, which allows individuals to save for medical expenses with tax-free dollars.

Study Tip: Know the acronyms: HDHP and HSA go together.

Explanation: The free look period is a mandatory provision in most states that gives the policyholder a set period (usually 10-30 days) to review the policy. If they are not satisfied for any reason, they can return it for a full refund of all premiums paid.

Study Tip: The free look period is a consumer protection law. It’s essentially a “no-questions-asked” return policy.

Explanation: A deferred annuity is purchased with a lump sum or periodic payments, and the income payments are deferred until a future date, typically retirement. This allows the funds to grow tax-deferred over time.

Study Tip: Immediate = payments start now. Deferred = payments start later.

Explanation: An irrevocable beneficiary designation gives the beneficiary a vested interest in the policy. The policyholder cannot change the beneficiary, assign the policy, or borrow against the cash value without the beneficiary’s written consent.

Study Tip: Irrevocable = “can’t revoke” without permission.

Explanation: The application is the primary source of information for an underwriter. It contains the applicant’s statements about their health, medical history, and other risk factors. While other sources like the MIB or an agent’s report are used for verification, the application is the main document.

Study Tip: The application is the starting point for all underwriting.

Explanation: COBRA (Consolidated Omnibus Budget Reconciliation Act) allows terminated employees to continue their group health coverage for up to 18 months. This period can be extended to 36 months for dependents in certain situations (e.g., death of the employee, divorce).

Study Tip: Memorize the standard continuation periods: 18 months for termination, 36 months for dependents under qualifying events.