Missouri Life & Health Insurance License, Practice Exams

An employer pays the entire premium for a group disability plan. When an employee collects benefits, those benefits are:

1. Taxable as income to the employee ✓
2. Always completely income-tax-free
3. Taxed only on the amount above prior salary
4. Exempt because they replace lost wages

Why: When the employer pays the premium (and it is not imputed to the employee), the disability benefits are taxable to the employee.

An annuitant has a $60,000 cost basis and a $120,000 expected return. Of each $12,000 annual payment, the taxable portion is:

1. $6,000 ✓
2. $3,000
3. $12,000
4. $0

Why: Exclusion ratio = 60,000/120,000 = 50%; $6,000 of each $12,000 payment is excluded and $6,000 is taxable.

'Coercion' as an unfair trade practice occurs when someone:

1. Uses physical or economic pressure to force the purchase of insurance ✓
2. Offers a small gift not specified in the policy to close a sale
3. Replaces a policy at another insurer through misrepresentation
4. Charges two identical risks two different premium amounts

Why: Coercion uses force or intimidation (for example, a lender requiring a borrower to buy insurance from a particular insurer) to induce an insurance transaction.

Under 20 CSR 400-5.400 (life and annuity replacement), the owner must receive notice of a right to return the policy for an unconditional refund within:

1. ten days of delivery
2. fifteen days of delivery
3. thirty days of delivery ✓
4. sixty days of delivery

Why: 20 CSR 400-5.400 requires that the policy or contract owner be given the right to return the policy within thirty days of delivery for an unconditional refund of premiums.

Credit life insurance is typically structured so that:

1. The face amount increases over the life of the underlying loan
2. It is decreasing term with the creditor named as the beneficiary ✓
3. The borrower's family receives the full original loan amount in cash
4. Coverage continues at the same level long after the loan is repaid

Why: Credit life is usually decreasing term equal to the outstanding debt, with the lender as beneficiary; it cannot exceed the loan balance.

State guaranty association protection may NOT be:

1. Used by producers as a selling point in advertising ✓
2. Available to policyholders of an insolvent insurer
3. Subject to statutory coverage limits
4. Funded by assessments on member insurers

Why: Using guaranty fund protection to induce a sale is prohibited; the fund exists to protect policyholders of insolvent insurers, within limits.

Choosing the cash surrender nonforfeiture option means the owner:

1. Takes the net cash value and ends the coverage ✓
2. Keeps the full face amount as term insurance for a limited number of years
3. Uses the cash value to buy a smaller, fully paid-up permanent policy
4. Borrows against the cash value while leaving the policy in force

Why: Cash surrender pays the net cash value and terminates the policy.

Under § 375.934, RSMo, a practice defined in § 375.936 is an unfair trade practice when committed with such frequency as to indicate:

1. A general business practice ✓
2. A single isolated error
3. A clerical mistake
4. An honest oversight

Why: Section 375.934, RSMo treats a defined practice as an unfair trade practice when committed with such frequency as to indicate a general business practice.

Under § 375.786, RSMo, what is the effect on an unauthorized insurer's ability to sue in Missouri courts if it lacked a certificate of authority?

1. Its contracts are automatically void and unenforceable by anyone
2. It faces no consequence because the requirement is advisory only
3. It may sue only in federal court sitting within the state's borders
4. It may not maintain an action in Missouri courts until it obtains one ✓

Why: Section 375.786, RSMo provides that failure to obtain a certificate of authority does not impair the validity of contracts, but such an insurer may not maintain an action in any Missouri court to enforce a right until it obtains a certificate of authority — therefore it cannot sue until it obtains one.

Under § 385.010, RSMo, how are the provisions of sections 385.010 to 385.080 to be construed?

1. Strictly against the insured party
2. Liberally ✓
3. Only as agreed by the lender and insurer
4. In a manner that discourages competition

Why: Section 385.010, RSMo provides the provisions shall be liberally construed and that nothing is intended to prohibit or discourage reasonable competition — therefore liberally.

Federal anti-money-laundering rules require life insurers, for covered products, to:

1. Refuse to sell any permanent life insurance to new applicants
2. Maintain an AML program and report suspicious transactions ✓
3. Report every policy sold, regardless of size, to the Treasury
4. Verify a buyer's citizenship before issuing any annuity

Why: Insurers must maintain AML programs and file suspicious activity reports; permanent life and annuities are 'covered products' producers help monitor.

Under § 375.018, RSMo, a producer reinstating an expired license within twelve months must pay renewal fees plus a penalty per month of:

1. ten dollars
2. twenty-five dollars ✓
3. fifty dollars
4. one hundred dollars

Why: Section 375.018, RSMo requires a penalty of twenty-five dollars per month the license was expired, in addition to the renewal fees, for reinstatement — therefore twenty-five dollars.

'Twisting' is an unfair trade practice defined as:

1. Using misrepresentation to induce a client to replace an existing policy ✓
2. Charging two clients different premiums for identical coverage by mistake
3. Sharing a small portion of one's commission with a licensed co-agent
4. Recommending the lowest-cost policy a client genuinely qualifies for

Why: Twisting is inducing a policy replacement through misrepresentation or incomplete comparisons; doing so within the same insurer is called churning.

A 'mutual' insurance company is:

1. Owned by its policyholders, who may receive policy dividends ✓
2. Owned by outside stockholders seeking profit
3. A government agency that pays claims of insolvent insurers
4. A producer-owned brokerage firm

Why: A mutual insurer is owned by its policyowners; dividends paid to them are treated as a nontaxable return of premium.

A typical annuity 'free withdrawal' provision allows the owner to withdraw, each year without a surrender charge, up to:

1. About 10% of the contract value ✓
2. The entire accumulated account value
3. Only the interest credited that month
4. Nothing until the contract is annuitized

Why: Many deferred annuities permit penalty-free withdrawals of roughly 10% of the value per year during the surrender-charge period.

Under § 376.777, RSMo, no legal action to recover on an individual policy may be brought until how long after written proof of loss has been furnished?

1. Thirty days
2. Ninety days
3. Twenty days
4. Sixty days ✓

Why: Section 376.777, RSMo bars any action for sixty days after proof of loss is furnished (and none after three years) — therefore sixty days.

Under § 374.049, RSMo, civil penalties recovered by the director are distributed to:

1. the insurance dedicated fund
2. the consumer restitution fund
3. the public schools of the state ✓
4. the state general revenue fund account

Why: Section 374.049, RSMo directs recovered civil penalties to the treasurer and then to the public schools as required by Article IX, Section 7 of the Missouri Constitution — therefore the public schools.

A Missouri family files a petition to adopt a newborn 20 days after the child's birth. Under § 376.816, RSMo, coverage for the adopted child is effective as of what date?

1. The date of birth ✓
2. The date the petition is filed
3. The date the adoption is final
4. The first of the next month

Why: Section 376.816, RSMo makes coverage effective from the date of birth if the adoption petition is filed within thirty days of birth — therefore the date of birth.

Under § 376.671, RSMo, a company may terminate a deferred annuity if no considerations have been received for two full years and the paid-up annuity benefit would be less than what monthly amount?

1. Twenty dollars monthly ✓
2. Fifty dollars per month in benefits
3. Ten dollars per month in benefits
4. One hundred dollars per month in benefits

Why: Section 376.671, RSMo allows termination of a deferred annuity where no considerations were received for two full years and the paid-up annuity benefit would be less than twenty dollars monthly — therefore twenty dollars monthly.

Under § 374.110, RSMo, who conducts the examination of insurance companies and reciprocal exchanges required by law?

1. The chief examiner, acting through the director of the department ✓
2. An independent auditor selected by the insurer being examined
3. The National Association of Insurance Commissioners directly
4. A grand jury empaneled by the circuit court of Cole County

Why: Section 374.110, RSMo provides the director, through the chief examiner, may examine insurers, and the chief examiner shall conduct or assist in conducting examinations required by law — therefore the chief examiner acting through the director.

A convertible term policyholder converts to whole life before the conversion deadline. They:

1. Need not provide new evidence of insurability ✓
2. Must pass a new medical exam
3. Forfeit all prior premiums paid
4. Can only convert to another term policy

Why: A conversion privilege lets the insured switch term to permanent coverage without new evidence of insurability.

Under § 376.777, RSMo, the required grace period for an individual accident and health policy paid on a monthly premium basis is at least how many days?

1. Seven days
2. Thirty-one days
3. Ten days ✓
4. Twenty days

Why: Section 376.777, RSMo sets the grace period at 7 days for weekly, 10 days for monthly, and 31 days for all other premium modes — for monthly premiums, therefore ten days.

The Medicare Supplement (Medigap) open enrollment period:

1. Lasts six months, starting when the person is 65 and enrolled in Part B ✓
2. Is a one-time 30-day window that opens at the person's 70th birthday
3. Occurs every fall and lets enrollees switch among all Medigap plans
4. Is available only to people who also qualify for full Medicaid benefits

Why: During the 6-month Medigap open enrollment (beginning at 65 and enrolled in Part B), insurers must issue any plan regardless of health (guaranteed issue).

A group long-term disability plan uses 'own occupation' for 24 months, then 'any occupation.' After 24 months, an insured who can work at a suitable job:

1. No longer qualifies for benefits ✓
2. Continues to receive full benefits indefinitely
3. Receives double benefits as compensation
4. Restarts a new elimination period

Why: Once the definition shifts to any occupation, an insured able to work in a suitable job no longer meets the disability standard.

Under § 375.942, RSMo, when the director determines an insurer has violated the unfair trade practices provisions, the director may issue what?

1. Administrative orders as authorized under section 374.046 ✓
2. A criminal indictment referred directly to a grand jury
3. An automatic license revocation without any further process
4. A binding arbitration award enforceable in circuit court

Why: Section 375.942, RSMo provides that the director may issue such administrative orders as authorized under section 374.046 upon determining a violation of sections 375.930 to 375.948 — therefore administrative orders under section 374.046.

Under § 354.536, RSMo, a 'dependent child' eligible to elect continued HMO coverage must be unmarried, a Missouri resident, and no more than what age?

1. Nineteen years of age
2. Twenty-one years of age
3. Twenty-five years of age ✓
4. Twenty-six years of age

Why: Section 354.536, RSMo defines an eligible dependent child as unmarried, no more than twenty-five years of age, a Missouri resident, and not otherwise covered — therefore twenty-five years of age.

Under § 376.758, RSMo, do the guaranty association provisions apply to an insurer that was already insolvent on the law's effective date of August 13, 1988?

1. Yes; the act applies retroactively to all prior insolvencies
2. No; the act does not apply to such already-insolvent insurers ✓
3. Yes, but only for health claims and not life insurance claims
4. Only if the receiver of the insolvent insurer elects coverage

Why: Section 376.758, RSMo states sections 376.715 to 376.758 shall not apply to any insurer which was insolvent or unable to fulfill its obligations on August 13, 1988 — therefore no.