Pennsylvania Life & Health Insurance License, Practice Exams

Under the optional 'Intoxicants and Narcotics' provision, the insurer is not liable for loss sustained while the insured is under the influence of a narcotic unless the narcotic was:

1. Administered on the advice of a physician ✓
2. Purchased legally
3. Used at the insured's residence
4. Below the legal limit

Why: Section 753(B)(11) excludes loss in consequence of the insured being intoxicated or under the influence of any narcotic unless administered on the advice of a physician.

If a member insurer is an insolvent insurer, what is the Guaranty Association's obligation under its powers and duties?

1. The association must immediately dissolve the insolvent insurer
2. The association is limited to advising the Commissioner without paying benefits in most situations
3. The association shall act, either guaranteeing the contracts or providing benefits and coverages ✓
4. The association may, in its sole discretion, decline to take any action

Why: Section 1706(b) provides that if a member insurer is insolvent, the association shall (mandatory) act by guaranteeing, assuming, reissuing, or reinsuring the contracts or by providing benefits and coverages, in contrast to the discretionary 'may' for impaired insurers under subsection (a).

A standard (non-replacement) individual fixed dollar life or endowment policy must carry a notice of the policyholder's right to return the policy and obtain a refund within at least how many days of delivery?

1. Twenty days
2. Ten days ✓
3. Thirty days
4. Forty-five days

Why: Section 510c(a)(1) requires a prominently printed notice that the policyholder may return the policy within at least ten (10) days of delivery and have the premium refunded if not satisfied for any reason.

The summary document required under the Guaranty Association Act must contain which of the following on its face?

1. A clear and conspicuous disclaimer in a form and content established by the Commissioner ✓
2. A guarantee that all of the policy owner's claims will be paid in full under the policy's terms
3. The home addresses of the association's board of directors
4. A schedule of the member insurer's current premium rates

Why: Section 1717(c) requires the summary document to contain a clear and conspicuous disclaimer on its face, with the Commissioner promulgating a regulation establishing the disclaimer's form and content.

If a licensee fails to correct the violation within 15 days of notice under Section 310.12, what penalty may the department assess?

1. License revocation without a hearing
2. An administrative fine of no more than $100 per day per violation ✓
3. A flat $5,000 civil penalty
4. Immediate suspension of all appointments in that particular circumstance

Why: Section 310.12(b) allows the department to assess an administrative fine of no more than $100 per day per violation if the licensee fails to correct within 15 days.

An annuity 'free-look' provision allows the purchaser to:

1. Return the contract within a set period for a refund ✓
2. Withdraw all earnings tax-free during the first year
3. Switch the contract to a different insurer at no cost
4. Cancel the contract any time over the next ten years

Why: The free-look period lets the buyer examine the annuity and return it within the stated number of days for a refund of premium.

Under 40 P.S. § 310.47, an insurance producer who issues or uses a statement misrepresenting the terms of an insurance contract, or makes an estimate with intent to deceive of future dividends, commits what?

1. A summary offense
2. A felony of the third degree
3. A misdemeanor of the third degree ✓
4. A civil violation only

Why: Section 310.47 prohibits a producer from misrepresenting the terms of a contract or making a deceptive estimate of future dividends, and subsection (b) grades a violation as a misdemeanor of the third degree.

An accelerated death benefit is typically payable when the insured:

1. Is diagnosed with a qualifying terminal or chronic illness ✓
2. Misses a single scheduled premium payment during the policy's grace period
3. Decides to surrender the policy in exchange for its accumulated cash value
4. Reaches the policy's stated maturity age while still living

Why: It advances part of the death benefit on diagnosis of a qualifying terminal or chronic condition.

What are the responsibilities the commissioner "shall" perform under Section 310.2?

1. Approve forms and add limited lines of authority
2. Secure fingerprints and participate in the NAIC registry
3. License producers and administer licensing exams and CE programs ✓
4. Conduct financial examinations of every insurer

Why: Section 310.2(a) provides the commissioner shall license insurance producers and approve and administer (or contract for) the producer licensing examinations and continuing education programs.

A 'corridor deductible' appears in supplementary major medical plans and is the amount:

1. Between where basic coverage ends and major medical begins ✓
2. Charged each time the insured visits an in-network specialist
3. Deducted from the death benefit before any claim is paid
4. Refunded to the insured at the end of a claim-free year

Why: In a supplementary major medical plan, the corridor deductible is the gap the insured pays after basic benefits are exhausted and before major medical starts.

Under a presumptive disability provision, the insured is presumed totally disabled (and paid full benefits) upon:

1. Total loss of sight, hearing, speech, or two limbs ✓
2. Any short illness expected to resolve within a single week
3. Voluntary early retirement from a physically demanding job
4. Reaching the policy's stated benefit-period maximum age

Why: Presumptive disability pays full benefits for specified losses (sight, hearing, speech, or two limbs) even if the insured is able to work.

With each application, an agent or broker who initiates a life insurance or annuity application must submit a signed statement addressing what?

1. Whether replacement is involved ✓
2. The applicant's credit score
3. The agent's commission rate
4. The insurer's reserve position

Why: Section 81.4(a) requires the agent/broker to submit, with each application, a statement signed by the applicant as to whether replacement is involved and a signed statement as to whether the agent/broker knows replacement is or may be involved.

Under § 1561(a), by what date each year must an HMO file with the commissioner its verified annual financial statement?

1. On or before the first of March ✓
2. On or before January 1
3. On or before June 30
4. On or before December 31

Why: Section 1561(a) requires an HMO, on or before the first of March of every year, to file with the commissioner a statement verified by at least two of its principal officers summarizing its financial activities.

The 'physical exam and autopsy' provision allows the insurer to:

1. Examine the insured at its own expense while a claim is pending ✓
2. Deny any claim if the insured refuses a free annual wellness check
3. Cancel the policy if the insured ever changes treating physicians
4. Require an autopsy in every state regardless of the local law

Why: During a pending claim the insurer may, at its own expense, examine the insured and (where not prohibited by law) require an autopsy.

A worker enrolled in a qualified high-deductible plan opens an HSA. Contributions are:

1. Tax-deductible, and qualified withdrawals are tax-free ✓
2. Taxable going in but tax-free coming out
3. Never deductible under any circumstances
4. Taxed both on contribution and on withdrawal

Why: HSAs offer a triple tax advantage: deductible contributions, tax-deferred growth, and tax-free qualified withdrawals.

A producer obtains a license by submitting fraudulent credentials. Which prohibited act has occurred?

1. Obtaining a license through misrepresentation or fraud ✓
2. Failing to remit fees owed to the department
3. Mingling fiduciary funds with personal funds
4. Transferring coverage without the insured's consent

Why: Section 310.11(3) prohibits obtaining or attempting to obtain a license through misrepresentation or fraud.

A child (children's) term rider added to a parent's life policy:

1. Provides level term coverage on the insured's children for a small added premium ✓
2. Pays the parent a monthly income benefit until each child turns eighteen
3. Automatically converts the parent's policy into a joint survivorship plan
4. Waives the parent's premiums whenever a covered child becomes ill

Why: A child term rider covers the insured's children under one rider, usually convertible to permanent coverage without evidence.

A family maintenance policy combines whole life with level term to:

1. Pay an income for a set period beginning at the insured's death, then the face amount ✓
2. Decrease the death benefit gradually as the insured's children grow up
3. Invest part of each premium in the policyowner's chosen mutual funds
4. Provide temporary coverage only, expiring with no value at the term's end

Why: Family maintenance adds level term to whole life; if the insured dies during the term, it pays income for a stated period from the date of death, then the face amount.

Within a business entity's structure, what is a "designated licensee"?

1. A nonresident producer reciprocally licensed in another state for the coverage that is in force
2. The surviving spouse holding a temporary license
3. A licensed producer designated as responsible for the entity's compliance with insurance laws ✓
4. An employee who only inspects and rates risks for the insurer

Why: Section 310.1 defines a "designated licensee" as an individual licensed as a producer who is designated by a business entity to be responsible for the entity's compliance with the Commonwealth's insurance laws and regulations.

Which managed-care plan typically requires members to select a primary care physician and obtain referrals to see specialists?

1. PPO
2. HMO ✓
3. Indemnity plan
4. EPO

Why: An HMO uses a primary care physician 'gatekeeper' and referrals, with care generally limited to the network; a PPO allows out-of-network care at higher cost without referrals.

Under § 1563, an HMO established and operated by a not-for-profit corporation is declared to be what for tax purposes?

1. A taxable insurance company
2. A public utility subject to gross-receipts tax unless an exception clearly applies for the coverage that is in force according to the insurer's rules
3. A charitable and benevolent institution whose income, funds, investments and property are exempt from all state and local taxation ✓
4. A federal tax-exempt municipality

Why: Section 1563 declares a not-for-profit HMO to be a charitable and benevolent institution whose income, funds, investments and property are exempt from all taxation of the State or its political subdivisions.

A health reimbursement arrangement (HRA) differs from a health savings account (HSA) in that an HRA is:

1. Owned by the employee and fully portable between jobs
2. Funded solely by the employer, who sets the terms ✓
3. Available only to people enrolled in a high-deductible plan
4. Always paired with a flexible spending account by law

Why: An HRA is employer-funded and employer-owned (not portable); an HSA is owned by the individual and requires a qualified HDHP.

Under § 991.2136, the provider directory listing participating providers by specialty must be updated at least how often?

1. Once every 90 days or more frequently as required by law ✓
2. Once a year
3. Once every two years
4. Only when requested by the department under the policy's terms

Why: Section 991.2136(a)(14) requires the list of participating providers (name, address, telephone number) to be updated at least once every 90 days, or more frequently as required by federal or state law.

Single-premium whole life insurance is funded by:

1. A single large premium that fully pays up the policy at issue ✓
2. A modest first-year premium followed by much larger renewal premiums for life
3. Level annual premiums paid until the insured reaches sixty-five years of age
4. Flexible deposits that the owner may raise or lower in any given year

Why: One lump-sum premium creates a fully paid-up permanent policy with no further premiums due.

40 P.S. § 473 prohibits an insurer or its representatives from making a misrepresentation or incomplete comparison of policies for what purpose?

1. To inflate the insurer's reported surplus
2. To deny a properly filed claim
3. To discriminate among policyholders of the same class unless an exception clearly applies for the coverage that is in force according to the insurer's rules
4. To induce a policyholder of another company to lapse, forfeit, or surrender coverage and replace it with a policy insuring against similar risks ✓

Why: Section 473 (the twisting prohibition) bars an insurer, its members, officers, or others on its behalf from making any misrepresentation or incomplete comparison of policies to induce a policyholder to lapse, forfeit, or surrender insurance and take out a policy in another company insuring against similar risks.

An insurer refuses to pay a clearly valid claim promptly, hoping the insured will accept less. This is:

1. An unfair claims settlement practice ✓
2. Permissible claims investigation
3. Coordination of benefits
4. A lawful subrogation action

Why: Failing to act in good faith to settle a clear claim is an unfair claims settlement practice.

In a direct-response sale where the insurer did NOT propose the replacement but replacement is involved, the insurer must do what?

1. Send the Notice Regarding Replacement with the policy and comply with the 20-day refund notice requirement ✓
2. Refuse to issue the policy
3. Personally meet with the applicant
4. Conduct a full underwriting investigation of the existing policy unless an exception clearly applies for the coverage that is in force

Why: Section 81.7(a) requires that, in a direct-response sale where the insurer did not propose the replacement, the insurer send the Notice Regarding Replacement with the policy and comply with § 81.6(d)'s 20-day refund notice.