Virginia Insurance Virginia Life, Annuities, and Health Insurance Examination Series 1101 Exam Questions Instant Access

Question 1

When a health insurer requires a covered individual to undergo a physical examination, who pays the cost of the examination?

AThe premium payor

BThe principal insured individual

CThe patient or parent of the patient

DThe insurer

Answer : D

Detailed Answer in Step-by-Step Solution:

If a health insurer requires a physical exam (e.g., for underwriting or claims), the insurer pays the cost (D), as it's their condition for coverage or payment.

The premium payor (A), insured (B), or patient (C) aren't responsible for insurer-mandated exams.

The Virginia study guide specifies that insurer-required exams, such as for contesting claims, are at the insurer's expense, per the physical examination provision. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on 'Health Insurance Policy Provisions.'

Question 2

Medical expense Plan A pays up to $4,000. Plan B pays up to $3,000. If a person covered under both plans incurs $6,000 in expenses and Plan A is primary, which is true under the coordination of benefits provision?

APlan A pays up to $6,000.

BPlan A pays up to $3,000 and Plan B pays up to $3,000.

CPlan A pays an adjusted percentage and Plan B pays the remainder.

DPlan A pays up to $4,000 and Plan B pays up to $2,000.

Answer : D

Under the coordination of benefits provision, when an individual is covered by more than one medical plan, the primary plan (Plan A) pays up to its limit first, and then the secondary plan (Plan B) pays any remaining covered expenses. In this case, since Plan A is primary, it will pay up to its maximum benefit of $4,000. After that, Plan B will pay up to its maximum benefit of $3,000, covering the remaining $2,000 in expenses.

Question 3

How much tax is withheld from funds that are transferred directly from one IRA to another IRA?

A15%

BNone

Answer : B

When funds are transferred directly (a direct rollover) from one IRA to another, no taxes are withheld. This is because the transfer is not considered a taxable event as long as the funds are moved directly between the institutions and not distributed to the individual. Taxes would only be owed when the funds are eventually withdrawn, depending on the type of IRA and the individual's tax situation.

Question 4

(All of the following statements about universal life insurance are true EXCEPT:)

AThe policyowner can decrease the death benefit.

BEach policy has a minimum guaranteed cash value for the life of the policy.

CThe premium is flexible for the duration of the policy.

DThe cash value interest rate must equal or exceed a guaranteed minimum rate.

Answer : B

Universal life insurance is a form of permanent life insurance that provides flexibility in both premium payments and death benefit amounts, subject to policy limits and insurer approval. Policyowners may increase or decrease the death benefit, although increases usually require evidence of insurability. Premiums are flexible, allowing the policyowner to vary the timing and amount of payments as long as sufficient cash value exists to cover policy charges. Universal life policies also credit interest to the cash value at a rate that must meet or exceed a stated guaranteed minimum. However, unlike whole life insurance, universal life does not guarantee a minimum cash value for the life of the policy. Cash value growth depends on credited interest and the cost of insurance charges deducted from the policy. If insufficient premiums are paid, the policy can lapse. Therefore, the statement that each policy has a guaranteed cash value for life is incorrect.

Question 5

A contractual arrangement that transfers exposure from one insurer to another insurer is a:

AReciprocal contract

BCoinsurance contract

CReinsurance contract

DCaptive contract

Answer : C

Detailed Answer in Step-by-Step Solution:

Reinsurance (C) is a process where one insurer (the ceding company) transfers part or all of its risk to another insurer (the reinsurer) to reduce exposure.

A reciprocal contract (A) involves mutual insurance exchanges, not risk transfer between insurers.

Coinsurance (B) refers to shared risk between the insurer and policyholder, not between insurers.

A captive contract (D) involves a company insuring itself through a subsidiary, not transferring risk to another insurer.

The Virginia study guide defines reinsurance as a contractual arrangement allowing insurers to mitigate risk by transferring it to another insurer, a common practice in the industry. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on 'Insurance Company Operations.'

Question 6

(Sales material used in the marketing of market value adjusted annuities in Virginia must clearly illustrate:)

AThe future projected values based on past experience

BThe future projected values predicted by the insurer

CThat the market value adjustment is always negative

DThat the market value adjustment can be either upward or downward

Answer : D

A market value adjusted (MVA) annuity applies an adjustment to the annuity's value if funds are withdrawn before the end of the guarantee period. Virginia regulations require sales materials to clearly and fairly explain how MVAs work, including the fact that the adjustment may be either positive or negative, depending on interest rate movements.

Misleading illustrations suggesting guaranteed gains or consistently negative adjustments are prohibited. Insurers must ensure consumers understand that interest rate changes affect annuity values and that withdrawals during certain periods may result in either an increase or decrease in value.

Options A and B improperly imply projections or guarantees, which are not allowed. Option C is incorrect because MVAs are not always negative. Therefore, option D is correct.

Question 7

Which is true about a term life insurance policy?

AIt usually provides a cash value.

BIt provides temporary protection.

CIt may only be written for periods of five years or less.

DIt usually can be renewed at the same premium.

Answer : B

A term life insurance policy provides temporary protection for a specified period, such as 10, 20, or 30 years, and does not accumulate cash value like whole life policies. Term life insurance is often renewable, but premiums typically increase with each renewal. It is designed to provide coverage for a set period, offering financial protection if the insured passes away within that term.