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

Question 1

In disability income insurance, when it can be shown that an individual would NOT suffer a substantial loss of income upon becoming disabled, an insurer will usually:

AIssue coverage at a standard rate

BIssue coverage at a preferred rate

CIssue coverage at a minimum rate

DDecline to issue coverage

Answer : D

Disability income insurance requires insurable interest based on potential income loss. If no substantial loss would occur, underwriting guidelines permit the insurer to decline coverage. Exact extract: ''Disability income protection shall not be issued where no substantial loss of earned income would result from disability.''

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Question 2

(In accordance with IRS regulations, which of the following is the MAXIMUM percentage of an employee's pay that is allowed through a simplified employee pension (SEP) plan?)

A5%

B15%

C25%

D30%

Answer : C

A simplified employee pension (SEP) plan is a retirement plan that allows employers to make tax-deductible contributions to individual retirement accounts established for employees. Under IRS regulations, employer contributions to a SEP plan are limited to a maximum of 25% of an employee's compensation, subject to an overall annual dollar limit. SEP plans are popular among small businesses because they are easy to establish and administer and have minimal reporting requirements. Contributions are made solely by the employer, not the employee, and must be allocated using the same percentage of compensation for all eligible employees. The exam tests the maximum allowable percentage of pay, which is 25%.

Question 3

Including a guaranteed insurability rider on a life insurance policy means that:

AThe original policy was sold on a non-medical basis.

BThe company will require evidence of insurability for any future purchase of life insurance.

CAny extra premium charged for a health impairment will be discontinued if standard insurability is proved later.

DThe policyowner may purchase additional life insurance periodically without proving insurability.

Answer : D

Virginia Code 38.2-3209 allows a guaranteed insurability rider, enabling the policyowner to buy additional coverage at specified intervals (e.g., every 3 years or life events like marriage) without proving insurability. Option D matches this definition. Option A is unrelated; non-medical underwriting isn't implied. Option B contradicts the rider's purpose, which waives insurability proof. Option C is false; premium adjustments aren't part of this rider. The study guide describes this rider as a planning tool for future needs, confirming D.

Question 4

Which doctor-ordered services can be performed by individuals without medical training?

ARehabilitative care

BTherapeutic care

CIntermediate care

DCustodial care

Answer : D

Custodial care is non-medical assistance with daily living activities, requiring no professional medical training. Rehabilitative, therapeutic, and intermediate care require licensed or trained personnel. Exact extract: ''Custodial care provides assistance with daily living activities and does not require medical skills.''

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Question 5

All of the following statements about tax-sheltered annuities (TSAs) are true EXCEPT:

AOnly employees of certain tax-exempt organizations may participate

BThe employee is normally the applicant, owner, and annuitant under the contract

CThe employee issues periodic personal checks to purchase the contract

DAn employee's rights under the contract are nonforfeitable

Answer : C

Tax-sheltered annuities (403(b) plans) are funded by employer salary reduction agreements, not personal checks written directly to the insurer. Eligible participants are employees of nonprofit or educational institutions. Exact extract: ''Contributions to tax-sheltered annuities are made by salary reduction agreements; employees of public schools and nonprofit organizations are eligible.''

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Question 6

A penalty tax sometimes applies to "premature" distributions of gains under a modified endowment contract (MEC). What is the amount of the penalty tax?

A7.5%

B10.0%

C12.5%

D15.0%

Answer : B

A 10% penalty tax applies to 'premature' distributions of gains from a modified endowment contract (MEC) before the policyholder reaches the age of 59. This penalty is applied in addition to regular income taxes on the distribution. The MEC rules were established to prevent the use of life insurance policies as tax shelters.

Question 7

Who usually selects the beneficiary of a life insurance policy?

AThe policyowner

BThe insurer

CThe beneficiary

DThe agent

Answer : A

Detailed Answer in Step-by-Step Solution:

The policyowner (A) has the right to designate the beneficiary, as they control the policy's terms and ownership rights.

The insurer (B) issues the policy, the beneficiary (C) receives proceeds, and the agent (D) facilitates but doesn't decide.

The Virginia study guide confirms that the policyowner selects the beneficiary, exercising a fundamental ownership right, unless assigned otherwise. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on 'Beneficiary Designations.'