Free Practice Questions for Insurance Licensing Virginia-Life-Annuities-and-Health-Insurance Exam

Detailed Answer in Step-by-Step Solution:

A continuous premium whole life policy requires premiums for the insured’s lifetime (A), while a limited payment policy has a set payment period (e.g., 20 years).

Settlement options (B), mortality tables (C), and dividends (D) are similar across both types.

The Virginia study guide distinguishes continuous premium whole life (lifelong payments) from limited payment whole life (fixed-term payments), both providing permanent coverage. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Whole Life Insurance."

The primary purpose of credit life insurance is to pay off the outstanding debt of a borrower in the event of their death. This ensures that the borrower’s family or estate is not burdened with the debt after their passing. It does not cover illness, act as a savings vehicle, or directly increase financing ability.

This scenario has two defining features: (1) the annuity was funded with a single lump sum ($100,000) and no further purchase payments are allowed, and (2) benefit payments begin in the future (17 years). That combination is the textbook definition of a single premium deferred annuity (SPDA). Virginia’s consumer materials explain that a single premium annuity may be immediate or deferred, and that a single premium deferred annuity begins payments at a future date and can provide larger payments than an immediate annuity purchased for the same amount because the premium earns interest during the deferred period.

General annuity definitions similarly describe an SPDA as an annuity established with one lump-sum payment that grows during the accumulation phase until annuitization, when payments begin. The “lawsuit settlement” detail is consistent with common annuity uses; Virginia’s exam outline lists annuities as a tool for lump-sum settlements. The other options don’t match: an IRA is a tax-qualified retirement arrangement, not implied here, and “individual life annuity” describes a payout form, not the premium structure and deferral features emphasized in the question.

In an AD&D (Accidental Death and Dismemberment) policy with a revocable beneficiary designation, the policyowner has the right to change the beneficiary. A revocable beneficiary designation means that the policyowner can change the beneficiary at any time without the beneficiary's consent. This is in contrast to an irrevocable beneficiary designation, where the beneficiary's consent would be required to make a change.

PPO plans allow members to seek care from non-network providers but at reduced benefit levels. This typically results in higher deductibles, coinsurance, and overall out-of-pocket expenses. Members retain freedom of choice, but the plan incentivizes using preferred providers.

Exact Extract (Virginia Health Insurance Study Guide): “Preferred Provider Organizations allow coverage for non-network services, but at a lower reimbursement level, leading to greater out-of-pocket expenses.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, PPO Plan Features

Virginia’s Unfair Claims Settlement Practices Act prohibits insurers or agents from misrepresenting facts or policy provisions relating to coverage. Doing so after a loss is classified as an unfair claims settlement practice.

Exact Extract (Virginia Unfair Claims Settlement Law): “Misrepresenting pertinent facts or policy provisions relating to coverages at issue is an unfair claim settlement practice.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-510 (Unfair claim settlement practices)

Virginia requires that the Medicare Supplement Buyer’s Guide be delivered at the time of application. This ensures applicants have all necessary information before purchase decisions.

Exact Extract (Virginia Medicare Supplement Regulations): “An outline of coverage and buyer’s guide shall be provided to all applicants at the time of application.”

References (Virginia Documents / Study Guide):

— Virginia Administrative Code 14VAC5-170-150 (Disclosure requirements for Medicare Supplement policies)

In a non-qualified deferred annuity, the owner’s cost basis is the total amount of premiums paid into the contract. This figure is used to determine the taxable and non-taxable portions of withdrawals and annuity payments.

Earnings in the annuity grow tax-deferred, and when distributions occur, amounts exceeding the cost basis are taxable as ordinary income. Opportunity cost and cash values are unrelated to tax basis calculations.

Virginia exam standards emphasize understanding cost basis to correctly apply annuity taxation rules, making option B correct.

In the context of Health Maintenance Organizations (HMOs), self-referral typically allows members to directly seek certain care or specialists without the need for a referral from their primary care physician (PCP). In HMO models, there are provisions where, in certain circumstances, members can decide to see a specialist without the formal referral process. This ability may be restricted or require prior approval depending on the specific plan provisions, but generally, members cannot arbitrarily make decisions about seeing specialists or obtaining certain health services without consulting the HMO guidelines. The best option here reflects the ability of the member to "decide" when a specialist is needed within the structure of self-referral.