Pass the Insurance Licensing Virginia Insurance License Virginia-Life-Annuities-and-Health-Insurance Questions and answers with CertsForce

Detailed Answer in Step-by-Step Solution:

Employer-paid premiums for group health plans like major medical (B), dental (C), and HMOs (D) result in tax-free benefits under IRC Section 106.

Disability income (A) benefits are taxable if the employer pays the premium, per IRS rules, unlike medical benefits.

The Virginia study guide, aligned with IRS regulations, notes that employer-funded disability income benefits are taxable to the recipient, while medical, dental, and HMO benefits remain tax-free. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Taxation of Insurance Benefits."

Twisting occurs when an agent uses misleading or incomplete comparisons to persuade a policyowner to lapse, surrender, or replace an existing insurance policy with a new one. This practice is unethical and prohibited because it may result in the consumer losing valuable benefits such as cash values, favorable policy provisions, or lower premiums. Rebating involves offering something of value not stated in the policy. Coercion involves force or threats. Defamation concerns false statements damaging another’s reputation. Since the agent is encouraging replacement through misleading comparisons, the act is twisting.

The bailout provision (also known as a “market-value adjustment escape clause”) allows the annuity owner to surrender the contract without penalty if the credited interest rate falls below a certain guaranteed minimum. This protects the annuitant from being locked into low rates.

Exact Extract (Virginia Annuities Study Guide): “Bailout provision—permits withdrawal of funds without surrender charges if the credited interest rate drops below a specified level.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Examination Outline, Annuity Contract Features

Virginia Code § 38.2-3500 et seq. governs major medical plans, which cover catastrophic costs like hospital expenses (option A), physicians’ visits (option C), and surgical expenses (option D). Option B (custodial care)—non-medical assistance with daily living (e.g., bathing)—is typically excluded, as it’s not “medically necessary” under standard definitions (Virginia Code § 38.2-3407.10). The study guide likely lists inclusions (A, C, D) with examples—e.g., $5,000 for surgery—versus exclusions like custodial care, covered by LTC policies instead, making B the usual exception.

Detailed Answer in Step-by-Step Solution:

Insurable risks require accidental loss (B), a large number of similar exposure units (C), and measurable loss (D) to allow statistical predictability and premium calculation.

Speculative risk (A), like gambling or business ventures, involves potential gain or loss and is not insurable, as insurance covers only pure risk (loss only).

The Virginia study guide distinguishes pure risk (insurable) from speculative risk (uninsurable), listing accidental, measurable, and widespread exposure as key criteria. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Risk and Insurance."

Virginia Code § 38.2-1809 mandates that licensees maintain specific records for regulatory oversight and consumer protection. Option A (accounting records of premium payments) is required to track funds received and remitted, ensuring financial accountability (e.g., premiums collected for a $1,000 policy). Option B (files of insurance applications on current policies) must be kept as part of the contract and for audit purposes, per § 38.2-1810. Option C (policy renewal notices) is required to document communication with policyholders about ongoing coverage, ensuring transparency. Option D (premium quotations of unissued policies) is not mandated; while agents may provide quotes (e.g., $500 annually for a term policy), these are preliminary offers, not binding until a policy is issued, and Virginia law doesn’t require retaining them unless they result in a transaction. The study guide likely details recordkeeping in a compliance chapter, contrasting required records (A, B, C) with optional ones like quotes (D), using examples—e.g., keeping a paid policy’s file but not a rejected quote—making D the item not required. This reflects Virginia’s focus on executed contracts over prospective ones.

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."

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%.

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.

Twisting is an unfair trade practice that involves persuading an insured, to the insured's detriment, to switch policies. This practice usually occurs when an agent convinces the insured to cancel or replace their existing policy with a new one, often through misleading comparisons or false representations. This is illegal because it may harm the policyholder by canceling coverage that would be beneficial to them.