Insurance Licensing Virginia-Life-Annuities-and-Health-Insurance Virginia Life, Annuities, and Health Insurance Examination Series 11-01 Exam Practice Test

When an HIV test is requested by a health insurer, the applicant must sign the consent form. This ensures that the insured is aware of the test and agrees to its administration. The insurance agent, physician, or medical laboratory technician are not required to sign the consent, though they may be involved in administering or facilitating the test.

During the first two years a life insurance policy is in force, the insurer may contest the policy for reasons such as material misrepresentation, fraud, or material concealment in the application. However, the insurer cannot contest a policy for a misstatement of age unless the misstatement was made with the intent to deceive. Misstatement of age generally only results in a benefit adjustment rather than a policy contest.

Consideration in health insurance is the combination of the initial premium payment and the application submitted by the insured. Exact extract: “The consideration clause states that the policy is issued in exchange for the application and payment of the first premium.” This reflects the legal exchange of value between the insured and the insurer.

Detailed Answer in Step-by-Step Solution:

When age is misstated, the insurer adjusts the death benefit based on the premium paid versus what should have been paid.

Premium paid: $15 per $1,000 (understated age). Correct premium: $18 per $1,000 (actual age).

Ratio: $15/$18 = 5/6 of the intended coverage. Thus, the benefit is 15/18 of the face amount (A).

Option B (95%) is arbitrary. Option C (full amount) ignores the misstatement. Option D (nothing) applies only in fraud cases beyond the incontestability period, not specified here.

The Virginia study guide states that under the misstatement of age provision, the benefit is adjusted proportionally to the premium paid versus the correct premium, not denied entirely. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Life Insurance Policy Provisions."

Independent agents are not employees of any single insurer. They work independently, representing multiple insurance companies and are responsible for their own expenses. They earn compensation based on commissions from sales, and they typically own the renewal business, meaning they retain the commissions from renewing policies.

Virginia Code § 38.2-5208 allows LTC policy cancellation by the insurer for nonpayment of premium (option A) after a 31-day grace period and notice, a standard contract right. Option B (Medicaid eligibility) isn’t a cancellation cause; it may coordinate benefits, not terminate coverage. Option C (insurer insolvency) affects payment ability, not lawful cancellation grounds. Option D (nuisance claims) isn’t a legal basis; claims frequency doesn’t void coverage unless fraudulent (Virginia Code § 38.2-309). The study guide likely lists nonpayment as the primary insurer-initiated cancellation reason, with examples like missed payments triggering notice, making A the lawful cause.

A straight life annuity pays income until death, with no further payments to beneficiaries. Exact extract: “Straight life annuities provide income for the life of the annuitant only; payments cease upon death with no refund.” This option offers the maximum periodic income but no residual value.

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."

Virginia Code § 38.2-5200 defines Activities of Daily Living (ADLs) in long-term care (LTC) insurance as basic self-care tasks triggering benefits if the insured can’t perform them (typically 2 of 6). Option D lists common ADLs: dressing, eating, bathing, and mobility (often with toileting and transferring), aligning with federal and Virginia standards (e.g., HIPAA). Option A (age, sex, income, occupation) is underwriting data, not ADLs. Option B (health providers) is unrelated to functional ability. Option C (family members) might confuse beneficiaries, not ADLs. The study guide likely lists ADLs with examples—e.g., needing help bathing due to arthritis—emphasizing their role in LTC eligibility, making D the precise answer.

A reinsurance company agrees to accept all or a portion of a risk covered by another insurance company. This helps the original insurer spread its risk by transferring part of it to the reinsurer. Reinsurance allows insurance companies to remain financially stable and continue offering coverage to policyholders.

The primary purpose of disability income insurance is to replace a portion of the insured’s income when they are unable to work due to illness or injury. It is not designed to cover hospital or physician expenses (those fall under medical insurance). Instead, it ensures that the insured continues to receive income during periods of disability.

Virginia life insurance law follows the principle of rate equity within underwriting classes. Insurers are permitted to classify applicants based on factors such as age, health, lifestyle, and risk characteristics, but once individuals are placed in the same underwriting class with equal life expectancy, they must be charged the same premium rate. This ensures fairness and prevents unfair discrimination.

Age alone is not sufficient because two individuals of the same age may have very different health profiles and mortality risks. Occupation and income may influence underwriting but do not independently mandate identical rates. Virginia regulations emphasize actuarial justification and prohibit unfair discrimination while allowing reasonable risk classification. Therefore, option A correctly reflects the legal standard.

Group term insurance can typically be converted to a permanent individual life insurance policy without the need for a medical exam or evidence of insurability. This option is especially valuable when an employee leaves a company or the group plan ends, as it allows them to retain coverage without having to go through underwriting.

Virginia Code § 38.2-3100 et seq. defines immediate annuities as contracts starting payments within one year of purchase, typically funded with a lump sum. Option C fits: retirees with savings (e.g., $200,000 from a 401(k)) buy immediate annuities for instant income. Option A (tax deduction) applies to contributions to qualified plans, not immediate annuities, which use after-tax funds unless from a rollover. Option B (tax-sheltered annuity) refers to 403(b) plans, not immediate annuities. Option D (accumulate funds) suits deferred annuities, not immediate ones. The study guide likely contrasts immediate (C) with deferred annuities (D), using examples like a 65-year-old converting a lump sum to monthly payments, making C the typical buyer.

A beneficiary designation by class identifies beneficiaries as a group rather than by individual names. Common class designations include children, grandchildren, or surviving spouse. “All children of the insured” is a classic example because it includes all individuals who meet that description at the time of the insured’s death, even if the number of children changes over time. A specified parent, a named shareholder, or the insured’s estate are not class designations. The estate is a legal entity, not a class of individuals, and naming a specific person does not constitute a class designation.

Most medical expense policies exclude elective cosmetic procedures unless medically necessary. Exact extract: “Policies may exclude benefits for cosmetic surgery unless required to correct accidental injury or congenital defect.”

The doctrine of reasonable expectations holds that insurance contracts will be interpreted as a reasonable person would expect, even if fine print suggests otherwise. Exact extract: “Under the principle of reasonable expectations, coverage is interpreted in line with what a prudent policyholder would believe was provided.” This prevents insurers from denying claims based on obscure or technical language.

Detailed Answer in Step-by-Step Solution:

Individual disability income (C) benefits are taxable if the insured paid premiums with pre-tax dollars (e.g., employer-paid), but tax-free if paid with after-tax dollars. The question implies taxable benefits, typical when premiums are deductible.

Business overhead expense (A), disability buy-sell (B), and key person disability (D) benefits are generally tax-free to the business or recipient, as premiums are not deductible.

The Virginia study guide, per IRS rules, states that individual disability income benefits are taxable if premiums were paid pre-tax (e.g., by an employer), unlike business-related disability policies where benefits serve specific tax-exempt purposes. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Taxation of Insurance Benefits."

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."

Detailed Answer in Step-by-Step Solution:

A 30-year decreasing term policy (B) reduces its death benefit over time, matching the declining balance of a 30-year mortgage, making it ideal for this purpose.

30-payment whole life (A) is permanent with level benefits. 30-year level term (C) maintains a constant benefit. 30-year endowment (D) builds cash value and pays out at maturity, not tied to a mortgage.

The Virginia study guide describes decreasing term insurance as tailored for obligations like mortgages, with the benefit decreasing as the debt is paid off. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Types of Life Insurance."

For an insurance policy to be legally binding, four essential elements must exist: (1) offer and acceptance, (2) consideration, (3) competent parties, and (4) legal purpose. Consideration refers to the exchange of value: the applicant’s premium and representations in the application, and the insurer’s promise to pay benefits. Exact extract: “Consideration is the value each party gives to the other: the insured provides premiums and truthful statements, while the insurer provides the promise of benefits.” Without consideration, a contract cannot be enforced.

Detailed Answer in Step-by-Step Solution:

In a deferred annuity, the owner (who purchases the contract) can be the annuitant (who receives payments), the beneficiary (who receives proceeds), or a third party (C).

Option A (group contract) applies to group annuities, not individual ownership.

Option B (non-transferable) is false; ownership can often be assigned.

Option D (rights at payment phase) is incorrect; owners have rights during accumulation.

The Virginia study guide notes that deferred annuity ownership is flexible, allowing the owner to differ from the annuitant or beneficiary, with rights exercisable before payout. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Annuities."

When replacing existing health insurance in Virginia, it is required by law that a replacement disclosure must appear in the application for new coverage. The purpose of this requirement is to inform the policyholder about the implications of replacing existing health insurance with a new policy. This ensures transparency and helps prevent consumers from losing necessary coverage or facing gaps in their benefits.

Home health care insurance covers long-term physical therapy or nursing services provided at the insured's residence. This type of insurance helps pay for the costs associated with receiving medical care in the home, such as nursing services, physical therapy, or assistance with activities of daily living. Nursing home insurance, on the other hand, covers care provided in a facility, not at home.

The entire contract provision in an individual health insurance policy states that the agent has no authority to change the policy or waive any of its provisions. This provision ensures that the terms of the policy are fixed and cannot be altered or waived by the agent without proper authorization from the insurer.

The investment gain in a tax-sheltered annuity (TSA), which is also known as a 403(b) plan, is not included in the participant's gross income until it is withdrawn. This allows the participant to defer taxes on the investment growth until retirement, when distributions are taken. The other statements about TSAs are accurate: they are funded through voluntary salary reductions, and the annuitant can have an individual account or contract.

Detailed Answer in Step-by-Step Solution:

False advertising includes exaggerating dividends (A), misrepresenting benefits (B), or claiming a policy is a stock (C), all deceptive practices.

Comparing benefits with a competitor (D) is permissible if accurate and not misleading, thus not inherently false advertising.

The Virginia study guide, per state law, prohibits deceptive advertising but allows factual comparisons with competitors, provided they are truthful. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Unfair Trade Practices."

The Medical Information Bureau (MIB) is an organization whose members are insurance companies, primarily life and health insurers. Its purpose is to help insurers detect misrepresentation and fraud during underwriting by sharing coded medical and application history data.

Consumers, agents, and physicians are not members of MIB. However, consumers have rights to access and correct their MIB records under privacy laws.

Virginia exam content emphasizes the role of MIB in underwriting accuracy and risk management while also stressing consumer privacy protections and disclosure requirements.

Detailed Answer in Step-by-Step Solution:

The reinstatement provision in health insurance allows a policy that lapsed due to nonpayment of premiums to be restored (B), typically within a set period (e.g., 3 years), if the insured pays back premiums and meets conditions like proving insurability.

Option A (reinstates amount after loss) relates to property insurance, not health.

Option C (change application statements) is unrelated to reinstatement.

Option D (Bureau approval) is false; reinstatement is handled by the insurer, not a regulatory body.

The Virginia study guide explains that the reinstatement provision protects policyholders by allowing revival of a lapsed health policy upon payment of overdue premiums and, if required, evidence of insurability. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Health Insurance Policy Provisions."

Medicare Part A typically covers skilled nursing facility care, which includes care provided in a facility for patients who require skilled care following a hospitalization. However, Medicare Part A does not cover intermediate or custodial care, which involves assistance with activities of daily living or care provided in a non-skilled nursing facility.

If all named beneficiaries die before the insured, the proceeds of the life insurance policy will typically be paid to the insured's estate. If no beneficiary survives, the estate is the default recipient, and the assets are distributed according to the terms of the will or, if no will exists, according to state law (intestate succession).

Detailed Answer in Step-by-Step Solution:

A foreign insurer (A) is an insurance company operating in a state other than its state of domicile (where it is incorporated).

A domestic insurer (B) operates in its home state. An alien insurer (C) is domiciled outside the U.S. A captive insurer (D) insures its parent company, not based on location.

The Virginia study guide defines a foreign insurer as one licensed to do business in Virginia but incorporated in another state, per insurance regulatory terminology. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Insurance Company Types."

Detailed Answer in Step-by-Step Solution:

Life insurance policies must include a misstatement of age clause (B), grace period clause (C), and incontestability clause (D) as standard provisions under state law.

The waiver of premium clause (A) is optional, typically a rider, not a required provision.

The Virginia study guide lists mandatory life insurance provisions (e.g., grace period, incontestability, misstatement of age) but notes that waiver of premium is an optional benefit, not required. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Life Insurance Policy Provisions."

During the annuitization or distribution phase, the annuitant receives regular income payments—monthly, quarterly, or annually—depending on contract terms. These payments may last for life or a specified period.

Exact Extract (Virginia Annuities Study Guide): “Distribution phase—annuitant receives systematic periodic payments of principal and interest.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Insurance Examination Outline, Annuity Phases

A decreasing term policy provides a declining death benefit over the policy term, while premiums remain level. These policies are often used for mortgage protection, as the insurance amount reduces in line with the declining loan balance.

Exact Extract (Virginia Life Insurance Study Guide): “Decreasing term insurance—provides a level premium and a decreasing face amount throughout the term of coverage, often used for debt protection.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Examination Outline, Term Insurance

Detailed Answer in Step-by-Step Solution:

An immediate annuity (C) begins payments shortly after a single premium is paid, lacking an accumulation period (the phase where funds build up, typical in deferred annuities).

Option A (installments) applies to deferred annuities. Option B (lump sum) is not standard; annuities pay periodically. Option D (tax-deductible) is false; contributions are not deductible unless part of a qualified plan, not typical for immediate annuities.

The Virginia study guide defines an immediate annuity as one purchased with a single premium, with payments starting within one year, bypassing an accumulation phase. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Annuities."

Detailed Answer in Step-by-Step Solution:

The buyer’s guide for Medicare Supplement insurance must be provided to the consumer at the time of application (B) to ensure they understand the policy’s benefits and limitations before committing.

Option A (replacement only) is incorrect; the guide is required for all sales, though additional notices apply for replacements.

Option C (prior to payment) is too vague and not a specific requirement.

Option D (first-time buyer) is not a condition under Virginia or federal rules.

Per the Virginia study guide, agents must deliver the buyer’s guide at the time of application for Medicare Supplement policies, as mandated by federal and state regulations to promote informed decisions. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Medicare Supplement Insurance Regulations."

Virginia law clearly states that misrepresentation of a policy is an unlawful act and a violation of the Unfair Trade Practices Act. The violation applies regardless of whether the misrepresentation concerns the agent’s own product or a competitor’s.

Exact Extract (Virginia Unfair Trade Practices Law): “It is an unfair and prohibited practice for any person to make, issue, or circulate any misrepresentation of a policy or contract of insurance.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-502 (Misrepresentation prohibited)

Only distributions from qualified employer-sponsored retirement plans (like 401(k)s or pensions) are eligible for rollover into an IRA. Personal savings, lottery winnings, or insurance death benefits do not qualify. Exact extract: “Eligible rollover distributions from qualified plans may be directly transferred or rolled over into an IRA within 60 days to preserve tax-deferred status.” This ensures retirement funds remain tax-deferred until later withdrawal.

Medicare supplement policies in Virginia are guaranteed renewable. This means the insurer cannot cancel coverage as long as premiums are paid on time, regardless of the insured’s health status or claim history. Exact extract: “Every Medicare supplement policy shall be guaranteed renewable and may not be terminated except for nonpayment of premium or material misrepresentation.” This provides strong consumer protection for seniors relying on supplemental coverage.

In an HMO, members designate a primary care physician (PCP) who coordinates care and issues referrals to specialists. This gatekeeper function is a hallmark of HMO plans.

Exact Extract (Virginia HMO Study Guide): “HMO members select a primary care physician responsible for providing and coordinating all medical care.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, HMO Characteristics

A Simplified Employee Pension (SEP) plan allows employers to make contributions directly into IRAs owned by employees. The employer determines contributions, and employees are immediately vested.

HR-10 plans are Keogh plans for self-employed individuals. 403(b) plans are salary reduction plans for certain nonprofit and public employees. SIMPLE plans allow both employer and employee contributions but are structured differently. Virginia retirement plan exam content clearly identifies SEP plans as employer-funded IRAs, making option C correct.

A major medical policy is designed as a comprehensive health policy, covering a wide range of expenses, including hospital, surgical, physician, and prescription costs. It provides broader coverage than limited benefit plans such as dental or vision policies. Workers’ compensation is not considered a general health policy because it specifically covers occupational injuries.

Exact Extract (Virginia Health Insurance Study Guide): “Major medical insurance—provides comprehensive coverage for hospital, physician, surgical, and other medical expenses, subject to deductibles and coinsurance. Distinguished from limited health expense policies (dental, vision).”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Section 2.2 Comprehensive vs. Limited Policies

Juvenile life insurance often includes a payor benefit rider, which waives premiums if the policy owner (usually a parent) dies or becomes disabled before the child reaches adulthood. Exact extract: “The payor benefit rider is typically attached to juvenile policies, ensuring coverage continues without premium payment if the payor dies or is disabled.”

A spendthrift clause, permitted under Virginia Code § 38.2-3122, protects life insurance proceeds from creditors or the beneficiary’s mismanagement by restricting access to the funds. It’s effective when proceeds are paid in controlled installments (e.g., options A, B, C), as the insurer retains and distributes the money over time, preventing lump-sum dissipation. Option A (fixed amount installments) pays a set dollar amount periodically, option B (fixed period installments) pays over a set time, and option C (interest-only payments) holds the principal while paying interest—all compatible with spendthrift protection. Option D (one lump sum payment) delivers the full proceeds at once, bypassing the clause’s control mechanism, rendering it ineffective since the beneficiary gains unrestricted access. The study guide likely explains this clause as a safeguard for structured payouts, noting that lump-sum elections nullify its purpose, as seen in Virginia case law and NAIC guidelines, making D the correct choice.

An annuity is primarily designed to provide a stream of income, typically during retirement, and to protect against the risk of outliving one’s assets. One important purpose of an annuity is to liquidate an estate, not create one. Unlike life insurance, which creates an immediate estate by paying a death benefit, annuities are intended to systematically distribute accumulated funds over time. Payments received from annuities are generally taxable to the extent they represent interest earnings, meaning they are not tax-free. Annuities do not typically provide tax-free lump sums or tax-free interest income to beneficiaries. Instead, they focus on income distribution and longevity protection. Therefore, the correct purpose listed is the liquidation of an estate.

Universal life insurance is a flexible type of permanent life insurance. The policyowner may be able to increase the death benefit, but this is typically subject to proof of insurability (such as a medical exam). Universal life allows adjustments to premiums and death benefits within policy limits. The interest credited is guaranteed at a minimum rate set by the insurer, not tied to the CPI. Coverage does not automatically terminate at retirement.

Detailed Answer in Step-by-Step Solution:

A trustee-to-trustee transfer (A) avoids the 20% mandatory tax withholding required when funds are distributed to the participant and rolled over within 60 days.

Options B (lost funds) and C (time) are incidental, not primary benefits. Option D (penalty tax) is irrelevant; rollovers aren’t penalized if timely.

The Virginia study guide, per IRS rules, notes that direct trustee-to-trustee transfers bypass withholding, preserving the full amount for reinvestment. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Retirement Plans."

Fixed annuities are designed to credit interest at a rate that is no lower than the contract’s guaranteed rate. This guaranteed rate is specified at the time of the contract and ensures that the policyholder will receive at least this minimum interest rate, regardless of market conditions. The fixed annuity’s interest rate can be higher depending on the insurer's performance, but it cannot fall below the guaranteed rate.

Employees under group life plans receive certificates of insurance summarizing coverage, not full policies. Exact extract: “Each employee insured under a group life policy shall be given a certificate of insurance describing coverage.”

Virginia Code § 38.2-3501 requires individual health insurance policies to incorporate the application as part of the contract, as it contains critical personal data (e.g., name, age, medical history) used to determine insurability (option C). This document—completed by the applicant and agent—details health conditions, lifestyle factors (e.g., smoking), and other risk indicators the underwriter evaluates—e.g., a 30-year-old with asthma noted for rating. Option A (enrollment form) applies to group health plans, not individual policies, where employees join a pre-set plan. Option B (policy schedule) summarizes coverage (e.g., limits, premiums) after issuance, not initial data for underwriting. Option D (agent’s statement) may supplement the application with observations, but it’s not the primary source; the application itself holds the insured’s data. The study guide likely highlights the application’s role in a health insurance section, with examples—e.g., a question about prior hospitalizations triggering a premium adjustment—making C the key document, per Virginia’s legal requirement that it be attached to the policy (§ 38.2-3503) for transparency and enforceability.

Noncancelable policies guarantee both renewability and level premiums. The insurer cannot raise rates or cancel coverage as long as premiums are paid. Exact extract: “A noncancelable policy may not be canceled nor may premiums be increased by the insurer beyond what is stated in the contract.” This makes noncancelable coverage the most consumer-friendly disability policy type.

Medical expense claim forms are designed to gather information relevant to the medical loss itself—its occurrence, character, and extent. Employee salary is not part of the standard claim form for medical expense policies.

Exact Extract (Virginia Health Insurance Study Guide): “Claim forms must provide space for details of the occurrence, character, and extent of loss but do not request information unrelated to medical expenses, such as salary.”

References (Virginia Documents / Study Guide):

— Virginia Uniform Health Policy Provisions

Virginia Code § 38.2-5207 and 14VAC5-200-185 outline marketing standards for long-term care (LTC) insurance to protect consumers. Option A (twisting)—misrepresenting a policy to induce replacement—is prohibited as an unfair practice (Virginia Code § 38.2-502). Option C (high pressure tactics)—aggressive sales forcing quick decisions—violates ethical standards and is banned (14VAC5-200-40). Option B (replacing existing coverage) is incorrect as stated; replacement itself isn’t prohibited but requires disclosure via a replacement notice (14VAC5-200-75), making it regulated, not banned outright—however, the question implies unauthorized or deceptive replacement, which is prohibited. Option D (cold lead advertising)—soliciting via broad, unsolicited leads (e.g., mailers)—is permitted if it complies with disclosure rules and isn’t deceptive (14VAC5-200-50). The study guide likely lists twisting and high pressure as unethical, with examples like misstating benefits, while allowing cold lead ads with proper labeling (e.g., “advertisement”), making D the exception.

The accidental death benefit is typically provided as an optional policy rider. This rider offers additional coverage, paying an extra benefit if the insured dies due to an accident. It is not an exclusion, annuity, or nonforfeiture option. The rider adds extra protection for accidents but is not part of the base policy unless specifically added.

The automatic premium loan provision is an optional feature found in many cash value life insurance policies. Its purpose is to prevent a policy from lapsing when the policyowner fails to pay a premium by the end of the grace period. If the policy has sufficient cash value, the insurer will automatically issue a policy loan in the amount needed to cover the overdue premium. This loan is secured by the policy’s cash value and accrues interest according to the policy’s loan terms. Over time, unpaid loan balances and interest may reduce the policy’s cash value and death benefit. This provision differs from a waiver of premium, which waives premiums due to disability, and from options that purchase additional insurance. The automatic premium loan simply uses the policy’s existing value to keep coverage in force.

Detailed Answer in Step-by-Step Solution:

Needs analysis (A) assesses an individual’s and dependents’ financial requirements (e.g., income replacement, debts) to determine appropriate life insurance coverage.

It doesn’t eliminate interest/inflation estimates (B), require underwriter collaboration (C), or ignore Social Security (D), which is often factored in.

The Virginia study guide describes needs analysis as a planning tool to calculate insurance needs based on personal and family financial obligations, including potential Social Security benefits. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Life Insurance Planning."

A Virginia agent license remains valid until revoked, suspended, or terminated. Appointments with insurers are separate, but the agent holds only one license. Exact extract: “Licenses are perpetual, subject to biennial renewal requirements and compliance; termination occurs only through suspension, revocation, or voluntary surrender.”

Detailed Answer in Step-by-Step Solution:

Life insurance policies typically include a two-year suicide clause; if the insured dies by suicide within this period (e.g., six months), the insurer pays only a refund of premiums, not the full death benefit (C).

Options A (accidental injury), B (lung cancer), and D (heart attack) are covered causes, barring misrepresentation or exclusions, within the first two years.

The Virginia study guide notes that the suicide provision limits payment to premiums paid if suicide occurs within two years of issuance, protecting insurers from early intentional loss. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Life Insurance Policy Provisions."

Most medical expense policies contain a war exclusion, denying benefits for losses resulting from war or military action. Auto accidents, sporting accidents, and tropical diseases are generally covered if not otherwise excluded.

Exact Extract (Virginia Health Insurance Study Guide): “Common exclusions include war, military service, self-inflicted injury, and experimental procedures.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Common Exclusions

Adjustable life allows policyholders to adjust face amount, premium, or coverage period. Increases in coverage may require proof of insurability. Exact extract: “Adjustable life permits increases in coverage, subject to evidence of insurability.”

A profit-sharing plan is an employer-sponsored qualified retirement plan in which the employer makes discretionary contributions based on company profits. Under Virginia exam standards and federal retirement plan rules covered in licensing materials, only the employer contributes to a traditional profit-sharing plan. Employees do not make direct salary deferral contributions as they would in a 401(k) plan. This makes option A correct.

The employer is not required to make a contribution every year, nor is the employer required to contribute a fixed amount. Contributions can vary year to year depending on business performance, which makes option D incorrect. Employers are allowed to offer other retirement plans alongside a profit-sharing plan, so option B is incorrect. Participation rules are typically defined by plan eligibility requirements rather than employee opt-out provisions, making option C inaccurate. Profit-sharing plans are attractive to employers because of flexibility in contributions and favorable tax treatment, while employees benefit from employer-funded retirement savings.

Detailed Answer in Step-by-Step Solution:

Group health underwriting considers average age (A), claims history (B), and occupation type (D) to assess risk, but marital status (C) is typically irrelevant for group policies, unlike individual underwriting.

The Virginia study guide notes that group underwriting focuses on collective risk factors like age, claims experience, and occupation, not personal details like marital status. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Group Insurance Underwriting."

Before an applicant is tested for HIV, they must sign a consent form that acknowledges their understanding of the test and the potential implications of the results. This is required by law to ensure that the test is done voluntarily and that the applicant is aware of their rights. The other options, such as paying for the test or providing evidence of insurability, are not required before HIV testing.

Rebating occurs when an agent gives part of their commission, money, or anything of value to induce a customer to purchase insurance. This practice is prohibited under Virginia’s Unfair Trade Practices Act.

Exact Extract (Virginia Unfair Trade Practices Law): “Rebating includes paying, allowing, or giving any rebate of premium, commission, or other valuable consideration as an inducement to the purchase of insurance.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-509 (Rebates and inducements prohibited)

Virginia Code § 38.2-100 et seq. defines insurance terms. A loss (option C) is the actual injury or damage sustained (e.g., a broken leg or burned house), the event insurance covers. Option A (claim) is the request for payment post-loss, not the loss itself. Option B (peril) is the cause (e.g., fire, collision), not the result. Option D (accident) is a type of peril or event, not the damage. The study guide likely clarifies this chain—e.g., a car crash (peril/accident) causes $5,000 damage (loss), prompting a claim—using examples to distinguish loss as the outcome, making C the precise term.

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)

Variable insurance products, such as variable life insurance and variable annuities, are regulated at both the state and federal levels because they involve securities components. In Virginia, oversight is shared by the Bureau of Insurance and state securities authorities, while the Securities and Exchange Commission provides federal regulation.

The State Attorney General’s office does not directly regulate or establish rules for variable insurance contracts. Its role is limited to enforcement of general consumer protection laws rather than insurance product regulation. Therefore, option D is the correct exception.

Virginia licensing education stresses the dual regulation of variable products and the requirement that agents selling them hold both insurance and securities registrations.

The return of premium benefit refunds a percentage of premiums paid if the policy is canceled or if the insured dies before benefits are used. Exact extract: “A return of premium rider provides a refund of premiums paid, less claims paid, upon cancellation or death of the insured.” This option is often added to long-term care policies to protect policyholder investment.

A single premium whole life insurance policy is a form of permanent life insurance in which the policyowner pays the entire premium in one lump sum at policy issuance. In exchange for this single payment, the policy provides lifetime protection and is immediately paid-up, meaning no additional premiums are required. The policy accumulates cash value and provides a guaranteed death benefit for the insured’s entire life. It does not provide coverage for a limited term, nor does it feature a decreasing face amount. While annuities provide income benefits, a single premium whole life policy remains primarily a life insurance contract. Therefore, the defining feature of this policy is that it provides protection for life as a paid-up policy.

A twenty-payment whole life insurance policy is a limited-pay whole life policy that requires premiums to be paid for only 20 years. If the insured survives the 20-year payment period, the policy becomes fully paid-up and remains in force for the insured’s lifetime without any further premium payments. If the insured dies before the 20-year payment period ends, premium payments stop at death, and the death benefit is paid to the beneficiary. Therefore, premium payments cease at the earlier of the insured’s death or the end of the 20-year payment period. The policy does not require premium payments until maturity or until cash value exceeds premiums. The correct definition focuses on the limited premium payment structure of the policy.

A contingent beneficiary is the person designated to receive life insurance proceeds only if the primary beneficiary is unable to do so, usually because the primary beneficiary has died before the insured. This designation ensures that benefits are still directed to another party without passing through the estate.

Exact Extract (Virginia Life & Annuities Study Guide): “Contingent beneficiary—person designated to receive policy proceeds if the primary beneficiary dies before the insured.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Insurance Examination Outline, Section 5.2 Beneficiaries

— Virginia Consumer’s Guide to Life Insurance, Beneficiary Designation Section

Detailed Answer in Step-by-Step Solution:

In Virginia, unintentional violations by an agent can result in fines, with a maximum aggregate penalty of $10,000 (C) for similar violations, as set by state insurance regulations.

Options A, B, and D deviate from this standard cap for unintentional acts.

The Virginia study guide, aligned with Virginia Code, specifies a $10,000 maximum aggregate penalty for unintentional violations, with higher penalties possible for willful acts. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Penalties and Enforcement."

Insurable interest exists when an individual stands to suffer a financial loss or hardship if another person dies or is injured. Insurable interest is typically present when one is closely related to the person (e.g., spouse, parent, or child) or has a financial relationship with them (e.g., co-signing a mortgage). While maintaining a lasting friendship may suggest emotional interest, it does not typically meet the financial criteria for insurable interest unless there is a direct financial loss involved.

When the owner of a life insurance policy reserves the right to change the beneficiary, it is referred to as a revocable designation. A revocable beneficiary designation allows the policyholder to change the beneficiary at any time without the consent of the current beneficiary. This flexibility is in contrast to an irrevocable designation, where the beneficiary cannot be changed without their consent.

A self-employed individual can use an annuity to fund an IRA, SEP, or Keogh plan, but not a tax-sheltered annuity (TSA). A TSA is a type of retirement plan typically offered to employees of public schools, colleges, and certain nonprofit organizations (i.e., 403(b) plans), not for self-employed individuals.

Virginia Code § 38.2-3432.1, aligned with the Affordable Care Act (ACA), mandates guaranteed renewability for small employer health plans (1-50 employees in Virginia). Insurers can deny renewal for nonpayment of premiums (option A), insufficient participants (option B, e.g., falling below one eligible employee), or fraud (option D), per Virginia Code § 38.2-3407. However, option C—overuse of services (high claims)—a—is not a permissible reason for denial, as renewability cannot be based on claims experience or health status. The study guide emphasizes this protection under Virginia’s small group market rules, making C the exception.

Insurers may consider objective risk-related factors such as age, gender, health, and occupation when underwriting disability insurance. Religion, however, is not an allowable underwriting factor. Exact extract: “Underwriting criteria may not unfairly discriminate based on race, color, creed, or religion.” This prohibition ensures fair treatment of all applicants while still allowing actuarial factors like age and occupation to determine risk.

Medicare eligibility begins at age 65 for most individuals. Earlier eligibility is available only for certain disabilities or end-stage renal disease, but the standard eligibility age is 65.

Exact Extract (Virginia Health Insurance Study Guide): “Medicare is a federal program providing health insurance to individuals age 65 or older and certain disabled individuals under age 65.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Medicare Overview

Detailed Answer in Step-by-Step Solution:

Employer-paid premiums for qualified long-term care insurance are treated as a business expense and are tax-deductible for the employer (B), provided the plan meets IRS requirements.

These premiums are not included in the employee’s gross income (A), as they are tax-exempt benefits under IRC Section 106.

Employees cannot deduct these premiums (C) since they are employer-paid.

Reimbursement (D) does not apply.

The Virginia study guide, aligned with IRS rules, notes that employer-paid premiums for qualified long-term care insurance are deductible as a business expense and excluded from employees’ taxable income. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Taxation of Insurance Benefits."

The grace period provision allows a policyholder a specified time (usually 31 days) after the due date to pay overdue premiums while coverage continues. If the insured dies during this period, the premium due is deducted from the policy proceeds.

Exact Extract (Virginia Policy Provisions Requirement): “Life insurance policies shall provide a grace period of not less than 31 days for the payment of premiums, during which the policy shall continue in force.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-3107 (Grace period in life insurance policies)

Virginia Code § 38.2-502 defines misrepresentation as an unfair practice, where an agent misstates or omits key policy details (e.g., calling a term policy “permanent”) to mislead the insured. Option C fits this legal breach. Option A (defamation) involves false reputational harm, not policy sales. Option B (unfair discrimination, § 38.2-211) involves unequal treatment, not misrepresentation. Option D (coercion) implies force, not deception. The study guide likely warns of misrepresentation penalties—e.g., an agent fined for hiding exclusions—making C the applicable violation.

The "benefit period" in a long-term care insurance policy refers to the length of time over which the insurer will pay benefits for covered services. This period can vary depending on the terms of the policy, and it typically starts when the policyholder begins receiving care and continues for a specified duration or until the benefit limit is exhausted. The other options, such as the hospitalization period or recovery period, do not relate to the time claims are paid under long-term care policies.

The deductible is the initial portion of covered expenses the insured must pay before the insurer pays benefits. Coinsurance applies only after the deductible has been met. Exact extract: “The deductible is the amount of covered expenses an insured must pay out of pocket before the insurer is obligated to pay under the major medical policy.” This provision ensures cost-sharing and discourages excessive claims.

Virginia Code § 38.2-4306 requires HMOs to offer preventive care, coordinated by primary care physicians (PCPs), focusing on health maintenance. Option A (well-baby checkups), option B (immunizations for children), and option D (physical examinations) are standard preventive services—e.g., growth monitoring, vaccines, and annual exams—covered at no cost under ACA-aligned plans (Virginia Code § 38.2-3440). Option C (experimental surgery) is not preventive; it’s a treatment, often excluded or requiring special approval due to its unproven nature, not a PCP’s routine role. The study guide likely lists HMO preventive benefits with examples (e.g., flu shots), contrasting them with non-preventive interventions like surgery, making C the exception.

Under IRC § 1035, certain insurance exchanges avoid immediate taxation: option B (life to annuity), option C (annuity to annuity), and option D (life to life) qualify if like-kind and properly executed, deferring gains. Option A (annuity to life) isn’t permitted tax-free; annuities (income-focused) and life insurance (death-benefit-focused) aren’t “like-kind,” triggering taxable gain recognition. Virginia Code § 38.2-3100 et seq. aligns with federal tax rules. The study guide likely explains § 1035 exchanges with examples—e.g., swapping a $50,000 life policy for an annuity tax-free (B)—noting A’s taxable status due to product mismatch, making it the exception.

The federal estate tax is the tax cost typically associated with death. It is imposed on the estate of a deceased person, and it applies to the transfer of assets above a certain threshold. Life insurance proceeds are generally not taxable to beneficiaries; however, if the policy is part of the estate, the proceeds may be subject to estate taxes. Excise taxes and state sales taxes are not typically related to death.

Virginia Code § 38.2-1826(C) requires licensees, including insurance agents, to report any felony conviction to the State Corporation Commission’s Bureau of Insurance within 30 calendar days of the final disposition (option C). “Final disposition” means the court’s conclusive ruling—e.g., sentencing after a guilty plea. This rule ensures the Bureau can assess the agent’s fitness to retain their license, protecting the public from untrustworthy practitioners. Option A (10 days) is too short and not specified in Virginia law for this purpose. Option B (20 days) lacks statutory support and falls between standard reporting periods. Option D (60 days) exceeds the mandated timeline, delaying oversight. The study guide likely highlights this 30-day deadline in a licensing compliance section, with examples—e.g., an agent convicted of fraud on June 1 must report by July 1—aligning with Virginia’s adoption of NAIC standards for licensee integrity (Virginia Code § 38.2-1800 et seq.), making C the precise requirement.

Virginia Code § 38.2-3330 mandates a conversion privilege in group term life policies, allowing insureds to convert to an individual policy without evidence of insurability within 31 days after losing group eligibility (e.g., employment termination). Option C matches this precisely. Option A is false; conversion is a legal requirement. Option B is incorrect; conversion applies post-eligibility, not during active membership while still insurable. Option D (five years) is arbitrary and unsupported by law. The study guide likely details this 31-day window with examples—e.g., an employee converting to whole life after layoffs—emphasizing its protective role, making C the correct timing.

Health Maintenance Organizations (HMOs) in Virginia, per Virginia Code § 38.2-4306, emphasize preventive care to reduce long-term costs. Preventive services, as defined in the study guide and aligned with ACA standards, include childhood immunizations (option C), such as vaccines for measles or polio, offered at no cost to members. Option A (rehabilitation therapy) is restorative, not preventive, addressing existing conditions. Option B (treatment for alcoholism) is a treatment service, not prevention, though HMOs cover it separately. Option D (home health services) supports recovery or chronic care, not primary prevention. The study guide likely lists immunizations as a core preventive benefit, contrasting them with treatment-oriented services, confirming C as the correct answer.

Policy loan provisions are typically found in whole life and universal life policies, where the policyholder can borrow against the cash value of the policy. A twenty payment life policy is a type of whole life insurance where premiums are paid for 20 years, and it may include loan provisions. However, a five-year life policy is typically a limited-pay policy, and policy loans are generally not available under this type because there is insufficient cash value accumulation in such a short time frame.

A joint and survivor annuity is designed to provide income for two people, typically spouses, and payments continue until both annuitants have died. This feature makes it especially suitable for retirement planning when ongoing income is needed for a surviving spouse.

When the first annuitant dies, payments continue to the survivor, often at the same or a reduced level depending on the contract terms. Only after the second annuitant’s death do payments cease. Therefore, option A is correct.

Options B, C, and D incorrectly describe other annuity structures. Beneficiaries are generally relevant only if a refund or period-certain option applies. Joint and survivor annuities are a core topic in Virginia annuity education because of their longevity risk protection.

Adjustable life insurance is a flexible premium policy designed to let a policyowner adapt coverage as needs change. The Virginia life insurance consumer guide describes adjustable life as combining an insurance protection element and a cash value element, with components separated and reported to the policyowner. That cash value element is a key feature: as cash value accumulates in permanent life policies, policy loan provisions are commonly available as a standard policy option, and Virginia’s life policy provision framework includes policy loans among the standard policy features tested for state licensing. Therefore, the statement that the policyowner is not permitted to take policy loans “even if the policy has a cash value” is the incorrect (EXCEPT) statement.

The other statements align with the purpose of adjustable life: it is designed to meet changing insurance needs, and it permits changes in the plan of coverage (for example, adjusting face amount or premium structure within policy limits). When the policyowner requests an increase in the amount of insurance, insurers commonly require evidence of insurability for the increased portion to manage adverse selection and maintain underwriting integrity—consistent with standard underwriting and application procedures addressed in Virginia exam content.

Term life insurance provides coverage for a specified period of time and is designed to offer pure death benefit protection without a savings or investment component. One of its defining characteristics is that it does not accumulate cash value. Term policies offer temporary protection and may have level or decreasing face amounts, depending on the policy design. They are also known for having a low initial cost compared to permanent life insurance, making them attractive for short-term needs such as income replacement or debt coverage. Because term life insurance does not build cash value, there is no opportunity for increasing cash values over time. Therefore, increasing cash values is not a characteristic of term life insurance and is the correct exception.

Detailed Answer in Step-by-Step Solution:

Term life insurance (B) provides coverage for a specified period (temporary protection) and does not accumulate cash value.

Option A (cash value) applies to permanent life insurance, not term.

Option C (five years or less) is false; term policies can span 10, 20, or 30 years.

Option D (same premium) is incorrect; renewable term policies increase premiums at renewal based on age.

The Virginia study guide describes term life insurance as temporary coverage with no cash value, contrasting it with permanent policies. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Types of Life Insurance."

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."

Adjustable life insurance is specifically designed to provide flexibility in both face amount and premium structure, allowing policyowners to adapt coverage as financial needs and objectives change. This flexibility may include adjustments to death benefit levels and premium payments within policy limits.

Term life and modified premium whole life lack this degree of adaptability. Current assumption whole life allows interest rate sensitivity but does not permit the same broad adjustments to coverage structure.

Virginia licensing materials identify adjustable life as a hybrid policy combining features of term and whole life insurance, making option B the correct answer.

Detailed Answer in Step-by-Step Solution:

The notice of claim provision typically deems notice to an agent as notice to the company (B), as agents act on the insurer’s behalf.

Options A (incomplete), C (not valid), and D (contrary) contradict standard practice unless the policy specifies otherwise.

The Virginia study guide, per NAIC model laws, confirms that notice to an agent satisfies the notice of claim requirement, equating it to notice to the insurer. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Health Insurance Claims Provisions."

A single premium whole life policy requires only one lump-sum payment. That single payment fully funds the policy for the insured’s lifetime. The insurer places the premium into the policy’s cash value account, where it grows to cover the cost of insurance throughout life. Exact extract: “Single premium whole life provides lifetime protection with one lump-sum premium payment at issue.” This design is often used for estate planning or wealth transfer because the insured never has to make another payment, and the cash value builds immediately.

Virginia Code § 38.2-5207.1 and 14VAC5-200-75 regulate replacement of long-term care (LTC) insurance, requiring a replacement notice when an applicant with existing coverage applies for a new policy that may replace it. This signed notice, provided to the applicant and retained by the insurer, ensures transparency about potential duplication or lapse of the original policy, protecting consumers from unintended coverage gaps or costs. Option C (replacement notice) fits this requirement. Option A (cancellation notice) relates to terminating a policy, not applying for a new one. Option B (substitution notice) isn’t a standard term; “replacement” is the legal phrase. Option D (duplication notice) might imply overlap but lacks regulatory specificity. The study guide likely includes a sample replacement form, stressing its role in LTC sales compliance, confirming C as the correct choice.

In insurance contract law, an offer must be a clear and definite proposal that, if accepted, results in a binding contract. In life and health insurance, the applicant typically makes the offer by submitting an application. When a premium is paid with the application, it may strengthen the intent to offer, although coverage does not begin unless the insurer accepts the risk or issues a conditional receipt. An offer can also be terminated through a counteroffer. For example, if an insurer issues a policy with different terms than those requested, the insurer has made a counteroffer, which must be accepted by the applicant before a contract is formed. Advertising, however, is generally considered an invitation to apply rather than an offer or a temporary contract of insurance. A binder represents temporary insurance coverage and requires intent by the insurer or authorized agent to provide immediate coverage. Advertising lacks this intent and does not establish coverage. Therefore, advertising may not be considered a binder, making that statement incorrect under insurance contract principles.

If a health insurance policy provision conflicts with the statutes of Virginia, the provision must be amended to conform to the minimum statutory requirements. This ensures that the policy complies with state law and that the insured receives the protection mandated by Virginia's insurance regulations. Provisions that do not meet these requirements are typically adjusted to align with legal standards.

Detailed Answer in Step-by-Step Solution:

A cost of living (COLA) rider (B) adjusts disability income benefits to account for inflation, maintaining purchasing power.

Inflation guard (A) is more common in property insurance. Price escalation (C) and wage protection (D) are not standard disability riders.

The Virginia study guide describes the COLA rider as an optional feature in disability income policies, increasing benefits based on inflation indices like the CPI. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Disability Insurance Riders."

Penalty-free withdrawals from a traditional IRA before age 59½ are permitted for disability, qualified first-time home purchase (up to $10,000), or certain unreimbursed medical expenses. Bankruptcy is not a qualifying exception.

Exact Extract (Virginia Retirement Study Guide): “Exceptions to early withdrawal penalty include disability, first-time home purchase, qualified education, or medical expenses. Bankruptcy is not included.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Examination Outline, Retirement Plans – Taxation Rules

An agent's license will not be revoked unless the agent has been afforded the right to a hearing on the charges. This ensures due process and that the agent is given an opportunity to present their case before any disciplinary action is taken. Revoking a license is a serious matter, and the law requires a fair hearing process to protect the agent's rights before taking such steps.

Renewable term insurance renews at the insured’s attained age, not the original issue age. Thus, at renewal after five years, the premium is based on age 40 rates.

Exact Extract (Virginia Life Insurance Study Guide): “Renewable term—premiums increase at renewal based on the insured’s attained age.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Term Insurance Features

The Limited Payment Whole Life policy provides life insurance protection that extends to age 100, but the policyholder is only required to pay premiums for a shorter period, such as 10, 20, or 30 years, or even until a certain age (e.g., age 65). After that period, the insurance coverage continues, but no further premiums are required, and the insured continues to be covered for the rest of their life. This type of policy is designed to provide the benefit of lifetime coverage while reducing the duration of premium payments.

In contrast, Endowment policies typically provide coverage for a set period and pay out either at the end of that period or upon the death of the insured. Continuous Premium Whole Life requires premiums to be paid continuously, which does not reduce the payment period. Yearly Renewable Term is term insurance, not permanent life insurance, and coverage expires at the end of each term period.

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."

Dental indemnity plans reimburse insureds for covered services up to specified amounts. Preventive services such as cleanings, exams, and fluoride treatments are typically covered every six months for both adults and children. These plans generally do not limit members to a network of providers, unlike managed care dental plans, but they do require deductibles and cost-sharing for major restorative work.

Exact Extract (Virginia Dental Plan Filing Requirements): “Preventive dental services—cleanings, exams, fluoride treatments—covered once every six months.”

References (Virginia Documents / Study Guide):

— Virginia SCC Product Checklist: Individual Stand-Alone Dental Plan Organizations

— Virginia Health Insurance Study Guide, Indemnity vs. Managed Care Plans

Universal life (Virginia Code § 38.2-3113.1) features: Option A is true; a mortality charge funds the death benefit, deducted monthly from cash value. Option B is true; expense charges are disclosed (e.g., admin fees). Option D is true; loans reduce the cash value earning interest. Option C is false; death benefits are generally tax-free under IRC § 101(a)(1), not ordinary income, unless an exception (e.g., transfer for value) applies, which isn’t standard. The study guide likely contrasts universal life mechanics—e.g., $50 monthly mortality charge—with tax-free benefits, making C the exception.

A second surgical opinion provision in health insurance policies typically requires the insured to seek a second opinion before undergoing certain elective surgeries. This provision is meant to ensure that the surgery is medically necessary and that there are no alternative treatments. The cost of the second opinion may or may not be covered depending on the policy, but the key requirement is that a second opinion must be obtained for elective procedures.

Indemnity dental insurance plans generally cover treatments directly related to dental health, such as fillings, root canal treatments, extractions, and certain preventive treatments like fluoride treatments for children under 16. However, dietary counseling and instructions are typically not covered under indemnity dental plans as they fall outside the scope of dental treatment.

Detailed Answer in Step-by-Step Solution:

The proof of loss is a formal statement of a claim, and standard health insurance policies require it within 90 days of the loss (C), unless the policy specifies otherwise or state law extends it.

Options A (30 days) and B (60 days) are too short for most policies, while D (120 days) exceeds the typical requirement.

The Virginia study guide aligns with the NAIC model laws, stating that proof of loss must typically be filed within 90 days of the loss, though insurers may accept later submissions if not prejudicial. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Health Insurance Claims Provisions."

Term life insurance is designed to provide pure death benefit protection for a specific period of time at a relatively low cost. It does not accumulate cash value and therefore is not appropriate for savings or investment objectives. This makes option D the correct answer.

Term life insurance is commonly used to cover temporary financial needs such as income replacement, mortgage protection, and family readjustment expenses. Because premiums are lower than permanent life insurance, it is well-suited for individuals seeking maximum death benefit for minimal premium.

Virginia exam materials emphasize that term insurance ends at the end of the term unless renewed or converted and does not build savings. Accumulating funds for education requires a policy with a cash value component, such as whole life or universal life, not term insurance.

The incontestability clause in health insurance policies generally provides that after two years from the date of issue, the insurer cannot deny a claim or void coverage due to material misrepresentation in the application, except in cases of fraud. This ensures that policyholders have long-term protection from policy rescission due to innocent mistakes.

Detailed Answer in Step-by-Step Solution:

Disability income policies exclude benefits for intentional self-inflicted injuries (B) to prevent abuse or fraud.

Permanent injuries (A), sporting accidents (C), and falls (D) are typically covered unless specifically excluded by the policy.

The Virginia study guide states that disability income insurance excludes self-inflicted injuries as a standard provision to ensure coverage applies to unforeseen events. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Disability Income Insurance."

A mutual insurance company is owned by its policyholders rather than shareholders. When the company’s operating results are favorable, dividends may be declared and paid to policyholders as a return of excess premium.

These dividends are not guaranteed and are not considered taxable income in most cases, as they are treated as a refund of premium. Shareholders receive dividends only in stock insurance companies. Beneficiaries receive death benefits, and producers receive commissions, not dividends.

Virginia exam content highlights ownership structure as the key distinction between mutual and stock insurers, making option A correct.

The main advantage of tax-qualified retirement plans is that earnings accumulate tax-deferred until distributed to participants. This allows employees’ investments to grow more quickly compared to taxable accounts. Exact extract: “Employees benefit from tax-deferred accumulation of pension and profit-sharing contributions until retirement distribution.” Employers may deduct contributions, but the true long-term tax benefit accrues to employees.

Business Overhead Expense (BOE) insurance is designed to cover the fixed overhead expenses of a business when the business owner becomes disabled. This includes things like payroll, rent, utilities, and other operational costs. It ensures that the business can continue to operate during the owner's period of disability. Workers compensation insurance, on the other hand, provides coverage for employees' work-related injuries, while BOE is specifically for business owners.

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.”

The "insurance with other insurers" provision, addressed in Virginia Code § 38.2-3514, is a coordination of benefits (COB) mechanism in individual health insurance policies designed to prevent over-insurance and duplicate payments when an insured has multiple policies covering the same loss. This provision allows the insurer to prorate benefits—paying a share based on the total coverage—when certain conditions are met. Option C states that the insurer wasn’t notified prior to the claim of other coverage, which triggers proration. This aligns with standard COB rules: if the insurer isn’t informed of other policies, it may assume primary liability initially but adjust to a pro-rata share upon discovery, ensuring equitable payment across insurers. Option A (within 31 days of renewal) is irrelevant; renewal proximity doesn’t affect benefit coordination. Option B (grace period) relates to premium payment timing, not other insurance, and doesn’t trigger proration. Option D ($2,000 claim threshold) is arbitrary and not a standard condition in Virginia law or study materials for this provision. The study guide likely emphasizes notification as key to COB, as Virginia follows NAIC model regulations requiring disclosure of other coverage (e.g., via application or claim forms). Without prior notice, the insurer applies proration retroactively, making C the correct choice.

Premiums for Medicare supplement plans are typically determined using the attained age rating, community rating, or issue age rating methods. Attained age rating adjusts premiums based on the insured's current age, community rating charges all policyholders the same premium, regardless of age, and issue age rating bases premiums on the age at which the policyholder first purchases the policy. Experience rating, however, is not used for Medicare supplement plans, as it is more commonly applied to group insurance policies based on the claims history of a group.

Uniform policy provisions are mandated by law and cannot be deleted. Underwriting actions include issuing, rejecting, or adding riders. Exact extract: “Insurers may not delete or alter mandatory uniform provisions.”

Virginia law requires agents to report any administrative action taken against them in another jurisdiction within 30 calendar days. Exact extract: “A licensee shall report to the Commission any administrative action taken against the licensee in another jurisdiction within 30 days.” This requirement ensures transparency and regulatory oversight.

Virginia small-group medical insurance disclosure rules require insurers to inform policyholders of renewability provisions, available benefits, and rights related to premium rate increases. However, insurers are not required to disclose their business operating expenses. Exact extract: “At the request of the policyholder, the insurer shall disclose the insurer’s right to increase premium rates, the renewability provisions, and all available benefits.”

Virginia contract law, reflected in Virginia Code § 38.2-102, requires capacity to form an insurance contract. Option A (intoxicated individuals) lacks capacity if impaired, voiding consent. Option B (mentally ill individuals) may lack comprehension, restricting ability unless adjudicated competent. Option C (minors, typically under 18 per § 38.2-3405) can’t contract without guardian consent, except for necessities. Option D (retired individuals) has no legal restriction; retirement is a status, not a capacity limiter—e.g., a 65-year-old retiree can buy insurance freely. The study guide likely covers capacity in a legal basics section, with examples like a drunk person’s void policy versus a retiree’s valid one, making D the exception.

Virginia’s insurance data security regulations require licensees to maintain records of cybersecurity events for a minimum of five years. These records must be available for examination by the Bureau of Insurance and are essential for demonstrating compliance, remediation efforts, and incident response procedures.

Shorter retention periods do not meet regulatory standards, and longer periods are not mandated. Therefore, option C is correct.

This requirement reinforces accountability and supports regulatory oversight of data protection practices within the insurance industry.

Detailed Answer in Step-by-Step Solution:

Rebating (B) is the illegal practice of offering a portion of an agent’s commission or other financial incentives to induce a sale, prohibited in most states, including Virginia, to ensure fair competition.

Twisting (A) involves misrepresenting policies to replace existing coverage. Replacement (C) is switching policies, not necessarily with a rebate. Retention (D) is not a recognized term here.

The Virginia study guide defines rebating as an unfair trade practice under Virginia insurance law, aimed at preventing agents from undercutting prices with commission kickbacks. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Unfair Trade Practices."

Life insurance on a child's life is typically purchased for reasons such as providing benefits for the child’s parents in the event of the child’s death (e.g., funeral expenses) or giving the child a head start on a personal insurance program (such as accumulating cash value). However, it is not typically purchased to fund the child’s education, as this is more commonly the purpose of other savings or investment vehicles, such as education savings plans.

The "accelerated benefit" provision allows a policyholder to access a portion of the life insurance death benefit while still alive, typically due to a terminal illness or other qualifying condition. This means that the amount advanced as an accelerated benefit will be subtracted from the total death benefit that will be paid to the beneficiaries after the insured's death.

Medicare provides home health care benefits for individuals who are homebound and need skilled nursing or therapy services. Custodial care, hospice care, and long-term nursing home stays are covered under different provisions.

Exact Extract (Virginia Medicare Study Guide): “Home health care—Medicare pays for part-time or intermittent skilled care for patients confined to the home.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Medicare Part A and B Benefits