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

Virginia Code § 38.2-3115 governs life insurance settlement options. The interest-only option keeps proceeds with the insurer (option A, true), paying interest periodically to the beneficiary (option C, true, e.g., quarterly), and allows the principal to be withdrawn or redirected later (option D, true, e.g., switching to fixed period). Option B is false; the policyowner can select this option during the policy term, not just the beneficiary post-death—though beneficiaries may elect it if not pre-specified. The study guide likely explains this flexibility with examples—e.g., a $100,000 policy earning 3% interest paid monthly—noting both parties’ roles, making B the exception since it restricts choice to the beneficiary alone.

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:

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."

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."

Cancellation, per Virginia Code § 38.2-3106 (life) and § 38.2-3508 (health), is the voluntary termination of a policy by the insured or insurer. Options A, B, and C aren’t standard terms for this action in Virginia insurance law. The study guide defines cancellation as a deliberate act, distinct from lapse (nonpayment) or nonrenewal, making D the correct term.

Individual disability income insurance policies are designed to provide coverage for both accident-related disabilities and sickness-related disabilities, unless otherwise excluded.

Exact Extract (Virginia Disability Insurance Study Guide): “Disability income insurance provides benefits for loss of income due to both accident and sickness.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Disability Income Insurance

Detailed Answer in Step-by-Step Solution:

For unintentional violations in Virginia, the maximum penalty is $1,000 per occurrence, with an aggregate cap of $10,000 (C), per state insurance regulations.

Options A, B, and D deviate from this standard penalty structure.

The Virginia study guide, per Virginia Code, sets unintentional violation penalties at up to $1,000 per act, with a $10,000 total cap, escalating for willful violations. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Penalties and Enforcement."

Qualified retirement plan funds are protected for the exclusive benefit of employees. Employers cannot repossess plan assets for their own use. They may invest, allocate contributions, or distribute vested benefits, but not reclaim assets.

Exact Extract (Virginia Retirement Plans Study Guide): “Plan assets must be held in trust for employees and may not revert to the employer except under limited IRS-approved termination procedures.”

References (Virginia Documents / Study Guide):

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

The application is the primary underwriting source for personal data and risk assessment. It provides the insured’s age, health, occupation, and lifestyle factors. Exact extract: “The application is a written request to the company for a contract and is the source of the insurer’s underwriting information.”

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.”

Insurance operates on the principle of risk transfer. The insured transfers the financial risk of loss to the insurer, which spreads the risk across a large group of policyholders.

Exact Extract (Virginia Insurance Fundamentals Study Guide): “Insurance is a mechanism of risk transfer, shifting the burden of loss from an individual to an insurer, which distributes the risk across many insureds.”

References (Virginia Documents / Study Guide):

— Virginia General Insurance Concepts, Risk Management Techniques

Life insurance proceeds are generally exempt from income tax but may be included in the insured’s gross estate for estate tax purposes if they are payable to the estate or if the insured retained ownership rights. If the proceeds are paid directly to a named beneficiary, they usually bypass probate and are not part of the taxable estate.

Exact Extract (Virginia Life Insurance Study Guide): “Proceeds of life insurance are included in the insured’s gross estate if payable to the estate or if the insured retained incidents of ownership at death.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Insurance Examination Outline, Section 6.3 Federal estate tax treatment

Under required uniform provisions, once an insurer receives notice of claim, it must provide claim forms to the insured within a specified period (usually 15 days). If forms are not provided, the claimant may submit proof of loss in any reasonable written form.

Exact Extract (Virginia Uniform Policy Provisions): “Upon receipt of notice of claim, the insurer shall furnish the claimant forms for filing proof of loss.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-3514 (Uniform accident and sickness provisions – Notice and claim forms)

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."

Detailed Answer in Step-by-Step Solution:

In health insurance, the "entire contract" refers to all the documents that collectively form the legal agreement between the insurer and the policyholder.

This includes the insurance policy itself (the main document outlining coverage), any endorsements (modifications or additions to the policy), and attached papers such as the application (if attached).

The completed application (A) is part of the contract only if attached, but it alone does not constitute the entire contract.

Uniform mandatory policy provisions (C) are specific clauses required by law within the policy, not the whole contract.

Notice of coverage (D) is a notification, not the contract itself.

Therefore, the correct answer is "entire contract."

The concept of the "entire contract" is a standard provision in health and life insurance policies. Per the Virginia insurance study guide, the entire contract clause ensures that all terms and conditions are contained within the policy, endorsements, and attached documents (like the application), protecting both parties by defining the full scope of the agreement. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Policy Provisions and Contracts."

A nonoccupational disability income policy covers accidents and sicknesses occurring off the job. Disabilities caused while performing work-related duties are excluded, since they are covered by workers’ compensation instead.

Exact Extract (Virginia Disability Insurance Study Guide): “Nonoccupational policies exclude coverage for work-related disabilities, which are handled under workers’ compensation.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Disability Income Insurance Exclusions

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.

Detailed Answer in Step-by-Step Solution:

Excess charges in Medicare occur when a provider charges more than the Medicare-approved amount, and the insured (D) is responsible for the difference unless covered by supplemental insurance.

The Social Security Administration (A) and CMS (B) administer Medicare, not pay claims.

Providers (C) may charge excess but don’t absorb it unless they accept assignment.

The Virginia study guide explains that Medicare beneficiaries bear excess charges unless a provider accepts Medicare assignment or a Medigap policy covers them. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Medicare Basics."

Detailed Answer in Step-by-Step Solution:

An absolute assignment transfers all ownership rights (C) of a life insurance policy to a new owner, relinquishing the original owner’s control.

Option A (limited rights) is a partial assignment. Option B (premium payment) is not ownership. Option D (collateral) is a collateral assignment, not absolute.

The Virginia study guide defines absolute assignment as the complete transfer of all policy rights to a new owner, distinct from collateral assignments for loans. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Policy Assignments."

Whole life contracts guarantee cash values, nonforfeiture options, loan values, and settlement values. Dividends are not guaranteed because they depend on company performance.

Exact Extract (Virginia Life Insurance Study Guide): “Whole life policies provide guaranteed cash values, policy loans, and settlement options. Dividends, if declared, are not guaranteed.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Policy Provisions and Guarantees

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."

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."

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

A conditional receipt is issued when the initial premium is collected with the application. Coverage may become effective upon meeting insurability conditions. Exact extract: “When the first premium is paid, the applicant is given a receipt. This conditional receipt provides coverage based on insurability.”

Coinsurance is a cost-sharing arrangement where, after the deductible is met, the insured pays a percentage of covered expenses and the insurer pays the rest. A common split is 80/20, where the insurer pays 80% and the insured pays 20% until the maximum out-of-pocket limit is reached.

Exact Extract (Virginia Health Insurance Study Guide): “Coinsurance—after the deductible has been satisfied, the insured and insurer share covered expenses in a stated ratio (e.g., 80/20).”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Major Medical Policy Provisions

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.

Virginia Code § 38.2-3508 defines a cancelable health policy as one either party—the insured or insurer—can terminate before its term ends, with notice (e.g., 30 days). Option C reflects this mutual right. Option A (insurer only) and option B (insured only) are too restrictive; cancelable policies aren’t unilateral. Option D (arbitration committee) isn’t a standard mechanism; cancellation follows policy terms, not third-party rulings. The study guide likely contrasts cancelable with non-cancelable policies, using examples like an insurer canceling for nonpayment or an insured canceling due to better rates, making C the correct scope.

An irrevocable beneficiary designation means the policyowner cannot unilaterally change the beneficiary. The irrevocable beneficiary gains a vested interest in the policy. Any changes require the consent of both the policyowner and the beneficiary.

Exact Extract (Virginia Life Insurance Study Guide): “Irrevocable beneficiaries have a vested right to policy benefits. Policyowner may not change designation without the beneficiary’s written consent.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Beneficiary Designations

A contingent beneficiary is designated to receive the policy proceeds only if the primary beneficiary is unable to do so, usually due to predeceasing the insured.

Exact Extract (Virginia Life Insurance Study Guide): “Contingent beneficiary—receives benefits if the primary beneficiary dies before the insured.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Beneficiary Designations

The purpose of Medicare supplement regulation is to ensure consumer protection, fair marketing, and full disclosure. Policies must clearly explain benefits, costs, and relationship to Medicare coverage. Exact extract: “The intent of the rules is to protect Medicare eligible persons by requiring full disclosure in the sale of accident and sickness insurance policies marketed as Medicare supplements.” These rules prevent misleading practices and ensure seniors understand their coverage.

Agents act as representatives of insurers to solicit, receive, and forward applications. They cannot approve claims or unilaterally reinstate or replace contracts. Exact extract: “An agent is authorized to solicit, receive, and forward applications to the insurer but has no power to approve claims or reinstate policies.”

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.

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."

A revocable beneficiary designation allows the policyowner to change beneficiaries at any time without the consent of the existing beneficiary. This right remains solely with the policyowner.

Exact Extract (Virginia Health Insurance Study Guide): “Revocable beneficiaries—policyowner retains the right to change the beneficiary designation at will.”

References (Virginia Documents / Study Guide):

— Virginia Life & Health Insurance Examination Outline, Beneficiary Designations

Automatic premium loans use policy cash value to keep coverage in force, and interest is charged on the borrowed amount. Exact extract: “The automatic premium loan uses policy values to pay overdue premiums; interest is charged on the loan balance.”

The fixed-period installment option provides that the death benefit proceeds, together with interest, are paid in equal installments to the beneficiary over a specified number of years. Each installment consists of principal and interest until the proceeds are fully distributed at the end of the fixed period. This ensures a guaranteed stream of income for the chosen period regardless of when the proceeds are exhausted.

Exact Extract (Virginia Life & Annuities Study Guide): “Settlement options include: fixed-period installments—payment of proceeds in equal installments over a specified period of years, consisting of principal and interest.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Insurance Examination Outline, Section 5.3 Settlement Options

— Code of Virginia §38.2-3117.2 (Requirement to provide settlement option explanations to beneficiaries)

Tax-sheltered annuities (TSAs), per IRC § 403(b) and Virginia Code § 38.2-3100 et seq., are retirement plans for nonprofit employees. Option A is true; they’re synonymous with 403(b) plans. Option B is true; contributions often come from voluntary salary reductions, tax-deferred until withdrawal. Option C is true; participants can have individual contracts or accounts. Option D is false; investment gains are tax-deferred, not included in gross income annually, only taxed upon distribution. The study guide highlights TSAs’ tax advantages, making D the incorrect statement.

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.”

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)

Accidental death benefit (ADB) riders pay an additional death benefit if death results from accidental causes. It is not automatically included in every policy and requires an additional premium. Exact extract: “The accidental death benefit rider provides extra coverage in the event of accidental death and is available only by payment of an additional premium.” It does not affect cash values or nonforfeiture options.

Disability buy-sell insurance funds a business partner’s buyout if one becomes disabled, per Virginia Code § 38.2-3100 et seq. Option C is true; proceeds are typically tax-free under IRC § 104(a)(3) as insurance benefits, not income, if premiums aren’t deducted. Option A is false; the policyowner (e.g., a partner or business) is often the beneficiary to fund the buyout. Option B is false; benefits go to the business or partner, not the disabled individual, who may receive separate disability income coverage. Option D is false; premiums aren’t tax-deductible (IRC § 265), preserving tax-free proceeds. The study guide likely explains this with scenarios—e.g., $500,000 paid tax-free to buy out a disabled partner—highlighting tax treatment, making C the true statement.

Certain Medicare supplement policies in Virginia may include preventive benefits not fully covered by Medicare, such as annual physical exams. These benefits are limited and distinct from core Medicare Part A (hospitalization) and Part B (medical) services.

Exact Extract (Virginia Medicare Supplement Study Guide): “Preventive medical care benefit may include annual physical exams and preventive screening tests, which are not part of basic Medicare coverage.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Medicare Supplement Provisions

Virginia Code § 38.2-1820 requires licensees (agents, agencies, or other entities) operating under an assumed or fictitious name to register that name with the Bureau of Insurance. This ensures transparency and consumer protection by linking all business names to the licensed entity. The statute specifies notification either at the time of license application or within 30 calendar days after adopting the assumed name, making option A correct. This timeline allows the Bureau to update records promptly without undue delay. Option B (60 days from first policy sale) introduces an unrelated trigger—policy sales—and extends the period beyond Virginia’s requirement, making it incorrect. Option C (license renewal) delays notification unnecessarily, as renewals occur biennially (Virginia Code § 38.2-1822), conflicting with the need for timely registration. Option D (30 days before discontinuing the name) is illogical; notification is required when adopting, not abandoning, a name. The study guide likely stresses this 30-day rule to ensure compliance with Virginia’s licensing oversight, reinforcing A as the precise answer based on regulatory intent and practice.

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.

Detailed Answer in Step-by-Step Solution:

Health insurance covers claims incurred during the policy period (A), not after termination (B), unless extended benefits (e.g., COBRA) apply, which is not indicated here.

Claims above the deductible (C), regardless of amount, are payable if covered.

Mental or nervous disorder claims (D) are typically covered unless excluded by the policy, which is not specified.

Thus, claims after termination (B) are the exception.

The Virginia study guide states that health insurance liability ends upon policy termination, barring specific continuation provisions, making post-termination claims generally non-payable. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Health Insurance Coverage Terms."

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.

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.

Keogh plans, established under the Internal Revenue Code, are retirement plans for self-employed individuals and small businesses, also known as HR 10 plans (option B) after the 1962 legislation (H.R. 10) creating them. They allow tax-deferred contributions, similar to qualified plans. Option A (Section 457 plans) applies to government and nonprofit employees, not self-employed individuals. Option C (403(b) plans) is for nonprofit employees (e.g., teachers), distinct from Keogh’s self-employed focus. Option D (Section 2503(c) trusts) relates to gifting for minors, not retirement. The study guide likely contrasts Keogh (HR 10) with other plans in a retirement section, noting its tax benefits and eligibility, confirming B as the correct synonym.

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.

Virginia Code § 38.2-3107 governs life insurance underwriting, where insurers assess risk using factors like gender (option A, affecting mortality rates), occupation (option C, e.g., hazardous jobs increase risk), and ability to pay premiums (option D, ensuring policy sustainability). Option B (religion) is not a permissible criterion; Virginia Code § 38.2-211 prohibits unfair discrimination in insurance based on religion, race, or other protected traits, reflecting federal and state anti-discrimination laws. The study guide likely explains underwriting with examples—e.g., higher premiums for a male firefighter—but flags religion as an illegal factor, with case studies of compliance, making B the exception.

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.

Misrepresentation occurs when an agent provides false, misleading, or incomplete information about a policy’s terms, benefits, or exclusions. Failing to disclose exclusions leads the applicant to believe coverage exists when it does not. This is specifically prohibited under Virginia’s Unfair Trade Practices laws.

Exact Extract (Virginia Unfair Trade Practices Act): “Misrepresentation includes any statement or omission of material fact, including failure to disclose policy limitations or exclusions.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-502 (Misrepresentations and false advertising of policies)

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."

The waiver of premium rider allows the insured to stop paying premiums while disabled. After a specified waiting period (typically 90 days), premiums are waived for as long as the disability continues.

Exact Extract (Virginia Disability Study Guide): “Waiver of premium—after a period of total disability, future premiums are waived while benefits remain payable.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Disability Riders

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:

In a PPO, using a non-PPO provider (out-of-network) leads to higher out-of-pocket expenses (A) due to lower reimbursement rates and potential excess charges.

Option B (full cost) is inaccurate; some coverage applies. Option C (100% reimbursement) is false. Option D (waiting period) is unrelated.

The Virginia study guide reiterates that PPOs cover out-of-network care but at a reduced level, increasing the insured’s costs compared to in-network use. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Managed Care Plans."

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

Reinsurance is a legitimate risk management tool used between insurers. Misrepresentation, fraudulent advertising, and illegal inducements are specifically prohibited as unfair trade practices in Virginia.

Exact Extract (Virginia Unfair Trade Practices Act): “Unfair practices include misrepresentation, false advertising, and offering unlawful inducements. Reinsurance is not an unfair practice.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-500 et seq. (Unfair Trade Practices Act)

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.

A joint and survivor annuity, as outlined in Virginia Code § 38.2-3100 et seq., is an annuity contract that pays benefits as long as at least one of the named annuitants (typically two, such as spouses) is alive. Option A accurately reflects this, stating benefits continue throughout their lifetimes, ceasing only upon the last survivor’s death. Option B is false because payments aren’t tied to life expectancy but to actual survival, per standard annuity terms in the study guide. Option C is incorrect; an annuity provides income, while whole life insurance offers a death benefit—combining them is a different product (e.g., a universal life policy), not a joint and survivor annuity. Option D is wrong because annuities, unlike life insurance, don’t typically require evidence of insurability, as they’re based on longevity, not mortality risk (Virginia Code § 38.2-3113). The study guide emphasizes the lifetime payment feature as the defining trait, confirming A.

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."

In noncontributory group life insurance, the employer pays the full premium, and all eligible employees must be covered. Exact extract: “Noncontributory group life plans require 100% participation of eligible employees.”

Detailed Answer in Step-by-Step Solution:

The incontestability provision in LTC policies typically limits the insurer’s ability to contest coverage based on misrepresentations to two years (B) from issuance, unless fraud is proven (which may extend this in some states).

Option A (six months) is too short. Option C (entire duration) applies only to fraud in some cases, not standard misrepresentations. Option D (prohibited) is incorrect due to the contestable period.

The Virginia study guide, aligned with NAIC standards, notes a two-year contestable period for health-related policies like LTC, after which misrepresentations cannot be challenged absent fraud. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Incontestability."

Virginia Code § 38.2-3501 governs health insurance applications, requiring accuracy and applicant consent. Changes or corrections by an agent (e.g., fixing a misspelled name) must be initialed by the applicant (option B) to verify agreement, as the application becomes part of the contract (Virginia Code § 38.2-3503). Option A (agent) initialing alone risks unauthorized alterations. Option C (physician) is irrelevant; medical input isn’t standard for application edits. Option D (underwriter) assesses, not corrects, applications post-submission. The study guide likely stresses this consumer protection rule, with examples—e.g., an agent correcting a birthdate, initialed by the applicant—ensuring transparency, making B the correct party.

Virginia requires licensees to report felony convictions within 30 days. Exact extract: “A licensed agent shall report to the Commission any felony conviction within 30 calendar days.”

In the context of health insurance, particularly dental coverage, Virginia Code § 38.2-3407.1 et seq. governs mandated benefits, though dental specifics often appear in policy riders or standalone plans. Orthodontics (option A) is the branch of dentistry focused on preventing and correcting irregularities of the teeth and jaws using mechanical devices like braces or aligners, precisely matching the question’s description. Endodontics (option B) deals with the tooth’s interior (e.g., root canals), not mechanical correction of alignment. Periodontics (option C) addresses gum diseases and supporting structures, not tooth positioning. Prosthodontics (option D) involves replacing missing teeth with prosthetics (e.g., dentures), not correcting irregularities mechanically. The study guide likely defines these terms in a health insurance section, emphasizing orthodontics’ role in alignment correction—both preventive (e.g., avoiding bite issues) and corrective—making A the clear answer. Examples like braces for malocclusion reinforce this distinction from other specialties.

In long-term care (LTC) insurance, the elimination period, per Virginia Code § 38.2-5202, is the waiting period between the onset of a qualifying condition (e.g., confinement due to inability to perform ADLs) and the start of benefit payments. It’s akin to a deductible in days (e.g., 30, 60, or 90 days), during which the insured must cover costs. Option D correctly names this period. Option A (trial period) isn’t a standard LTC term. Option B (exclusion period) might confuse with pre-existing condition exclusions, but it’s not the waiting period for benefits. Option C (qualifying period) could imply eligibility determination, but “elimination period” is the precise industry term. The study guide likely defines this as a cost-sharing feature, with examples illustrating how longer periods reduce premiums, solidifying D as the answer.

Virginia Code § 38.2-5205 mandates that long-term care (LTC) policies define pre-existing conditions, typically as conditions for which medical advice or treatment was recommended or received within six months before the policy’s effective date. Option B (pre-existing condition) matches this definition exactly, as it identifies prior health issues that may affect coverage (e.g., exclusions or waiting periods). Option A (covered illness) is vague and implies a condition already insured, not necessarily pre-existing. Option C (long-term care condition) isn’t a standard term; LTC policies cover specific needs (e.g., ADLs), not a category tied to this timeframe. Option D (pre-determined risk) suggests underwriting factors, not a specific medical history definition. The study guide likely details this six-month lookback as a common LTC standard, with examples like a recent stroke diagnosis, emphasizing disclosure requirements and potential coverage limits, confirming B as the answer.

Accidental death benefit riders require proof of accidental cause, timely death after injury, and age restrictions. They do not require the death to be work-related. Exact extract: “Accidental death benefits are payable if death results from accidental injury, occurs within a stated period (often 90 days), and before a specified age, usually 60–65.” Job-relatedness is irrelevant unless specifically excluded (e.g., hazardous occupation).

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.

Group life insurance in Virginia, governed by Virginia Code § 38.2-3318 et seq., operates on a “group underwriting” basis, meaning coverage is issued to the group as a whole without individual health assessments. For large groups (typically over 10 employees, though Virginia defines “large” contextually), insurers accept the entire eligible group without requiring evidence of insurability, provided the group meets participation and eligibility standards (e.g., active employees). Option C reflects this: an employee in poor health, as part of an acceptable group, receives the same coverage as others, as health status doesn’t affect eligibility or terms. Option A (ineligible) is false; group plans don’t exclude based on individual health. Option B (rated basis) applies to individual policies where substandard risks increase premiums, not group plans where risk is pooled. Option D (limited coverage) contradicts the uniformity of group coverage terms. The study guide likely highlights this non-discriminatory feature of group life, ensuring equal benefits for all eligible members, making C the correct answer per Virginia’s legal and practical framework.

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.”

A joint life annuity pays benefits to two annuitants during their lifetimes, but terminates entirely upon the first death. Exact extract: “Joint life annuities provide income until the death of the first annuitant; no further payments are made thereafter.”

Ordinary whole life pays the face amount at maturity (traditionally age 100 or 120) if the insured is still alive, or upon earlier death. Term policies have no maturity value.

Exact Extract (Virginia Life Insurance Study Guide): “Ordinary whole life—pays the face amount at death or at policy maturity if the insured survives to that date.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Insurance Examination Outline, Whole Life Characteristics

Virginia Code § 38.2-3109 allows life insurance riders to extend coverage. A family term rider (option C) attaches to a primary policy (e.g., the breadwinner’s) and provides term insurance for all family members—spouse and children—under one supplement, often with a single premium. Option A (spouse term rider) covers only the spouse, not children. Option B (children’s term rider) insures only children, excluding the spouse. Option D (survivorship term rider) isn’t a standard term; “survivorship” typically refers to joint life policies paying at the second death, not family coverage. The study guide likely describes the family term rider as a cost-effective way to insure dependents, with examples showing level term benefits for each member, making C the accurate answer.

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.

Eligibility for long-term care benefits is based on inability to perform Activities of Daily Living (ADLs). Functional assessment measures this ability. Exact extract: “Functional assessments measure the insured’s ability to perform ADLs such as bathing, dressing, eating, continence, and transferring.”

Virginia’s long-term care (LTC) rules allow certain exclusions (e.g., war, alcoholism/drug addiction, intentionally self-inflicted injury) but prohibit disease-specific exclusions for conditions like Alzheimer’s or senile dementia. Exact extract: “No long-term care insurance policy or certificate may exclude or limit coverage for Alzheimer’s disease, senile dementia, organic brain disorder, or other demonstrable organic disease.” Permitted exclusions include: “loss resulting from war or act of war,” “alcoholism and drug addiction,” and “intentionally self-inflicted injury.”

Virginia Code § 38.2-3100 et seq. governs annuities. A joint life annuity (option C) pays income until the first of two annuitants dies, then ceases—ideal for temporary dual coverage. Option A (joint and survivor annuity) continues payments until the last survivor dies, not stopping at the first death. Option B (temporary annuity) pays for a fixed term (e.g., 10 years), regardless of death, and isn’t tied to two lives. Option D (single life annuity) covers one person until their death, not two. The study guide likely defines these with examples—e.g., a couple receiving $1,000 monthly until one dies (joint life) versus until both die (joint and survivor)—highlighting C’s “first death” cutoff, making it the correct answer.

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.

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.