Virginia-Life-Annuities-and-Health-Insurance Virginia Life, Annuities, and Health Insurance Examination Series 11-01 Questions and Answers

Virginia requires an incontestability clause in life policies. After a policy has been in force for two years, it becomes incontestable except for nonpayment of premium.

Exact Extract (Virginia Law): “A life insurance policy shall be incontestable after it has been in force during the lifetime of the insured for two years, except for nonpayment of premiums.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-3107 (Incontestability clause requirement)

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.

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

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

Insurance works on the law of large numbers, which states that as the number of exposure units increases, the predictability of losses increases—not that the number of losses decreases. Losses still occur, but they become more statistically predictable.

Exact Extract (Virginia Insurance Fundamentals Study Guide): “Law of large numbers—predictability of loss increases as the number of similar exposure units increases. The number of losses does not decrease.”

References (Virginia Documents / Study Guide):

— Virginia General Insurance Concepts, Risk and Principles of Insurance

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.

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.

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

Replacement regulations are intended to safeguard the policyowner, ensuring they are fully informed of disadvantages, such as surrender charges or loss of benefits, before replacing an existing policy.

Exact Extract (Virginia Replacement Rules): “Replacement provisions are designed to protect the policyholder by requiring full disclosure of the implications of replacing an existing policy.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Replacement Regulations (14VAC5-20-10 et seq.)

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.

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.

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

Children’s riders provide coverage for all eligible children in the family under one flat premium. Additional children are automatically covered without an increase. Exact extract: “Children’s riders charge one level premium regardless of the number of children insured; coverage automatically includes children born or adopted after issue.”

Detailed Answer in Step-by-Step Solution:

An alien insurer (B) is headquartered outside the U.S. but licensed to operate within it, distinguishing it from a foreign insurer (A), which is domiciled in another U.S. state.

A captive insurer (C) insures its parent company, and a reciprocal exchange (D) is a mutual insurance structure, neither based on location.

The Virginia study guide defines an alien insurer as one incorporated outside the U.S., operating under state licensing, per standard insurance terminology. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Insurance Company Types."

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.”

Group life insurance requires that the group meet a minimum size threshold to prevent adverse selection. New employees do not provide evidence of insurability if they enroll during eligibility. Exact extract: “Group life eligibility requires that the group be formed for purposes other than insurance and meet minimum size and participation requirements.”

Virginia Code § 38.2-3500 et seq. allows health insurance policies to include riders—supplemental agreements modifying coverage or terms (e.g., adding dental benefits or exclusions). Option D (rider) is the standard term. Option A (limit clause) isn’t a distinct attachment; limits are within the policy. Option B (attachment) is vague and not insurance-specific. Option C (insuring clause) is the core promise of coverage, not an alteration. The study guide likely defines riders with examples—e.g., a maternity rider increasing premiums—distinguishing them from policy staples, confirming D as the answer.

Virginia Code § 38.2-3207 allows participating life policies to offer dividend options: option A (reduce premium), option B (buy paid-up additions increasing coverage), and option C (accumulate with interest) are standard, reflecting insurer profits shared with policyowners. Option D (receiving the entire cash value) isn’t a dividend option; it’s a surrender or nonforfeiture action, terminating the policy, not distributing profits. The study guide likely lists these options with examples—e.g., $100 dividend reducing a $500 premium (A)—contrasting them with cash value withdrawal, making D the exception.

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

Term life provides pure death protection with no cash value. Its major advantage is lower initial premium compared to whole life insurance. Premiums increase at renewal, but initial affordability makes it attractive for temporary coverage needs.

Exact Extract (Virginia Life Insurance Study Guide): “Term life—provides temporary protection with lower initial premiums than permanent insurance.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Term Life Characteristics

Virginia exam materials describe standard STD plan design as wage-replacement for a short duration with a weekly cap; integration with Social Security and multi-year benefit periods are characteristics of long-term disability (LTD), not STD. Exact extract (Study Guide): “Short-Term Disability (STD) pays weekly benefits, typically 50%–60% of earnings, subject to a weekly maximum, for a short duration (commonly up to 13–26 weeks).” “Coordination with Social Security benefits is generally a feature of LTD, not STD.”

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.”

Detailed Answer in Step-by-Step Solution:

The entire contract clause includes the policy and the attached application (B), ensuring all terms and representations are part of the agreement.

The premium receipt (A) is temporary, the waiver rider (C) is optional, and the declaration page (D) is part of the policy, not separate.

The Virginia study guide states that the entire contract provision encompasses the policy and attached application, defining the full legal agreement. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Life Insurance Policy Provisions."

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."

Detailed Answer in Step-by-Step Solution:

In a PPO, using a non-preferred (out-of-network) provider typically results in higher out-of-pocket expenses (A) due to lower reimbursement rates (e.g., 60% vs. 80% in-network) and potential excess charges.

Option B (full cost) may apply to HMOs, not PPOs, which still offer some coverage. Option C (100% reimbursement) is false. Option D (waiting period) is unrelated to provider choice.

The Virginia study guide explains that PPOs offer flexibility to use out-of-network providers, but at a higher cost to the insured due to reduced coinsurance or additional charges. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Managed Care Plans."

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."

The notice of claim provision states that notice may be given to the insurer or its authorized agent. Legally, providing notice to an authorized agent constitutes notice to the insurer itself.

Exact Extract (Virginia Uniform Policy Provisions): “Notice of claim may be given to the insurer or to any authorized agent of the insurer.”

References (Virginia Documents / Study Guide):

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

Detailed Answer in Step-by-Step Solution:

Life insurance premiums are calculated based on three factors: mortality (death rates), interest (investment earnings), and expenses (operating costs).

When an insurer earns interest on premiums invested, it increases the funds available to pay claims, reducing the amount needed from policyholders.

This results in a decrease in the premium rate (C), as higher interest earnings offset the cost of coverage.

Option A (increase premium rate) would occur if interest earnings decreased.

Options B and D (mortality rate changes) are unrelated to interest, as mortality is a statistical factor, not a financial one.

The Virginia study guide explains that interest earned on premiums is a key component of pricing life insurance, allowing insurers to lower premium rates when investment returns are favorable. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Premium Determination."

The agent’s report includes observations on the applicant’s financial status, character, and other relevant factors, but the applicant’s signature belongs on the application form, not the agent’s report.

Exact Extract (Virginia Health Insurance Study Guide): “The agent’s report is confidential and includes information on financial condition and character. It does not contain the applicant’s signature.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Field Underwriting

Detailed Answer in Step-by-Step Solution:

If an IRA owner dies before distributions, the surviving spouse beneficiary can roll the IRA into their own IRA (B), treating it as their own and delaying distributions until their required beginning date.

Option A (forfeited) is false; assets pass to the beneficiary. Options C and D apply to non-spouse beneficiaries under older rules, not spousal rollovers.

The Virginia study guide, per IRS rules, allows a surviving spouse to roll an inherited IRA into their own, avoiding immediate taxation or forced distributions. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Retirement Plans."

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."

Virginia requires group health plans to cover employees who meet participation requirements but prohibits imposing evidence of insurability requirements on new eligible employees. Exact extract: “No evidence of insurability shall be required for new employees who enroll during the eligibility period.”

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

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 Code § 38.2-3431 et seq., aligned with the ACA, requires small employer health plans (1-50 employees) to offer coverage to all eligible employees who apply, without discrimination based on health status or other factors. “Eligible” typically means full-time employees meeting the employer’s criteria (e.g., 30+ hours/week). Option A reflects this guaranteed issue mandate, ensuring broad access. Option B (12-month waiting period) is false; Virginia and federal law cap waiting periods at 90 days (Virginia Code § 38.2-3445), not 12 months. Option C (evidence of insurability) contradicts guaranteed issue rules for small groups, which prohibit medical underwriting. Option D (under age 65) is incorrect; coverage extends to all eligible employees regardless of age, though Medicare coordination may apply post-65. The study guide likely stresses this inclusivity as a cornerstone of small group market reforms, making A the correct answer.

Dental policies exclude treatment that begins before coverage starts, but generally cover preventive, diagnostic, and restorative care. Exact extract: “Dental insurance typically excludes expenses for treatment initiated before the insured’s eligibility date.”

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.”

Detailed Answer in Step-by-Step Solution:

Group insurance (B) covers individuals based on their affiliation with an organization (e.g., employees of a company), not as individuals.

Contributory insurance (A) refers to group plans where employees pay part of the premium, but it’s not the defining feature.

Health insurance (C) is too broad, and COBRA (D) extends group coverage, not defines it.

The Virginia study guide defines group insurance as coverage tied to membership in an organization, such as an employer or association. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Group Insurance."

Flexible premium life insurance, such as universal life (Virginia Code § 38.2-3113.1), allows the policyowner to adjust premium payments within policy limits (e.g., minimum to maintain coverage, maximum for tax advantages), offering flexibility over fixed-premium plans like whole life. Option A correctly identifies the policyowner as the decision-maker. Option B (contingent beneficiary) is false; beneficiaries have no control over premiums. Options C and D tie adjustments to economic indices (CPI, interest rates), but Virginia law and standard policies don’t grant insurers unilateral premium-changing rights based on these factors—flexibility is the policyowner’s prerogative, subject to cash value sufficiency. The study guide likely contrasts this with traditional policies, using examples of skipped or increased payments, confirming A as the defining trait.

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:

Medicare Part D (C) specifically covers prescription drug costs for enrollees.

Medical expenses (A) are under Part B, hospital costs (B) under Part A, and dental (D) is generally not covered by Medicare unless supplemental.

The Virginia study guide states that Medicare Part D, introduced in 2006, provides prescription drug coverage through private plans, distinct from Parts A and B. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Medicare."

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 § 38.2-5205 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.

A 10-year certain annuity guarantees payments for 120 months. If the annuitant dies after receiving 119 payments, only one more payment remains for the beneficiary. Exact extract: “Life with 10-year certain annuities guarantee at least 120 payments; if the annuitant dies before that period, remaining payments go to the beneficiary.” After 120 months, no benefits continue.

Virginia Code § 38.2-3502 mandates a “free look” period (typically 10 days) for individual health insurance, allowing the insured to review the policy and cancel it with a full premium refund (option D) if returned within that time. Option A (try without paying) is false; premiums are paid upfront, refundable only upon cancellation. Option B (compare policies) is a practical use but not the legal purpose; the provision ensures cancellation rights, not comparison. Option C (change coverage) isn’t allowed; modifications require underwriting, not free-look terms. The study guide likely details this consumer protection with examples—e.g., returning a policy on day 9 for a refund—making D the precise right.

Virginia Code § 38.2-1800 et seq. outlines roles in life insurance. Agents and underwriters both evaluate risks (option B): agents assess initial client risk (e.g., health questions) for application accuracy, while underwriters analyze it for approval (e.g., medical records). Option A (finding clients) is agent-only; underwriters don’t prospect. Option C (collecting premiums) is primarily the agent’s task, not underwriting’s. Option D (reviewing coverage) is a post-sale service, not a core underwriting function. The study guide likely contrasts roles but notes this shared risk focus—e.g., an agent flags smoking, underwriter rates it—making B the common duty.

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.”

Detailed Answer in Step-by-Step Solution:

A viatical settlement involves a terminally ill policyowner selling their life insurance policy for a lump sum. The policyowner in this transaction is called the viator (C).

The viatical settlement provider (A) is the entity purchasing the policy.

The viatical settlement broker (B) facilitates the transaction.

"Viatee" (D) is not a recognized term in this context.

The Virginia study guide defines the viator as the insured policyowner who sells their policy in a viatical settlement, typically due to a terminal illness. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Viatical Settlements."

In insurance contract law, per Virginia Code § 38.2-102, a contract requires consideration—something of value exchanged to make it legally binding. Option C (consideration) fits this definition: the insured’s premium payment and the insurer’s promise of coverage form the mutual value. Option A (grant) implies a unilateral transfer, not a contract element. Option B (codicil) is a will amendment, irrelevant to insurance contracts. Option D (covenant) is a promise within a contract, not the value exchanged. The study guide likely explains consideration as a foundational principle, using examples like a $500 premium for a $100,000 policy, distinguishing it from other legal terms. Virginia follows common law requiring consideration for enforceability, making C the precise answer.

Agents are fiduciaries, meaning they must handle clients’ premiums with the highest standard of care. Misuse or misappropriation of funds constitutes a violation of fiduciary duty.

Exact Extract (Virginia Agent Regulations): “Insurance producers act in a fiduciary capacity regarding premiums received from insureds and must promptly remit them to insurers.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-1834 (Fiduciary responsibility of agents)

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.

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."

Virginia Code § 38.2-4306 mandates that Health Maintenance Organizations (HMOs) provide comprehensive health services, including emergency care, as a core benefit. Emergency services must be available 24 hours a day, 7 days a week (option D) to ensure immediate access to life-saving treatment, aligning with federal and state standards (e.g., ACA requirements under 42 CFR § 422.113). This reflects the HMO’s obligation to cover urgent needs—e.g., a heart attack at 2 a.m.—via in-network facilities or out-of-network reimbursement if necessary. Option A (16 hours, 6 days) and Option B (16 hours, 7 days) fall short of the continuous access requirement, limiting coverage unreasonably. Option C (24 hours, 6 days) excludes one day, contradicting the nonstop mandate. The study guide likely emphasizes this 24/7 rule in an HMO benefits section, with examples like ER visits covered anytime, making D the correct standard. This ensures HMOs meet Virginia’s consumer protection goals under § 38.2-4300 et seq., distinguishing them from less comprehensive plans.

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."

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)

Virginia Code § 38.2-3445, aligned with ACA rules, allows group health plans to impose a probationary period (option C)—also called a waiting period—before new employees become eligible for coverage, capped at 90 days. This delay, set by the employer, ensures employment stability before benefits begin. Option A (participation period) isn’t a standard term; it might confuse with minimum participation rules for group plans. Option B (grace period) is the post-due-date window for premium payment (e.g., 31 days), not eligibility. Option D (contributory period) implies employee premium contributions but isn’t a defined phase. The study guide likely explains this as an employer tool, with examples like a 30-day wait, making C the precise term.

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

The free-look provision ensures policyholders may review their contract and, if dissatisfied, return it for a full refund. Exact extract: “The insured may return the policy within 10 days of delivery for a full refund of all premiums.”

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 § 38.2-3330 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.

The insurance with other insurers provision prevents over-insurance and duplication of benefits by allowing insurers to coordinate coverage. If an insured has multiple policies with different insurers and fails to notify, each insurer will pay only a proportionate share of the claim.

Exact Extract (Virginia Health Policy Provisions): “If the insurer was not notified that the insured has other valid coverage, benefits will be prorated to prevent duplication.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Required Policy Provisions

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 § 38.2-5200 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.

Medicare Part A is generally available at age 65, but younger individuals may qualify if they have received Social Security disability benefits for at least 24 months.

Exact Extract (Virginia Medicare Study Guide): “Individuals under age 65 become eligible for Medicare Part A after receiving Social Security disability benefits for 24 months.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Medicare Eligibility

The misstatement of age provision adjusts benefits to reflect the correct age at which premiums should have been paid. The insurer does not void or cancel the policy; instead, it adjusts the coverage to the amount the paid premium would have purchased at the correct age.

Exact Extract (Virginia Uniform Policy Provisions): “In the event of misstatement of age, benefits payable under the policy shall be adjusted to the amount the premium would have purchased at the correct age.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-3514 (Uniform individual accident and sickness policy provisions – Misstatement of age)

In Virginia, an insurance agent’s license is governed by the State Corporation Commission’s Bureau of Insurance under Title 38.2 of the Virginia Code. According to Virginia Code § 38.2-1819, once issued, the license authorizes the agent to transact insurance business on behalf of appointed insurers until it is terminated, suspended, or revoked by the Bureau. The license fee is paid to the Bureau of Insurance, not the insurance company (Virginia Code § 38.2-1818), making option A incorrect. Virginia Code § 38.2-1822 specifies that licenses are renewed biennially (every two years), not annually, rendering option C false. Finally, Virginia Code § 38.2-1833 clarifies that an agent needs only one license but must secure an appointment for each insurer they represent, not a separate license per insurer, making option D incorrect. Option B is the only statement consistent with Virginia law, reflecting the license’s ongoing authority unless altered by regulatory action.

Once an agent is appointed by an insurer in Virginia, the appointment remains in effect until either the insurer or the Bureau of Insurance terminates it. No quarterly renewal or NAIC approval is required.

Exact Extract (Virginia Producer Licensing Rules): “Appointments remain in effect until terminated by the insurer or the Bureau of Insurance.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-1833 (Appointments of agents)

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.

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.

Detailed Answer in Step-by-Step Solution:

The "time limit on certain defenses" provision (B), often tied to incontestability, limits the insurer’s ability to deny claims based on application errors after a period (e.g., 2 years), unless fraud is proven.

Legal actions (A) governs lawsuits, grace period (C) covers premium delays, and time payment of claims (D) sets claim payment deadlines—none relate to application defenses.

The Virginia study guide explains that the time limit on certain defenses provision protects insureds by restricting post-issuance claim denials after a contestable period, absent fraud. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Health Insurance Policy Provisions."

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.

Virginia law obligates agents to act as fiduciaries with premiums collected and to promptly remit payments to the insurer. Exact extract: “An agent who accepts funds from an applicant shall hold such funds in a fiduciary capacity and shall promptly remit them to the insurer.”

When all named beneficiaries predecease the insured, the policy proceeds revert to the insured’s estate. This allows settlement under probate unless otherwise directed by policy terms.

Exact Extract (Virginia Life Insurance Study Guide): “If no living beneficiary is designated at the time of the insured’s death, proceeds are payable to the estate of the insured.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Beneficiary Succession

The recurrent disability provision allows a relapse of the same disability within a specified time (usually 6 months) to be treated as a continuation of the prior disability, avoiding a new elimination period. Exact extract: “Recurrent disability is one which results from the same cause as a prior disability and occurs within a stated period; it is considered a continuation of the prior claim.”

Insurers may evaluate actuarial risk factors such as age, health, weight, and occupation. Religion is never a permissible underwriting factor. Exact extract: “Underwriting practices may not discriminate based on race, color, creed, or religion.” This ensures compliance with fairness standards and anti-discrimination laws.

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.

Detailed Answer in Step-by-Step Solution:

Accidental death and dismemberment (AD&D) insurance (B) provides a lump sum benefit for specific losses, such as loss of sight in both eyes, due to an accident.

Hospital expense (A) covers hospital stays, not lump sums for dismemberment.

Major medical (C) and medical expense (D) cover healthcare costs, not specific injury benefits.

The Virginia study guide describes AD&D as providing lump sum payments for accidental death or specific injuries like loss of sight, distinct from medical expense coverage. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Health Insurance Types."

Detailed Answer in Step-by-Step Solution:

Long-term care insurance (B) is designed to cover custodial care (e.g., help with daily activities like bathing or dressing) when individuals cannot care for themselves, often outside a hospital setting.

Medicare (A) provides limited long-term care coverage (e.g., skilled nursing for a short period), not comprehensive custodial care.

Major medical (C) covers hospital and medical expenses, not long-term custodial care.

Disability income (D) replaces lost income, not care costs.

The Virginia study guide defines long-term care insurance as coverage for extended care needs, such as in nursing homes or at home, when individuals cannot perform activities of daily living, distinguishing it from Medicare or major medical plans. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Types of Health Insurance."