Question 1

Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income?

Accepted Answer

Borrowing money to buy a car that will enable you to get a better paying job can be financially beneficial in the long run as it may lead to a higher income and career advancement. This is known as investing in oneself or one's career. Options A and D are not financially beneficial as they are purchases for personal enjoyment and do not have any potential return on investment. Option B is not financially beneficial as the interest on the loan would be an additional cost, whereas if the interest earned on savings is less than the interest paid on the loan, it would result in a net loss.

Question 2

It is the initial amount not covered by an insurance policy and thus the insured's responsibility; it's usually determined on a calendar-year basis or on a per-illness or eraccident basis. We may call it as:

Accepted Answer

Deductible is the initial amount not covered by an insurance policy and thus the insured's responsibility. Participation clause refers to a type of policy where the insured pays a fixed amount, while co-insurance refers to the percentage of costs shared between the insurer and the insured. Internal limits are a cap on the amount of coverage provided by the policy.

Question 3

Many people put aside money to take care of unexpected expenses. If John and Jenny have money put aside for emergencies, in which of the following forms would it be of LEAST benefit to them if they needed it right away?

Accepted Answer

Investing in a down payment for a house is not liquid, meaning it cannot be quickly converted to cash in case of an emergency.

Question 4

The delivery of medical and personal care, other than hospital care, to persons with chronic medical conditions resulting from either illness or frailty is called:

Accepted Answer

Long-term care refers to the delivery of medical and personal care to persons with chronic medical conditions resulting from illness or frailty. Short-term care refers to temporary care, usually after a hospitalization, to help a person recover before returning home. Basic care and guaranteed renewability are not relevant to this definition.

Question 5

It is an insurance plan designed to supplement the basic coverage of hospitalization, surgical and physician expenses; used to finance more catastrophic medical costs. What is it?

Accepted Answer

A major medical plan is specifically designed to supplement basic coverage for catastrophic medical costs. It usually has a much higher deductible and out-of-pocket maximum than a traditional health insurance plan but provides coverage for more expensive treatments and procedures.

Question 6

___________ is a policy provision ensuring continued insurance coverage for the insured's lifetime as long as premiums continue to be paid.

Accepted Answer

Guaranteed Renewability is a policy provision ensuring continued insurance coverage for the insured's lifetime as long as premiums continue to be paid. A waiting period is a period of time that must pass before certain benefits can be received, and optional renewability allows the policyholder to choose whether or not to renew their policy at the end of its term. None of these options describe the policy provision of Guaranteed Renewability.

Question 7

Retirement income paid by a company is called:

Accepted Answer

Retirement income paid by a company is called a pension. Rents and profits refer to income generated from property or business ownership, social security is a government-funded retirement program, and 401(k) is a retirement savings plan offered by some employers.

Question 8

Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage?

Accepted Answer

If the parents lose their job, they may lose their health insurance coverage and, as a result, the coverage of their dependents. Therefore, young people may not be covered by their parents' insurance if their parents become unemployed. Option A is incorrect because young people, like everyone else, may still encounter health complications or accidents, and health insurance can help with those situations. Option B is incorrect because coverage eligibility typically depends on age, regardless of whether or not the dependent still lives at home. Option C is incorrect for the same reason as option B.

Question 9

______________ is a health insurance plan that combines into a single policy the coverage for basic hospitalization, surgical, and physician expenses along with major medical protection.

Accepted Answer

Comprehensive major medical insurance combines basic hospitalization, surgical, and physician expenses with major medical protection.

Question 10

Several insurance provisions affect a health insurance plan's value to you. Some important provisions address:

Accepted Answer

These provisions are important as they determine who is covered, under what circumstances the policy can be canceled, and what rehabilitation services are included. "Re-existing conditions" seems to be a typo or incorrect term; it should likely refer to "pre-existing conditions," which is also an important provision but not listed correctly here.

Question 11

Maria worked her way through college earning $20,000 per year. After graduation, her first job pays $40,000. The total dollar amount Maria will have to pay in federal income taxes in her new job will:

Accepted Answer

Federal income taxes are calculated as a percentage of one's income. As Maria's income has doubled from $20,000 to $40,000, she will be moved into a higher tax bracket and will owe more in federal income taxes. Therefore, her taxes will at least double.

Question 12

Kelly and Pete just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?

Accepted Answer

Stocks tend to have the highest growth over long periods of time, making them a good choice for investing in a child's education. However, stocks come with greater risk and volatility than other options, so it's important for Kelly and Pete to consult with a financial advisor before investing in stocks.

Question 13

Most of the major types of health plans are sufficient to meet the protection needs of most individuals and families. But, insurance companies offer other options that provide limited protection against certain types of perils. Which one of the following is the example of those limited types of protections?

Accepted Answer

Accident protection and home income policies are limited types of protections that provide coverage against specific perils. Accident protection provides coverage in the event of accidental injury, while home income policies provide coverage in the event of unexpected loss of income due to job loss or disability. Comprehensive medical insurance, on the other hand, is a more comprehensive type of protection that offers coverage for a range of medical expenses.

Question 14

A voluntary program under Medicare that provides payments for services not covered under basic hospital insurance is called:

Accepted Answer

Supplementary medical insurance (SMI) is a voluntary program under Medicare that provides payments for services not covered under basic hospital insurance. It helps pay for physician services, outpatient hospital services, certain home health services, and durable medical equipment.

Question 15

Prescription drug coverage is:

Accepted Answer

The answer of Prescription drug coverage is:
...

Question 16

Many health insurance plans omit or offer only reduced benefits for treatment of mental disorders. For example, a health insurance policy may offer hospitalization benefits that continue to pay as long as you are hospitalized except for mental illness. It may restrict payment for mental illness to one-half of the normally provided payment amounts and for a period not to exceed:

Accepted Answer

The question states that the insurance policy restricts payment for mental illness for a period not to exceed a certain amount. Out of the options given, the highest amount is 30 days, so the best choice is C.

Question 17

A universal life insurance provides two types of death protections, i.e. Type A and B. As with any insurance policy, universal life insurance has its own pros and cons. There are two principle advantages. Which of the followings is/are out of those advantages?

Accepted Answer

Universal life insurance offers the advantage of flexibility in terms of premium payments, death benefits, and policy modifications, as well as a savings feature where a portion of the premium is invested to accumulate cash value over time. Therefore, option B is correct as it mentions both flexibility and savings feature as the principle advantages of universal life insurance. Option A (Flexibility) and Option C (Flexibility and variability) are partially correct, but they do not mention the savings feature, which is an important advantage of universal life insurance. Option D (Variability and savings feature) is incorrect as it does not mention flexibility, which is one of the main advantages of universal life insurance.

Question 18

A participation or co-insurance clause stipulates that the company will pay some portion of the covered loss in excess of the deductible rather than the entire amount. How much portion of the covered loss may be paid by the company?

Accepted Answer

The answer of A participation or co-insurance clause stipulates that...

Question 19

If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to federal law?

Accepted Answer

According to federal law, you are only responsible for up to $50 of fraudulent charges made on your stolen credit card, as long as you report the theft to the issuer as soon as possible.

Question 20

There is a feature which is commonly found in health insurance policies that limit the amount that will be paid for certain specified expenses, even if the claim does not exceed overall policy limit. What is that feature?

Accepted Answer

The feature commonly found in health insurance policies that limit the amount that will be paid for certain specified expenses, even if the claim does not exceed overall policy limit is called internal limits. This means that even if the overall policy limit has not been reached, there may be a separate limit for certain expenses such as prescription drugs, hospital stays, or mental health services.

Exam 2: Certified Trust and Financial Advisor