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

Virginia insurance law (Title 38.2, Chapter 18) recognizes three types of agent authority: express, implied, and apparent. Express authority (option B) is explicitly granted by the insurer in the agency agreement (e.g., soliciting policies), per Virginia Code § 38.2-1800 et seq. Implied authority (option C) is unwritten power to perform incidental acts necessary for express duties (e.g., collecting premiums). Apparent authority (option A) arises when a third party reasonably believes the agent has authority based on the insurer’s actions (e.g., providing branded materials), binding the insurer legally. Option D (residual authority) is not a recognized term in Virginia insurance or agency law; “residual” might relate to markets or benefits elsewhere, but not agent authority. The study guide likely outlines these three authorities with examples, excluding D as a fabricated or irrelevant concept, making it the exception.

The concept of agency authority is foundational in Virginia insurance law, derived from general agency principles and reflected in Title 38.2, Chapter 18. Express authority is explicitly granted in the agency agreement (e.g., soliciting and binding coverage), per Virginia Code § 38.2-1800 et seq. Implied authority, however, is not written but assumed to be necessary for carrying out express duties—such as scheduling client meetings or collecting initial premiums—unless restricted by the insurer. “Mandated authority” (option B) is not a recognized term in Virginia insurance regulations or study materials. Option C (express authority) is incorrect because it’s explicitly stated, not unwritten. Option D (nonexistent) denies the presence of authority, which contradicts the question’s premise. The Virginia Life, Annuities, and Health Insurance study guide likely highlights implied authority as a key concept for agents’ day-to-day operations, making A the correct answer.

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

Virginia Code § 38.2-3500 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 § 38.2-3508 governs cancellation of individual health insurance policies. For the insured to cancel, they must notify the insurer in writing (option A), specifying intent to terminate, typically effective upon receipt or a stated date, per policy terms. This formal notice ensures clarity and protects both parties, aligning with contract law principles. Option B (replace with another policy) is a practical choice but not a legal requirement; cancellation can occur without replacement. Option C (challenge mandatory provisions) is nonsensical; uniform provisions (e.g., grace period, per § 38.2-3503) are standard and unrelated to cancellation. The study guide likely outlines this process in a policyholder rights section, with examples—e.g., a letter stating “Cancel effective 5/1/2025”—emphasizing written notice as the sole requirement, making A the correct action.

Virginia Code § 38.2-3106 governs life insurance delivery, where insurers may require a statement of good health (option B) at policy issuance to confirm no material health changes occurred since the application (e.g., a new cancer diagnosis). This signed document protects the insurer from undisclosed risks between underwriting and delivery, potentially voiding coverage if false (subject to incontestability, § 38.2-3105). Option A (disclosure notice) relates to privacy or policy terms, not health updates. Option C (conditional receipt) is issued at application with premium payment, providing temporary coverage, not a delivery requirement. Option D (notice of information practices) informs about data use (per § 38.2-604), not health status. The study guide likely illustrates this with a scenario—e.g., an insured signing to confirm no heart attack post-application—making B the standard practice.

Agents may collect premiums but cannot personally cash or deposit checks as if they were funds of their own. Exact extract: “Agents must forward funds promptly to insurers and may not treat premiums as personal assets.”

Producer/agent authority in insurance is taught and tested in Virginia under general agency law concepts: express (actual), implied, and apparent authority. Exact extract (Study Guide): “Types of producer authority include: (1) express authority—authority the insurer gives the producer by contract; (2) implied authority—authority not expressly granted but reasonably necessary to carry out the producer’s duties; and (3) apparent authority—authority the public reasonably believes the producer has.”

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.”

Detailed Answer in Step-by-Step Solution:

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

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

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

Detailed Answer in Step-by-Step Solution:

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

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

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

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

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 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.”

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

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."

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

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

Detailed Answer in Step-by-Step Solution:

Virginia law requires due process, meaning an agent’s license cannot be revoked until they’ve had a hearing (A) to contest the charges.

Options B (three violations), C (jury), and D (cease and desist) are not prerequisites for revocation proceedings.

The Virginia study guide mandates that the Bureau of Insurance provide a hearing before revoking a license, ensuring fairness under state administrative law. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "License Regulation."

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

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

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Term Insurance Features

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.”

Moral hazard refers to the increased chance of loss due to the insured’s dishonesty or fraudulent intent. Examples include exaggerating claims or intentionally causing loss.

Exact Extract (Virginia Insurance Fundamentals Study Guide): “Moral hazard—hazard arising from dishonesty or lack of integrity of the insured, such as filing fraudulent claims.”

References (Virginia Documents / Study Guide):

— Virginia General Insurance Concepts Outline, Risk and Hazards

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.”

A POS plan blends characteristics of HMOs and PPOs/indemnity plans. Like an HMO, members choose a primary care physician, but they can also go out-of-network and receive partial reimbursement (similar to indemnity coverage). Exact extract: “POS plans combine features of HMOs and indemnity plans, permitting members to seek care within the network or outside the network at higher cost-sharing.” This flexibility allows broader provider choice while controlling costs through the HMO model.

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

An outline of coverage must be given to all applicants at the time of application. This document clearly describes the benefits, services, copayments, deductibles, exclusions, limitations, and premium details so that consumers can make informed choices. Virginia regulations require insurers to deliver this document in a standard format prescribed by the Bureau of Insurance.

Exact Extract (Virginia Medicare Supplement Regulations): “Issuers shall provide an outline of coverage to all applicants at the time the application is presented… It shall include a description of benefits, services, exclusions, copayments, deductibles, and premiums.”

References (Virginia Documents / Study Guide):

— Virginia Administrative Code 14VAC5-170-150 (Required disclosure provisions – Outline of Coverage)

— Code of Virginia §38.2-3606 (Outline of Coverage requirement)

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."

Detailed Answer in Step-by-Step Solution:

The health insurance application is signed by the applicant (who provides personal info) and the agent (D), who certifies the information’s accuracy and their role in the process.

The spouse (A) or dependents (B) don’t sign unless they’re co-applicants. An inspection representative (C) is not involved in the application process.

The Virginia study guide specifies that the agent signs the application alongside the applicant to verify the submission and their involvement, per standard industry practice. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Application Process."

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

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

References (Virginia Documents / Study Guide):

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

When an insured is covered under more than one group health plan, the primary plan pays first. The secondary plan pays remaining eligible expenses after the primary plan has paid.

Exact Extract (Virginia Group Health Insurance Study Guide): “The primary plan is responsible for paying benefits first under coordination of benefits. The secondary plan covers remaining eligible expenses.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Coordination of Benefits

Detailed Answer in Step-by-Step Solution:

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

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

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

Detailed Answer in Step-by-Step Solution:

Agents assist underwriting by collecting application data (A), obtaining additional info (C), and reporting material facts (D), but determining the final rate classification (B) is the insurer’s underwriter’s role, not the agent’s.

Rate classification involves risk assessment, which is beyond an agent’s authority.

The Virginia study guide specifies that agents facilitate underwriting by providing accurate information, while the insurer’s underwriters set rates based on that data. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Underwriting Process."

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.)

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.”

Virginia law requires agents to promptly notify the Bureau of Insurance if they discontinue the use of an assumed name or trade name under which they were licensed.

Exact Extract (Virginia Producer Regulations): “An agent who conducts business under an assumed or fictitious name shall notify the Bureau of Insurance when such name is no longer used.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-1822 (Use of assumed or fictitious names)

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.”

Virginia Code § 38.2-1826(C) mandates that licensees (agents, brokers, etc.) report administrative actions—such as license revocation or fines by another state or agency—to the Bureau of Insurance within 30 calendar days of the final disposition. “Final disposition” means the conclusion of the action (e.g., final order or settlement). This requirement ensures Virginia regulators can assess the licensee’s fitness to hold a license and protect consumers. Option C (30 days) matches this statutory timeline precisely. Option A (10 days) is too short and not supported by Virginia law. Option B (20 days) lacks a basis in the Code or study materials. Option D (45 days) exceeds the mandated period, risking delayed oversight. The study guide likely emphasizes this 30-day rule as a critical compliance deadline, reinforced by Virginia’s alignment with NAIC standards for licensee reporting, making C the definitive answer.

Federal Age Discrimination in Employment Act (ADEA) requires equal benefits for older workers. Employers cannot deny the same group health coverage offered to younger employees. Exact extract: “Employees age 65 and older must be offered the same health benefits as those under 65.”

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

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.”

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:

The policyowner (A) has the right to designate the beneficiary, as they control the policy’s terms and ownership rights.

The insurer (B) issues the policy, the beneficiary (C) receives proceeds, and the agent (D) facilitates but doesn’t decide.

The Virginia study guide confirms that the policyowner selects the beneficiary, exercising a fundamental ownership right, unless assigned otherwise. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Beneficiary Designations."

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."

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.

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)

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."

Detailed Answer in Step-by-Step Solution:

Endodontic services involve treatment of the tooth’s interior (pulp and roots), with root canals (C) being a primary example.

Crowns (A) and fillings (D) are restorative, not endodontic. Dentures (B) are prosthetic, unrelated to endodontics.

The Virginia study guide classifies root canals as an endodontic procedure, distinct from restorative or prosthetic dental services, per standard dental insurance definitions. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Dental Insurance."

Virginia Code § 38.2-3501 requires health insurance applications to include essential details for underwriting and contract formation: the applicant’s name and address (option A), signature (option B) to affirm accuracy, and date (option C) to establish timing. These are mandatory for a complete application. Option D (initial premium) is not required on the application itself; while payment may accompany it to bind coverage (e.g., via a conditional receipt), it’s a separate transaction, not an application component. The study guide likely lists these elements in a sample application, noting that premium submission is optional until acceptance, making D the exception.

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.”

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

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."

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.

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.

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

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 § 38.2-3330 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.

Virginia requires a free-look period for individual health insurance during which the policy may be returned for a full refund of all premiums paid. Exact extract: “A ten-day free-look period shall be provided in which the policy may be returned for a full refund of premium.”

Pre-existing conditions are defined as illnesses or conditions for which an insured received medical advice, diagnosis, or treatment prior to the effective date of coverage.

Exact Extract (Virginia Health Insurance Study Guide): “Pre-existing condition—any condition for which diagnosis, medical advice, or treatment was received prior to the policy’s effective date.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Policy Exclusions and Limitations

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.

Virginia’s Unfair Claims Settlement Practices Act prohibits insurers or agents from misrepresenting facts or policy provisions relating to coverage. Doing so after a loss is classified as an unfair claims settlement practice.

Exact Extract (Virginia Unfair Claims Settlement Law): “Misrepresenting pertinent facts or policy provisions relating to coverages at issue is an unfair claim settlement practice.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-510 (Unfair claim settlement practices)

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."

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

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

References (Virginia Documents / Study Guide):

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

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.

Whole life insurance provides permanent coverage, builds guaranteed cash value, and allows for policy loans. However, it has a higher initial premium cost compared to term life insurance. Therefore, the statement that whole life has lower initial costs is incorrect.

Exact Extract (Virginia Life Insurance Study Guide): “Whole life insurance provides long-term protection, guaranteed cash values, and policy loans. Premiums are higher than term insurance for equivalent coverage.”

References (Virginia Documents / Study Guide):

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

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

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.

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:

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

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

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

When underwriting group health, insurers consider the group’s stability, demographics, and industry risk. Persistency (how long the employer has had coverage) is important for business retention but is not directly a health risk factor.

Exact Extract (Virginia Group Insurance Study Guide): “Underwriting group health considers stability, composition, and industry. Persistency of a contract relates to retention, not health risk.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Group Underwriting Factors

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.

Disability income insurance excludes coverage for claims resulting from participation in illegal activities or employment considered unlawful. Therefore, disability resulting from an illegal occupation may be denied.

Exact Extract (Virginia Disability Insurance Study Guide): “Policies exclude disabilities arising from illegal occupations or activities. Claims in connection with such occupations may be denied.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Exclusions in Disability Income Policies

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.

When a corporation buys disability income insurance on a key employee, the corporation is both policyowner and beneficiary. Premiums are not deductible because the business is the direct beneficiary. However, benefits received by the business are tax-free when the insured employee becomes disabled.

Exact Extract (Virginia Disability Income Study Guide): “Key person disability insurance—premiums are not deductible to the business, but benefits received are tax-free to the business.”

References (Virginia Documents / Study Guide):

— Virginia Health Insurance Examination Outline, Business Uses of Disability Insurance

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

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.