Illinois Life & Health Practice Test

Answer choices

1. A. The employee must immediately buy Medicare regardless of age or Medicare eligibility.
2. B. A reduction in hours can be a qualifying loss of coverage for which Illinois continuation rights must be evaluated under Section 367e.
3. C. The insurer may ignore continuation because the employee remains on the payroll.
4. D. Continuation applies only when the employer goes out of business, never when hours are reduced; the plan could rely solely on its internal contract wording without considering the separate statutory protection.

Wrong-answer review

• A. The employee must immediately buy Medicare regardless of age or Medicare eligibility.: Incorrect. A reduction in work hours does not itself create Medicare eligibility.
• C. The insurer may ignore continuation because the employee remains on the payroll.: Incorrect. The relevant issue is loss of group eligibility, not merely payroll status.
• D. Continuation applies only when the employer goes out of business, never when hours are reduced; the plan could rely solely on its internal contract wording without considering the separate statutory protection.: Incorrect. Section 367e expressly addresses qualifying losses tied to termination or reduction in hours.

Answer choices

1. A. $5,000, because the annual maximum is automatically paid whenever a covered hospitalization occurs.
2. B. $500, because only the first five inpatient days can be counted toward the policy maximum.
3. C. The full hospital bill, because hospital-indemnity coverage reimburses actual inpatient charges up to the annual maximum; this outcome would also assume that the limited-benefit contract pays according to the stated covered event or schedule rather than ordinary major-medical reimbursement.
4. D. $600, because six covered days at $100 per day total $600 and the annual maximum has not been reached.

Answer choices

1. A. Increasing term insurance, with the death benefit rising by a stated amount or percentage and premiums generally increasing with the added coverage.
2. B. Level term insurance, with a death benefit and scheduled premium that remain level for the stated term; the producer could present it as the closest fit for the temporary insurance need described.
3. C. Single-premium whole life insurance, funded with one lump-sum premium for lifetime protection.
4. D. Decreasing term insurance, with a death benefit that falls while the premium commonly stays level.

Answer choices

1. A. Maria has no continuation right because COBRA applies only to employers with fewer than 20 employees; this outcome would also assume that the continuation or coordination rule would apply to the covered employee and dependents under the plan as described.
2. B. Maria receives permanent continuation coverage at the employer's expense for life.
3. C. Only Maria's employer may elect continuation on her behalf; Maria has no individual election right.
4. D. Maria and other qualified beneficiaries must be offered the opportunity to elect temporary continuation coverage under COBRA, generally up to 18 months for termination or reduction in hours.

Answer choices

1. A. The HSA distribution becomes taxable only because the HRA is employer-funded, even if no second reimbursement occurs.
2. B. The HRA must reimburse the expense first in every case because federal law creates a universal HRA priority rule; the employee’s eligibility would be determined under the federal rules governing other health coverage.
3. C. He may collect unlimited tax-free reimbursements for the same expense from every available account.
4. D. The same expense cannot be treated as an unreimbursed qualified expense for multiple tax-free reimbursements; plan coordination rules must prevent duplicate reimbursement.

Answer choices

1. A. Policy loan, which automatically converts the contract to a smaller paid-up policy.
2. B. Extended term insurance, which keeps the original face amount permanently with no expiration.
3. C. Reduced paid-up insurance, using the policy's value to purchase a smaller fully paid permanent death benefit.
4. D. Cash surrender, which preserves the original death benefit while paying the cash value to the owner, with the policyowner retaining the contractual rights that are not specifically changed by the transaction.

Answer choices

1. A. A 401(k) must distribute all earnings tax-free immediately each year.
2. B. A 401(k) is an individual life insurance policy and is not a retirement plan.
3. C. A 401(k) is available only to state governments and cannot be maintained by private employers, with no separate qualified-plan rule changing the result under the facts given.
4. D. A 401(k) plan is a type of qualified retirement plan and generally provides tax-favored retirement saving under applicable contribution and distribution rules.

Answer choices

1. A. Yes. Accelerated benefits and fixed-period settlements are legally identical because both divide a death benefit into installments; this outcome would also assume that the settlement method would control only the manner or timing of payment rather than create a new insured risk.
2. B. Yes. Accelerated benefits are elected only by the beneficiary after the insured's death.
3. C. No. Accelerated benefits are annuity contracts and therefore cannot be attached to life insurance.
4. D. No. An accelerated death benefit is a living-benefit provision for an insured who meets the rider's qualifying conditions; settlement options govern how proceeds are paid when a death claim becomes payable.

Answer choices

1. A. Shopping, driving, cooking, banking, housekeeping and medication management.
2. B. Walking, reading, hearing, speaking, breathing and sleeping.
3. C. Bathing, continence, dressing, eating, toileting and transferring.
4. D. Working, exercising, bathing, driving, shopping and dressing.

Answer choices

1. A. Maria, because the policyowner holds the contractual ownership rights while the beneficiary designation remains revocable.
2. B. The daughter, because any named beneficiary automatically becomes the policyowner when designated.
3. C. The insurer, because insurers control beneficiary changes after policy issue.
4. D. The producer, because the producer may alter ownership records whenever the insured requests advice; this outcome would also assume that the ownership or beneficiary change would be effective under the policy without the additional condition described elsewhere.