Michigan Life & Health Practice Test

Answer choices

1. A. Coinsurance, because the member pays a stated percentage of the covered allowed amount.
2. B. A copayment, because every percentage-based charge is treated as a fixed dollar fee.
3. C. A premium, because the charge is due only when the member receives a covered service.
4. D. An elimination period, because the member must pay part of the cost before benefits continue.

Wrong-answer review

• B. A copayment, because every percentage-based charge is treated as a fixed dollar fee.: Incorrect. A copayment is generally a fixed amount.
• C. A premium, because the charge is due only when the member receives a covered service.: Incorrect. A premium keeps coverage in force and is not calculated as a percentage of a specific service.
• D. An elimination period, because the member must pay part of the cost before benefits continue.: Incorrect. An elimination period is a waiting period, not percentage cost sharing.

Answer choices

1. A. The distribution is entirely tax-free because all IRA earnings become exempt once the owner retires.
2. B. Only one-half of the distribution is taxable because traditional IRAs receive a statutory 50% exclusion.
3. C. The distribution is taxed only if the owner also receives Social Security benefits during the same year.
4. D. The distribution is generally included in ordinary income in the year received.

Answer choices

1. A. Unilateral contract.
2. B. Bilateral employment contract.
3. C. Negotiated commutative contract.
4. D. Joint venture agreement.

Answer choices

1. A. Absolute warranties in every circumstance.
2. B. Representations.
3. C. Automatic policy exclusions.
4. D. Nonforfeiture options.

Answer choices

1. A. Adopted-child and placement coverage rules can make the child eligible from the qualifying placement, subject to plan enrollment procedures.
2. B. The child must wait until the adoption decree is final and then remain uninsured for a 12-month probationary period.
3. C. The child can be covered only as a grandchild because placement does not create dependent eligibility.
4. D. The child may join the plan only after the employee changes from group coverage to an individual policy.

Answer choices

1. A. A straight-life or life-only annuity, which pays for the annuitant's lifetime with no period-certain guarantee.
2. B. A life-with-20-year-certain annuity, which adds a guaranteed payment period and therefore typically reduces the periodic amount.
3. C. A joint-and-survivor annuity, which continues income based on two lives rather than ending at the first annuitant's death.
4. D. A fixed-period annuity, which pays for a stated number of years without a lifetime guarantee.

Answer choices

1. A. The insurer must charge every applicant exactly the same premium regardless of age, location, tobacco use, or family size.
2. B. The insurer must cover every conceivable service without exclusions, utilization management, or plan limitations.
3. C. The insurer cannot refuse the applicant solely because of health status or the chronic condition.
4. D. The insurer must issue coverage at any time of year even when no open or special enrollment right exists.

Answer choices

1. A. She is the beneficiary because the owner always receives the death benefit after the annuitant dies.
2. B. She is the insurer because she controls contract rights and selects the payout option.
3. C. She is the producer because an annuity owner automatically becomes the licensed representative on the contract.
4. D. She is the annuitant because her life expectancy is used to determine the life-contingent payments.

Answer choices

1. A. Medicare Part A, because all physician and outpatient services are treated as inpatient hospital care.
2. B. Medicare Part B, which helps cover physician services, outpatient care, durable medical equipment, and many preventive services.
3. C. Medicare Part C, because Original Medicare automatically includes every private Medicare Advantage plan.
4. D. Medicare Part D, because durable medical equipment is classified as a prescription drug benefit.

Answer choices

1. A. The employee must immediately buy Medicare because termination of employment creates automatic Medicare eligibility.
2. B. The employee may have a right to elect temporary continuation of the same group health coverage under COBRA.
3. C. The employee has no continuation right if the termination was voluntary rather than involuntary.
4. D. The employee may continue coverage only if the former employer keeps paying the entire premium.