Other Insurance Concepts — practice questions

6% of the exam ≈5 real questions 8 free questions here

Disability definitions, coordination of benefits, taxation of premiums and benefits, workers compensation and subrogation: 5 of the 85 scored questions.

Where people lose points

• Residual disability pays in proportion to lost income; partial disability pays a flat reduced benefit.
• The birthday rule uses the parent whose birthday comes first in the calendar year, not the older parent.
• Employer-paid disability premiums make the benefits taxable; premiums the worker pays make them tax-free.
• Occupational coverage includes on-the-job injuries; nonoccupational coverage leaves them to workers compensation.

Questions and answers, explained

All 8 questions above, with the correct answer and why it is correct. Everything here is on other insurance concepts.

1. After recovering from surgery, Marta returns to her job part-time and now earns 40% less than she did before her disability. Which disability income policy benefit would pay her an amount based on the percentage of earnings she has lost?

   • ATotal disability benefit
   • BResidual disability benefitCorrect
   • CPresumptive disability benefit
   • DWaiver of premium benefit

   Why: A residual disability benefit pays a proportionate amount based on the insured's actual loss of earnings — here, roughly 40% of the total disability benefit. By contrast, a partial disability benefit typically pays a flat 50% of the total benefit for a limited time, and presumptive disability applies to specified losses such as sight, hearing, speech, or two limbs.

   Reference Outline VIII (Other Health Insurance Concepts): total/partial/residual disability

2. Which beneficiary is entitled to a policy's death proceeds ONLY if the primary beneficiary dies before the insured?

   • AThe irrevocable beneficiary
   • BThe contingent beneficiaryCorrect
   • CThe tertiary beneficiary
   • DThe insured's estate

   Why: The contingent (secondary) beneficiary stands second in line and collects only if the primary beneficiary predeceases the insured. A tertiary beneficiary is third in line, behind the contingent beneficiary, and the insured's estate receives the proceeds only when no named beneficiary survives the insured.

   Reference Outline VIII (Other Health Insurance Concepts): primary and contingent beneficiaries

3. Diego is insured under his employer's nonoccupational group disability income plan. He is injured while performing his job duties, and the injury is compensable under workers' compensation. What will the group plan pay?

   • AFull benefits, in addition to the workers’ compensation award
   • BBenefits, but only after the workers’ compensation benefits are exhausted
   • CHalf of the normal benefit amount for the duration of the disability
   • DNothing, because a nonoccupational plan excludes work-related injuriesCorrect

   Why: Nonoccupational coverage applies only to sickness and injuries that occur off the job, because on-the-job injuries and illnesses are the province of workers' compensation. Occupational policies, by contrast, cover the insured 24 hours a day, both on and off the job.

   Reference Outline VIII (Other Health Insurance Concepts): occupational vs. non-occupational; workers compensation

4. Which statement BEST distinguishes a partial disability benefit from a residual disability benefit?

   • APartial pays in proportion to the insured's actual loss of earnings, while residual pays a flat 50% of the total benefit
   • BPartial benefits are payable for life, while residual benefits always stop after one year
   • CPartial pays a flat percentage of the total benefit, often 50%, while residual pays in proportion to the insured's actual loss of earningsCorrect
   • DOnly partial disability benefits require satisfaction of the elimination period

   Why: The defining difference is the measuring stick: a partial benefit is a fixed fraction of the total benefit paid for a stated maximum period, typically only after the insured has first been totally disabled, while a residual benefit is calculated from the insured's actual loss of income and can run for the full benefit period. Choice A simply reverses the two definitions, which is the single most common confusion on this pair.

   Reference Outline VIII (Other Health Insurance Concepts): total, partial, and residual disability

5. An employer pays the entire premium for its employees' group medical expense plan. Which statement about the federal tax treatment is CORRECT?

   • AThe premium is not deductible by the employer, but benefits are received tax-free
   • BThe premium is taxable income to the employees, and benefits are also taxable
   • CBenefits are taxable to the extent they exceed the premiums paid
   • DThe premium is deductible by the employer, is excluded from employees' income, and benefits are tax-freeCorrect

   Why: Employer-paid group medical expense premiums are a deductible business expense, are excluded from employees' gross income, and reimbursement of medical expenses is received income tax-free. This is the opposite of group disability income, where employer-paid premiums make the resulting benefits taxable to the employee — the distinction candidates most often miss.

   Reference Outline VIII (Other Health Insurance Concepts): tax treatment of medical expense coverage

6. Under Florida's workers' compensation law (ch. 440, F.S.), which employer is generally REQUIRED to carry workers' compensation coverage?

   • AA landscaping company with two employees
   • BA roofing contractor with one employeeCorrect
   • CA retail store with three part-time employees
   • DA law firm with three employees

   Why: Section 440.02(20)(b), F.S., defines covered employment to include all private employment in the construction industry with one or more employees, while non-construction private employers are generally covered only at four or more employees, counting full-time and part-time workers alike. The landscaping company, retail store, and law firm are all non-construction employers below the four-employee threshold, so only the roofing contractor is required to be covered.

   Reference Outline VIII (Other Health Insurance Concepts): workers' compensation; ss. 440.02(20)(b) and 440.10, F.S.

7. Elsa is 67, still actively working, and covered by her employer's group health plan. The employer has 45 employees. She is also enrolled in Medicare Parts A and B. Which coverage pays first?

   • AMedicare, because she is over age 65
   • BThe two plans split each claim equally
   • CThe employer group health plan, because the employer has 20 or more employeesCorrect
   • DNeither — she must choose one coverage and drop the other

   Why: Under the Medicare Secondary Payer rules, a group health plan of an employer with 20 or more employees is primary for active employees age 65 or older and their covered spouses, and Medicare pays secondary. Choice A would be correct only if the employer had fewer than 20 employees; note that the threshold rises to 100 employees when Medicare entitlement is based on disability rather than age.

   Reference Outline VIII (Other Health Insurance Concepts): coordination with Medicare — Medicare Secondary Payer

8. A disability income policy includes a Social Insurance Supplement (SIS) rider. This rider pays a benefit

   • Aonly while the insured is also collecting Social Security disability benefits
   • Bin place of the base policy benefit at all times, whether or not the insured is disabled
   • Cwhen Social Security disability benefits are denied, delayed, or paid in a lesser amountCorrect
   • Dto the insured's employer as reimbursement for sick pay already advanced

   Why: The SIS rider exists to fill the gap created by Social Security's strict 'any occupation' definition and its five-month waiting period: it pays when the expected social insurance benefit is not received, and it typically reduces or stops once Social Security benefits actually begin. Choice A reverses the trigger — the rider is most valuable precisely when Social Security pays nothing.

   Reference Outline VIII (Other Health Insurance Concepts): Social Insurance Supplement rider

Drill other domains

• Types of Health Policies (19%)
• Policy Provisions, Clauses and Riders (18%)
• Social Insurance (7%)
• Field Underwriting Procedures (9%)
• Florida Statutes and Rules Common to All Lines (23%)
• Florida Statutes — Health Insurance (18%)

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