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

A SPDA is funded with a single lump sum payment. The payout (distribution) begins at a later date, not immediately, and withdrawals are taxable.

Exact Extract (Virginia Annuities Study Guide): “Single Premium Deferred Annuity—funded with a single lump-sum payment; benefits begin at a future date.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Examination Outline, Types of Annuities

Custodial care is non-medical assistance with daily living activities, requiring no professional medical training. Rehabilitative, therapeutic, and intermediate care require licensed or trained personnel. Exact extract: “Custodial care provides assistance with daily living activities and does not require medical skills.”

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.”

The fixed period settlement option in life insurance, per Virginia Code § 38.2-3115, pays the death benefit in equal installments over a set time (e.g., 10 years), determined by the policyowner or beneficiary if not restricted. Option B is true; a longer period spreads the principal and interest over more payments, reducing each installment (e.g., $100,000 over 20 years yields smaller payments than over 5 years). Option C is true; payments blend principal and interest earned on the remaining proceeds held by the insurer. Option D is true; Virginia law allows beneficiaries to choose settlement options unless the policyowner locks in a method (e.g., via a policy endorsement). Option A is false; the payment amount depends on the proceeds, interest rate, and period length—not the beneficiary’s age, which might influence a life income option instead. The study guide likely contrasts fixed period (time-based) with life annuity (age-based) options, using examples like $500 monthly for 10 years, making A the exception.

Rebating occurs when an agent gives part of their commission, money, or anything of value to induce a customer to purchase insurance. This practice is prohibited under Virginia’s Unfair Trade Practices Act.

Exact Extract (Virginia Unfair Trade Practices Law): “Rebating includes paying, allowing, or giving any rebate of premium, commission, or other valuable consideration as an inducement to the purchase of insurance.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-509 (Rebates and inducements prohibited)

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."

Agents are fiduciaries, meaning they must handle clients’ premiums with the highest standard of care. Misuse or misappropriation of funds constitutes a violation of fiduciary duty.

Exact Extract (Virginia Agent Regulations): “Insurance producers act in a fiduciary capacity regarding premiums received from insureds and must promptly remit them to insurers.”

References (Virginia Documents / Study Guide):

— Code of Virginia §38.2-1834 (Fiduciary responsibility of agents)

Virginia Code § 38.2-4306 requires HMOs to offer preventive care, coordinated by primary care physicians (PCPs), focusing on health maintenance. Option A (well-baby checkups), option B (immunizations for children), and option D (physical examinations) are standard preventive services—e.g., growth monitoring, vaccines, and annual exams—covered at no cost under ACA-aligned plans (Virginia Code § 38.2-3440). Option C (experimental surgery) is not preventive; it’s a treatment, often excluded or requiring special approval due to its unproven nature, not a PCP’s routine role. The study guide likely lists HMO preventive benefits with examples (e.g., flu shots), contrasting them with non-preventive interventions like surgery, making C the exception.

Automatic premium loans use policy cash value to keep coverage in force, and interest is charged on the borrowed amount. Exact extract: “The automatic premium loan uses policy values to pay overdue premiums; interest is charged on the loan balance.”

Detailed Answer in Step-by-Step Solution:

Reinsurance (C) is a process where one insurer (the ceding company) transfers part or all of its risk to another insurer (the reinsurer) to reduce exposure.

A reciprocal contract (A) involves mutual insurance exchanges, not risk transfer between insurers.

Coinsurance (B) refers to shared risk between the insurer and policyholder, not between insurers.

A captive contract (D) involves a company insuring itself through a subsidiary, not transferring risk to another insurer.

The Virginia study guide defines reinsurance as a contractual arrangement allowing insurers to mitigate risk by transferring it to another insurer, a common practice in the industry. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Insurance Company Operations."