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web.groovymark@gmail.com
- December 18, 2024
Question 01
What is the main feature of a money market mutual fund (MMMF)?
a) It is offered by depository institutions
b) It requires a high initial deposit
c) It offers higher interest rates and is offered by mutual fund companies
d) It has no limit on the number of transactions
Answer: c) It offers higher interest rates and is offered by mutual fund companies
Explanation: Money market mutual funds (MMMFs) are offered by mutual fund companies, not depository institutions, and tend to provide higher interest rates than standard savings accounts.
Question 02
What does the “110 Rule” suggest about investment allocation?
a) Subtract your age from 110 to determine the percentage of your portfolio to invest in bonds
b) Subtract your age from 110 to determine the percentage to invest in stocks
c) Subtract your age from 110 to determine the percentage of income to save annually
d) Subtract 110 from your investment to calculate the risk-free return
Answer: b) Subtract your age from 110 to determine the percentage to invest in stocks
Explanation: The "110 Rule" is used to determine the percentage of an investment portfolio that should be allocated to equities (stocks) based on the investor’s age.
Question 03
Which of the following is NOT a feature of a tiered interest account?
a) Higher balances earn higher interest rates
b) There is a fixed interest rate regardless of balance
c) Lower balances earn lower interest rates
d) Interest rates vary based on account balance levels
Answer: b) There is a fixed interest rate regardless of balance
Explanation: Tiered interest accounts offer different interest rates based on the balance in the account, with higher balances earning higher rates. Fixed interest rates do not apply to this type of account.
Question 04
What is a “rider” in an insurance policy?
a) A clause that increases the insurance premium
b) A provision that provides additional benefits at an extra cost
c) A required legal document to renew the policy
d) A method to reduce coverage on a policy
Answer: b) A provision that provides additional benefits at an extra cost
Explanation: A rider is a provision added to an insurance policy to provide additional benefits beyond the basic policy coverage, typically at an additional cost.
Question 05
Which of the following health care plans involves paying a set fee per month for services rather than paying separately for each service?
a) Preferred Provider Organization (PPO)
b) Health Maintenance Organization (HMO)
c) Fee-for-service plan
d) Indemnity plan
Answer: b) Health Maintenance Organization (HMO)
Explanation: HMOs charge a fixed monthly fee for health services instead of charging separately for each visit or service, promoting preventive care and managing overall costs.
Question 06
What is the “individual mandate” under the Affordable Care Act (ACA)?
a) A requirement for health insurance companies to cover pre-existing conditions
b) A provision that mandates all Americans buy health insurance regardless of health status
c) A tax penalty on employers who do not offer health insurance
d) A subsidy for low-income individuals to purchase health insurance
Answer: b) A provision that mandates all Americans buy health insurance regardless of health status
Explanation: The individual mandate requires all Americans and legal residents to have health insurance, regardless of pre-existing conditions, to ensure that everyone contributes to the healthcare system.
Question 07
Which of the following defines a “health insurance exchange”?
a) A program where employers trade health insurance plans
b) A marketplace where consumers can purchase health insurance plans
c) A financial assistance program for medical bills
d) An organization that reviews insurance claims
Answer: b) A marketplace where consumers can purchase health insurance plans
Explanation: Health insurance exchanges, established by the Affordable Care Act, are state or federal marketplaces where consumers can shop for and buy health insurance plans.
Question 08
What is the benefit of a health savings account (HSA)?
a) Funds can only be used for prescription drugs
b) Contributions are tax-deductible, and withdrawals for medical expenses are tax-free
c) It provides automatic enrollment in health insurance
d) The employer matches contributions dollar for dollar
Answer: b) Contributions are tax-deductible, and withdrawals for medical expenses are tax-free
Explanation: HSAs allow individuals to make tax-deductible contributions and use the funds tax-free for qualified medical expenses, offering both savings and tax benefits.
Question 09
What is the maximum period for which an employee can remain on a group health plan under COBRA rights?
a) 6 months
b) 12 months
c) 18 months
d) 24 months
Answer: c) 18 months
Explanation: Under COBRA (Consolidated Omnibus Budget Reconciliation Act), a former employee can continue group health insurance coverage for up to 18 months after leaving employment.
Question 10
Which of the following accurately describes an “umbrella liability insurance”?
a) It replaces standard auto and home insurance
b) It covers liability losses that exceed the limits of other policies
c) It only covers business-related losses
d) It provides guaranteed payouts in case of a lawsuit
Answer: b) It covers liability losses that exceed the limits of other policies
Explanation: Umbrella liability insurance provides additional protection by covering claims that exceed the limits of underlying policies such as homeowner’s or auto insurance.
Question 11
What does the term “coinsurance” mean in the context of health insurance?
a) The portion of a medical bill you pay after the deductible
b) The amount paid for prescription drugs only
c) The monthly premium for health insurance
d) A tax-deductible contribution to a medical savings account
Answer: a) The portion of a medical bill you pay after the deductible
Explanation: Coinsurance is the percentage of the cost of a medical service that a patient must pay after meeting their deductible. For example, if your coinsurance is 20%, you pay 20% of the medical bills after the deductible.
Question 12
What is a “benchmark premium” under the Affordable Care Act (ACA)?
a) The maximum allowable premium for an individual health plan
b) The amount of credit used to calculate how much a person will pay for a health insurance policy
c) The amount of deductible an individual must pay before receiving subsidies
d) The premium charged to businesses for group health insurance
Answer: b) The amount of credit used to calculate how much a person will pay for a health insurance policy
Explanation: The benchmark premium is used to calculate how much financial assistance an individual will receive to pay for health insurance under the Affordable Care Act.
Question 13
Which type of insurance policy protects against losses from specifically named perils only?
a) All-risk policy
b) Open-perils policy
c) Named-perils policy
d) Comprehensive policy
Answer: c) Named-perils policy
Explanation: Named-perils policies only cover losses that result from the specific perils listed in the policy, such as fire or theft.
Question 14
What is the primary purpose of replacement cost insurance for homeowners?
a) To ensure full market value is paid for any losses
b) To cover 100% of all property damages regardless of cause
c) To reimburse the homeowner for the full cost of replacing a damaged item
d) To cover only depreciation of damaged property
Answer: c) To reimburse the homeowner for the full cost of replacing a damaged item
Explanation: Replacement cost insurance covers the full cost of replacing damaged or lost items without factoring in depreciation, unlike actual cash value policies.
Question 15
Which of the following insurance options is most appropriate for renters?
a) Homeowner’s general liability insurance
b) Renter’s contents broad form (HO-4)
c) Replacement cost insurance
d) Umbrella liability insurance
Answer: b) Renter's contents broad form (HO-4)
Explanation: HO-4, or renter’s insurance, protects renters by covering the loss or damage of personal belongings inside a rented dwelling.
Question 16
Which of the following best defines a “custodial care” service in long-term care insurance?
a) Medical care provided by licensed nurses
b) Supervision and assistance with daily living activities, such as eating and bathing
c) Care provided in a hospital emergency room
d) Short-term rehabilitation services following an accident
Answer: b) Supervision and assistance with daily living activities, such as eating and bathing
Explanation: Custodial care involves helping individuals with basic personal needs, such as eating, bathing, and dressing, typically provided by non-medical personnel.
Question 17
What does the residual clause in an own-occupation disability policy allow for?
a) Full benefits even if the insured can perform some work duties
b) Partial benefits if the insured is able to work in a different occupation
c) Full benefits only if the insured cannot perform any job
d) Partial benefits when the insured cannot fully perform their own job
Answer: d) Partial benefits when the insured cannot fully perform their own job
Explanation: The residual clause provides partial benefits for individuals who are still able to perform some, but not all, of their previous job duties.
Question 18
Which of the following best describes an “any-occupation” disability policy?
a) Provides benefits if the insured is unable to work in their own profession
b) Provides benefits only if the insured cannot perform any job at all
c) Provides benefits for temporary disabilities only
d) Provides benefits only for high-risk professions
Answer: b) Provides benefits only if the insured cannot perform any job at all
Explanation: Any-occupation disability policies only provide benefits if the insured is unable to perform any job, not just the job they were trained for.
Question 19
What is the primary advantage of a “trust” in estate planning?
a) It allows beneficiaries to avoid paying estate taxes
b) It eliminates the need for a will
c) It ensures that assets are managed and distributed according to the grantor’s wishes, often avoiding probate
d) It reduces the need for retirement planning
Answer: c) It ensures that assets are managed and distributed according to the grantor's wishes, often avoiding probate
Explanation: A trust allows for the management and distribution of assets according to the grantor's wishes, and it often avoids the probate process, which can be time-consuming and costly.
Question 20
Which type of trust allows the grantor to make changes or revoke it during their lifetime?
a) Irrevocable living trust
b) Testamentary trust
c) Revocable living trust
d) Contingent trust
Answer: c) Revocable living trust
Explanation: A revocable living trust allows the grantor to make changes or revoke the trust during their lifetime, giving them flexibility in managing their estate.
