1. A U.S. life insurance applicant indicates that he has never been treated for mental health issues on his application but has in fact been undergoing treatment for bi-polar disorder for many years. He dies some time after buying the policy while coverage is still in effect. With a typical U.S. life insurance policy, what is the critical question that will determine whether or not the insurance company can attempt to deny the claim?

2. Which of the following is true of a renewable and convertible 10-year term insurance policy? a. The policy is renewable after 10 years, but typically only for a reduced face value. b. The policy is renewable after 10 years, but the rates will typically be much higher than those that were charged during the first 10 years. c. The policy typically can only be renewed after 10 years if the insured demonstrates evidence of insurability. d. The policy can typically only be renewed if it has been converted into a cash-value policy during the conversion period.

3. A policyholder has a TERM life policy develops an aggressive terminal illness. She decides that she needs cash now. Which one of the following is likely to be option for her? a. A policy loan b. Surrender c. Settlement d. Installment refund

4. True or False. All else equal, the monthly income payment received from a life annuity with no guarantee should be lower than the monthly income payment received from a life annuity with a 5-year period certain guarantee.

5. Which of the following is not typically true of deferred annuities? a. Account value changes during the accumulation period due to premium payments and investment earnings. b. Premium payments cease before the liquidation period. c. At the end of the accumulation period, the holder is required to annuitize. d. Investment income earned during the accumulation period is not taxed during the accumulation period.

6. Which of the following is not true of IRAs? a. Early withdrawals from Traditional IRAs are subject to a tax penalty. b. Normal distributions made after age 59 from Roth IRAs are not subject to taxation c. Investment income earned in a Traditional IRA is not taxed until it is distributed d. Roth IRAs are funded with pre-tax dollars

7. You are planning your retirement and anticipate that your marginal income tax rate is going to be substantially HIGHER during your retirement than it is now. You have some money that you are about to save for retirement. Given your view, and if your goal is to minimize your lifetime tax bill, should you contribute to a Roth IRA or a Traditional IRA? Briefly explain.

8. Which of the following is true of retirement saving in the United States? a. Private employer pensions have shifted from defined contribution plans to defined benefit plans over the past 70 years. b. The Pension Benefit Guaranty Corporation guarantees a minimum level of investment earnings in defined contribution plan accounts. c. ERISA sets minimum standards for vesting for both defined contribution and defined benefit plans. d. Employers with defined benefit plans are not required to pre-fund their obligations under ERISA

9. Suppose you have decided that you want to annuitize a portion of your wealth in ten years. You are trying to decide how to accomplish this goal. Option 1 to purchase a deferred annuity, where you would make an investment now (i.e., pay a premium), earn investment income in the deferred annuity account over the next 10 years, and then use the original investment along with the income to purchase a life annuity in 10 years. Option 2 is to just make your investments now without purchasing a deferred annuity, and then buy an immediate annuity in 10 years. Suppose that the Supreme Court suddenly decides that all income taxation is unconstitutional, and so all income taxes are abolished forever. Briefly discuss how this would affect your choice between your two options, assuming nothing else changes. (Even if this does not change your choice, discuss how it would change the relative attractiveness of the two options.)

10. Suppose a life insurance buyer reports his age as 42 when it is in fact 52 when buying a life policy. The buyer dies 5 years later. Which of the following best describes how the misstatement-of-age-or-sex clause will affect this situation? a. The insurer will not be required to pay the claim due to the misrepresentation by the insured. b. The insurer must pay the claim according to the amount that the premium being paid by the buyer would have purchased had the age been stated correctly. c. The insurer will not be able to deny the claim because the death occurred 5 years after the inception of the policy. d. The insurer will not be required to pay the claim because the misstatement was material enough to have affected the initial underwriting decision.

11. Consider the following statement: Given the same death benefit, whole life policies will typically feature a higher level annual premium than term policies. Indicate whether this is true or false, and briefly discuss why.

12. Which of the following is true of the annuities? (Circle all that apply.) a. Variable annuities can be used if the buyer of a deferred annuity wants a future monthly income that varies according to the performance of the stock market during the accumulation phase b. All else equal, a woman will generally have to pay more than a similarly aged man for a life annuity that produces the same amount of monthly income c. Monthly annuity benefits are not subject to income tax d. A couple with a joint-and-survivor annuity would continue to receive payments until the second of the couple dies

13. Make the choice that best completes each of the following: a. Most of the non-elderly under 65 population in the United States is covered by (employer-based, individual) health insurance. b. Most of the elderly over 65 population in the United States is covered by (Medicaid, Medicare)

14. Which of the following is not true of the U.S. health care system? a. The fraction of national income spent on health care has been rising over the past 50 years. b. The U.S. is unusual among developed countries in terms of its degree of reliance on private health insurance. c. Managed care plans have cost containment as a primary objective. d. The share of national income devoted to health care is significantly higher than in other developed countries. e. None of the above

15. True or False. Prior to the passage of the Affordable Care Act (Obamacare), the uninsured nonelderly were largely comprised of people with health conditions who were unable to obtain individual health insurance coverage due to pre-existing conditions exclusions.

16. Which of the following were features of the Affordable Care Act as originally passed (circle all that apply)? a. Individuals who did not carry health insurance were subject to tax penalties b. Lifetime dollar limits on benefits were prohibited c. Insurers must accept all applicants for individual health policies sold through insurance exchanges d. Rating factors for individuals were limited to certain factors such as age, tobacco use, and geographic location

17. Which of the following is not true of spending accounts? a. HSAs must be paired with high deductible health plans. b. Funds in FSAs can be used for out of pocket medical expenses c. Unused funds in FSAs can be rolled over at the end of the year without any limitation d. Both HSAs and FSAs are funded with pre-tax dollars

18. A company decides to offer a group dental expense benefit to its employees but decides that the benefit will be optional and that participating employees will have to pay the full cost of the premium. Briefly explain why this idea will be problematic for the insurer.

19. Which of the following are true of group term life insurance (circle all that apply)? a. New employees typically must provide evidence of insurability in order to be eligible for insurance benefits b. Coverage during employment is typically yearly renewable term c. Employees typically can extend the term coverage after employment ends d. Instead of each employee having a life insurance contract, there is a single master contract with the employer

20. Which of the following is not an example of a feature of managed care plans that is intended to reduce the average medical expenditures per plan participant (i.e., the total expenditure, including both the insurers portion and the patients portion)? a. Cost sharing provisions with patients, such as deductibles and coinsurance b. Negotiated lower fees with providers c. Capitation arrangements with providers d. Flexible spending accounts e. Utilization review