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HI Life & Health practice questions

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Question 1Hawaii Insurance Laws, Rules and Regulations

The Hawaii Insurance Division, which regulates insurers and producers, operates within which state agency?

  1. State of Hawaii Department of Health and Human Services
  2. Department of Commerce and Consumer Affairs Correct answer.
  3. State of Hawaii Department of Labor and Industrial Relations
  4. State of Hawaii Department of Taxation and Revenue

Explanation

The Hawaii Insurance Division is an agency within the state Department of Commerce and Consumer Affairs. It administers the Insurance Code and supervises insurers, producers, and related licensees.

Question 2Hawaii Insurance Laws, Rules and Regulations

Who appoints the Hawaii Insurance Commissioner?

  1. The state Senate
  2. The Insurance Division director
  3. The voters in a statewide election
  4. The Governor Correct answer.

Explanation

The Governor appoints the Insurance Commissioner, who heads the Insurance Division. The commissioner is not chosen by voters or by the legislature.

Question 3Hawaii Insurance Laws, Rules and Regulations

Before a person may solicit or sell life or health insurance in Hawaii, the person generally must hold what?

  1. An application filed with the commissioner
  2. A certificate of authority from the insurer
  3. A Hawaii producer license Correct answer.
  4. A county business license

Explanation

Hawaii requires a producer license for the lines of insurance being solicited or sold. A county business license, an insurer certificate, or a pending application does not by itself authorize solicitation.

Question 4Hawaii Insurance Laws, Rules and Regulations

Under Hawaii's Prepaid Health Care Act, an employer generally must provide health coverage once it has at least how many employees?

  1. Ten
  2. Fifteen
  3. Five
  4. Twenty Correct answer.

Explanation

The Hawaii Prepaid Health Care Act generally applies to employers with 20 or more employees. Smaller employers are not subject to the mandate, though they may offer coverage voluntarily.

Question 5Hawaii Insurance Laws, Rules and Regulations

Under the Hawaii Prepaid Health Care Act, coverage generally must be provided to an employee who works at least how many hours per week?

  1. 25 hours
  2. 40 hours
  3. 30 hours
  4. 20 hours Correct answer.

Explanation

The Act generally covers employees who work at least 20 hours per week. Part-time workers below that threshold are generally not covered by the mandate.

Question 6Hawaii Insurance Laws, Rules and Regulations

Hawaii temporary disability insurance (TDI) is designed to replace wages for a worker who is disabled by which cause?

  1. A non-work illness or injury Correct answer.
  2. A work-related injury
  3. A layoff from employment
  4. A retirement from the workforce

Explanation

Hawaii TDI provides wage replacement for non-work-related sickness or injury. Work-related injuries are covered by workers' compensation instead.

Question 7Hawaii Insurance Laws, Rules and Regulations

Which practice is prohibited under Hawaii insurance law when a producer offers a life insurance applicant a personal cash payment to induce the purchase?

  1. Twisting
  2. Coercion
  3. Defamation
  4. Rebating Correct answer.

Explanation

Rebating is offering an applicant something of value not stated in the policy to induce the purchase. Hawaii prohibits rebating as an unfair trade practice.

Question 8Hawaii Insurance Laws, Rules and Regulations

Which insurer behavior is an example of an unfair claim settlement practice in Hawaii?

  1. Explaining a policy exclusion to a claimant
  2. Requesting a death certificate with a life claim
  3. Denying a claim without a reasonable basis Correct answer.
  4. Paying a valid claim after proof of loss

Explanation

Unfair claim settlement practices include denying or delaying a claim without a reasonable basis. Prompt payment after proof of loss and explaining policy terms are proper claim handling.

Question 9Hawaii Insurance Laws, Rules and Regulations

Under Hawaii's Prepaid Health Care Act, what minimum share of the employee's health premium must an employer pay?

  1. At least 50% Correct answer.
  2. At least 75%
  3. At least 25%
  4. At least 100%

Explanation

Under the Prepaid Health Care Act, the employer must pay at least half of the employee's health premium. The employee may be responsible for the remaining portion, subject to statutory caps.

Question 10Hawaii Insurance Laws, Rules and Regulations

Hawaii TDI benefits generally begin after what waiting period?

  1. 14 days
  2. 7 days Correct answer.
  3. 30 days
  4. 1 day

Explanation

Hawaii TDI has a seven-day waiting period before benefits are payable. The waiting period is generally consecutive days of disability.

Question 11Hawaii Insurance Laws, Rules and Regulations

What is the maximum duration of Hawaii TDI benefits for a single disability, in general?

  1. 13 weeks
  2. 26 weeks Correct answer.
  3. 20 weeks
  4. 52 weeks

Explanation

Hawaii TDI benefits are generally limited to 26 weeks for a single period of disability. Longer periods may require other benefits.

Question 12Hawaii Insurance Laws, Rules and Regulations

A Hawaii life insurance policy delivered to a new owner generally must give the owner how many days to return it for a full premium refund?

  1. 3 days
  2. 7 days
  3. 5 days
  4. 10 days Correct answer.

Explanation

Hawaii life insurance policies must provide a free-look period of at least 10 days after delivery. If the owner returns the policy within that period, the premium is refunded.

Question 13Hawaii Insurance Laws, Rules and Regulations

A Hawaii Medicare supplement policy must give the applicant a free-look period of at least how many days after delivery?

  1. 10 days
  2. 30 days Correct answer.
  3. 20 days
  4. 14 days

Explanation

Medicare supplement policies in Hawaii must provide a 30-day free-look period after delivery. This gives the applicant time to review the policy and return it for a refund.

Question 14Hawaii Insurance Laws, Rules and Regulations

A Hawaii life insurance policy must include a grace period of at least how many days for payment of overdue premium?

  1. 30 days Correct answer.
  2. 60 days
  3. 7 days
  4. 31 days

Explanation

Life insurance policies delivered in Hawaii must include a grace period of at least 30 days. Coverage remains in force during the grace period if the overdue premium is paid.

Question 15Hawaii Insurance Laws, Rules and Regulations

Under Hawaii law, a life insurance policy generally becomes incontestable after how long from issue?

  1. 6 months
  2. 2 years Correct answer.
  3. 5 years
  4. 1 year

Explanation

The incontestability clause generally prevents an insurer from contesting a life policy after two years from issue, except for nonpayment of premium. This protects beneficiaries from late coverage disputes.

Question 16Hawaii Insurance Laws, Rules and Regulations

If a Hawaii life insurance claim reveals the insured's age was misstated, how is the benefit generally adjusted?

  1. All premiums are refunded with interest
  2. The policy is voided from inception
  3. The benefit is adjusted Correct answer.
  4. The claim is denied completely

Explanation

When age is misstated, the insurer adjusts the benefit to what the premium paid would have purchased at the correct age. The policy is not automatically voided or denied.

Question 17Hawaii Insurance Laws, Rules and Regulations

Twisting is best described as which act?

  1. Using false statements to harm an insurer's reputation
  2. Paying a commission to an unlicensed person
  3. Charging different premiums to insureds in the same risk class
  4. Misleading a policyholder into replacing coverage Correct answer.

Explanation

Twisting involves misleading a policyholder to induce lapse or replacement of existing coverage. It is an unfair trade practice because it relies on inaccurate comparisons.

Question 18Hawaii Insurance Laws, Rules and Regulations

A Hawaii insurer may pay a sales commission on a life insurance policy to which person?

  1. The policyholder as a thank-you
  2. A properly licensed Hawaii producer Correct answer.
  3. An unlicensed office assistant who recruited the client
  4. A friend who referred the applicant

Explanation

Hawaii law permits commissions on insurance sales only to properly licensed producers. Paying an unlicensed person, a policyholder, or a referral source for the sale is prohibited.

Question 19Hawaii Insurance Laws, Rules and Regulations

Premiums that a Hawaii producer collects from applicants are generally held in what capacity?

  1. As a gift to the producer
  2. As personal funds once received
  3. In a fiduciary capacity Correct answer.
  4. As insurer-owned surplus

Explanation

Premiums collected by a producer are held in a fiduciary capacity and must be accounted for and remitted to the insurer. The producer may not treat them as personal funds.

Question 20Hawaii Insurance Laws, Rules and Regulations

What is the main purpose of Hawaii's life insurance replacement rules?

  1. To ban all replacement of existing life insurance
  2. To require disclosure and comparison Correct answer.
  3. To require the insurer to pay a bonus
  4. To guarantee a lower premium after replacement

Explanation

Replacement rules require disclosure and comparison so the applicant can make an informed decision. They do not ban replacement or guarantee a lower premium.

Question 21Hawaii Insurance Laws, Rules and Regulations

How many continuing education credit hours must a Hawaii resident insurance producer generally complete every two years?

  1. 30 hours
  2. 12 hours
  3. 24 hours Correct answer.
  4. 16 hours

Explanation

Hawaii resident producers generally must complete 24 continuing education hours every two years. The requirement includes at least 3 hours of ethics.

Question 22Hawaii Insurance Laws, Rules and Regulations

A Hawaii producer is convicted of a felony. Within what period must the producer generally report the conviction to the insurance commissioner?

  1. 60 days
  2. 30 days Correct answer.
  3. 90 days
  4. 10 days

Explanation

A Hawaii producer must report a felony conviction to the commissioner within 30 days. The duty supports the commissioner's oversight of licensee integrity.

Question 23Hawaii Insurance Laws, Rules and Regulations

In Hawaii, an appointment is best described as what?

  1. An insurer's authorization of a producer Correct answer.
  2. The applicant's acceptance of a policy
  3. The commissioner's approval of a policy form
  4. The producer's license issued by the state

Explanation

An appointment is an insurer's authorization for a producer to represent it. The state license allows the producer to be licensed, but the appointment ties the producer to a specific insurer.

Question 24Hawaii Insurance Laws, Rules and Regulations

Under Hawaii's Prepaid Health Care Act, an employee's required contribution toward the health premium generally cannot exceed what percentage of wages?

  1. 2.0%
  2. 1.0%
  3. 1.5% Correct answer.
  4. 0.5%

Explanation

Under the Prepaid Health Care Act, the employer must pay at least half of the premium. The employee's required share is generally capped at 1.5% of wages.

Question 25Hawaii Insurance Laws, Rules and Regulations

Hawaii TDI benefits are generally calculated as what percentage of the employee's average weekly wages?

  1. 66 2/3%
  2. 50%
  3. 58% Correct answer.
  4. 75%

Explanation

Hawaii TDI generally replaces 58% of the employee's average weekly wages, subject to a maximum weekly benefit. The benefit is paid for covered non-work disabilities.

Question 26General Insurance Concepts

In life insurance, insurable interest must exist at which point in time?

  1. When the policy is applied for Correct answer.
  2. When the insured person dies
  3. Continuously for the life of the policy
  4. Only when a claim is actually filed

Explanation

Insurable interest in a life insurance policy need exist only at the time of application and policy issue; it is not required to continue afterward. This rule reflects the fact that the policy is bought to protect against the loss of a person's economic value, not to indemnify a later loss.

Question 27General Insurance Concepts

Which type of risk involves only the chance of loss or no loss, with no possibility of gain?

  1. Pure risk Correct answer.
  2. Investment risk
  3. Business venture risk
  4. Speculative risk

Explanation

Pure risk has only two possible outcomes, loss or no loss, and it is the category private insurers are willing to cover. Speculative risk includes the chance of gain as well as loss and is therefore generally not insurable.

Question 28General Insurance Concepts

An insurance policy is described as an aleatory contract, meaning that the value exchanged by the parties:

  1. Is always equal in value
  2. May be unequal and depends on chance Correct answer.
  3. Is fixed by statute in advance
  4. Must be paid in one lump sum

Explanation

In an aleatory contract the dollar amounts exchanged by the parties are not necessarily equal because performance depends on the occurrence of an uncertain event. A policyholder may pay small premiums for years and never collect, or may collect a large benefit after one payment.

Question 29General Insurance Concepts

Reinsurance is best described as insurance purchased by:

  1. A beneficiary to protect a death benefit
  2. A producer to cover sales errors
  3. A homeowner to cover a second residence
  4. An insurer to cover risks it has assumed Correct answer.

Explanation

Reinsurance is the transfer of risk from a primary insurer, called the ceding company, to a reinsurer. It protects the insurer against unusually large or numerous claims and frees capacity to write additional business.

Question 30General Insurance Concepts

The principle of indemnity is designed to:

  1. Guarantee a set benefit for any loss
  2. Allow the insured to profit from a loss
  3. Penalize the person who caused the loss
  4. Restore the insured to the pre-loss position Correct answer.

Explanation

Indemnity means the insured should be returned to approximately the same financial position held before the loss, no better and no worse. It prevents recovery of more than the actual loss and underpins concepts such as actual cash value and subrogation.

Question 31General Insurance Concepts

The law of large numbers allows an insurer to:

  1. Guarantee that no losses will ever exceed expectations
  2. Remove the need for underwriting classification
  3. Predict losses more accurately as exposures increase Correct answer.
  4. Charge higher premium rates to larger employer groups

Explanation

As the number of similar, independent exposure units grows, actual loss experience tends to approach the expected or predicted level. This statistical predictability is what lets an insurer set rates before losses are known.

Question 32General Insurance Concepts

A mutual insurance company is legally owned by its:

  1. Policyholders Correct answer.
  2. Creditors
  3. Board of directors
  4. Stockholders

Explanation

A mutual insurer is owned by its policyholders, who may receive dividends or vote on company matters. A stock insurer, by contrast, is owned by shareholders who provided capital.

Question 33General Insurance Concepts

Purchasing an insurance policy to handle a financial exposure is an example of which risk management technique?

  1. Retention
  2. Transfer Correct answer.
  3. Avoidance
  4. Reduction

Explanation

Insurance transfers the financial consequences of a loss to an insurer in exchange for a premium. The risk itself still exists, but its economic burden has been shifted to another party.

Question 34General Insurance Concepts

A condition that increases the chance or severity of a loss is called:

  1. A claim
  2. A hazard Correct answer.
  3. A peril
  4. A loss

Explanation

A hazard is a condition that raises the likelihood or size of a loss, while a peril is the actual cause of the loss, such as fire or windstorm. Hazards are commonly classified as physical, moral, or morale.

Question 35General Insurance Concepts

An insurer's underwriting process exists primarily to control which problem?

  1. Establishment of claim reserves
  2. Recovery of subrogation dollars
  3. Availability of policy loans
  4. Adverse selection Correct answer.

Explanation

Adverse selection occurs when those most likely to suffer a loss are most eager to buy or increase coverage. Underwriting screens applicants and classifies them so that premiums reflect expected losses and low-risk insureds are not forced to subsidize high-risk ones.

Question 36General Insurance Concepts

An insured deliberately sets fire to his own building in order to collect the insurance money. This is an example of:

  1. Speculative risk
  2. Moral hazard Correct answer.
  3. Morale hazard
  4. Insurable interest

Explanation

Moral hazard is a dishonest tendency or character trait that increases the likelihood of a loss, such as intentional destruction of property for profit. Insurers guard against it with application questions, inspections, and fraud provisions.

Question 37General Insurance Concepts

A homeowner stops locking the doors because the property is fully insured against theft. This behavior illustrates:

  1. Moral hazard
  2. Physical hazard
  3. Morale hazard Correct answer.
  4. Adverse selection

Explanation

Morale hazard is indifference or carelessness toward loss because insurance will pay for it. It differs from moral hazard, which involves intentional dishonesty.

Question 38General Insurance Concepts

A manufacturer discontinues a product line because of liability concerns. Which risk management technique is being used?

  1. Avoidance Correct answer.
  2. Retention
  3. Transfer
  4. Reduction

Explanation

Avoidance eliminates the exposure entirely by not engaging in the activity that creates it. It is the only technique that removes the risk rather than financing or lessening it.

Question 39General Insurance Concepts

A business installs a sprinkler system to limit damage if a fire occurs. This is an example of:

  1. Risk avoidance
  2. Risk reduction Correct answer.
  3. Risk transfer
  4. Risk retention

Explanation

Risk reduction lowers the severity or frequency of losses while the exposure continues to exist. Sprinklers do not prevent fires but they limit the resulting damage.

Question 40General Insurance Concepts

The right of subrogation permits an insurer to:

  1. Cancel a policy without advance notice
  2. Deny coverage for losses caused by an insured's negligence
  3. Increase premiums following a large claim
  4. Seek recovery from the party at fault Correct answer.

Explanation

After paying a claim, the insurer steps into the insured's shoes and may pursue the party responsible for the loss. This supports the indemnity principle by preventing the insured from collecting twice.

Question 41General Insurance Concepts

The principle of utmost good faith requires each party to an insurance contract to:

  1. Submit every claim to arbitration
  2. Accept the contract exactly as written
  3. Pay premiums on the first of each month
  4. Disclose all material facts honestly Correct answer.

Explanation

Insurance depends on each side relying on information supplied by the other, so both applicant and insurer must deal honestly and disclose material facts. Breach of this duty, such as concealment or material misrepresentation, can give the injured party grounds to void the contract.

Question 42General Insurance Concepts

An applicant for life insurance omits a recent cancer diagnosis. If the insurer would have declined the policy had it known the facts, the omission is:

  1. Material Correct answer.
  2. Immaterial
  3. Excused by waiver
  4. A harmless warranty breach

Explanation

A fact is material if a reasonable insurer would have acted differently had it known the truth, for example by declining or rating the policy. Material misrepresentation or concealment allows the insurer to rescind coverage, subject to state limits such as the incontestability period.

Question 43General Insurance Concepts

In insurance, a warranty is best described as:

  1. A promise to pay premiums on time
  2. An oral estimate of future losses
  3. A statement guaranteed to be true Correct answer.
  4. A written request for coverage

Explanation

A warranty is a statement or condition in the policy that the insured guarantees to be true. A breach can give the insurer grounds to deny a claim or void coverage, although many states now require a material connection between the breach and the loss.

Question 44General Insurance Concepts

A producer who collects premiums for an insurer holds those funds in a fiduciary capacity, which means the producer must:

  1. Deposit the funds in a personal account
  2. Hold and account for the funds properly Correct answer.
  3. Keep the funds until the year ends
  4. Apply the funds to office expenses

Explanation

Fiduciary duty requires a producer to hold premium funds in trust for the insurer and to account for and remit them as required. Commingling those funds with personal or business money is prohibited and can lead to license discipline.

Question 45General Insurance Concepts

Which statement best distinguishes facultative reinsurance from treaty reinsurance?

  1. Treaty is negotiated after each loss; facultative is negotiated before
  2. Facultative is handled case by case; treaty is automatic Correct answer.
  3. Facultative obligates the reinsurer to accept every risk offered
  4. Facultative applies only to life risks; treaty applies only to property risks

Explanation

Under facultative reinsurance the ceding insurer and the reinsurer negotiate each risk individually, and either side may decline. A treaty is an ongoing agreement under which the reinsurer automatically accepts all risks that fall within the classes and limits described.

Question 46General Insurance Concepts

An agent knows a policy condition has been breached but the insurer continues to accept premiums without objection. The insurer is later barred from denying coverage under the doctrine of:

  1. Indemnity
  2. Adhesion
  3. Subrogation
  4. Estoppel Correct answer.

Explanation

Estoppel prevents a party from asserting a right after its own conduct led another party to rely on that right being given up. The insurer's knowing acceptance of premiums after the breach is treated as a waiver, and estoppel bars it from later denying coverage.

Question 47General Insurance Concepts

An insurer provides an agent with company business cards, office space, and rate manuals, leading clients to reasonably believe the agent may bind coverage. The agent's power in the clients' eyes is:

  1. Implied authority
  2. Statutory authority
  3. Apparent authority Correct answer.
  4. Express authority

Explanation

Apparent authority arises from the impression the insurer creates in the mind of a reasonable third party, even if the agent was not actually authorized. The insurer may be bound by the agent's acts because the client justifiably relied on the appearance of authority.

Question 48General Insurance Concepts

Lloyd's of London is best described as:

  1. A marketplace of syndicates that underwrite risks Correct answer.
  2. A government reinsurance program for marine risks
  3. A single insurer owned by its policyholders
  4. A fraternal society writing only life insurance

Explanation

Lloyd's is not an insurance company but a marketplace where independent syndicates of members accept risks, each member being liable for its share. Business is brought by brokers to the syndicates under rules set by the governing body.

Question 49General Insurance Concepts

Which feature distinguishes a fraternal benefit society from a commercial insurer?

  1. It issues only term life policies
  2. It must be licensed in every state
  3. It operates on a lodge system for members Correct answer.
  4. It is owned by stockholders

Explanation

A fraternal benefit society is a nonprofit organization with a lodge or chapter system and a social, charitable, or fraternal purpose that provides insurance to its members. Its governance and membership structure differ from those of a stock or mutual commercial insurer.

Question 50General Insurance Concepts

Because a private insurer cannot reliably predict or price a loss that strikes nearly all policyholders at once, which exposure is generally treated as uninsurable?

  1. Fire damage to a single warehouse
  2. Theft of an individual's jewelry
  3. Premature death of a policyholder
  4. Losses resulting from a declared war Correct answer.

Explanation

Insurable risks must be measurable, accidental, and limited to a small portion of the exposure pool at any one time. War and similar catastrophic events can produce losses affecting an entire pool simultaneously, so private policies normally exclude them.