CEBS - GBA 1 & 2 LATEST 2023 Exam 200+
QUESTIONS AND CORRECT ANSWERS|COMPLETE
EXAM(VERIFIED ANSWERS)
CEBS - GBA 1
Which of the following statements correctly describes eligibility requirements
under most group insurance plans? - ANSWER- Unmarried children under a
specified age and dependent on the plan member for support are eligible for
coverage
Which of the following statements correctly describes the negotiated placement
method of marketing a group benefits plan? - ANSWER- Once potential insurers
are identified, each company submits a brief report that highlights its general
strategy, philosophy and proposed group benefits plan
True North Insurance has established a waiver-of-premium reserve of $100,000
and will have to pay out an optional life insurance benefit of $200,000. With an
interest rate of 6% compounded annually, how many years will it take for the
reserve of $100,000 to accumulate to $200,000? - ANSWER- 12 years (Use the
relationship between future value and present value to solve for the number of time
periods.
FVt = PV x (1 + r)^t
$200,000 = $100,000 x (1 + 6%)^t
$200,000/$100,000 = (1.06)^t
2.00 = (1.06)^t
The number of time periods can be approximated using the future value table. With
an interest rate of 6%, it will take 12 years to accumulate to a sum of $200,000 (or
2.01220).)
,Which of the following statements correctly describes a group insurance policy? -
ANSWER- It is issued on a group of individuals for protection against financial
hazards, such as death, accident and sickness
Last year, a small town reported that 20 people under the age of 50 died. If the
population of people under the age of 50 in the town is 10,000, what is the
probability of a resident under the age of 50 dying? - ANSWER- 0.2% (Probability
of a resident under the age of 50 dying is 20/10,000 = 0.002 = 0.2%.)
Which of the following statements correctly describes the predictability of an event
and the cost of insurance under a group benefits plan? - ANSWER- An out-of-
country emergency is an unforeseen event with a potentially high cost (Disability
is an unforeseen event with a potentially high cost. Option C: Basic dental services
are a predictable event with a low cost. Option D: Paramedical services are an
unforeseen event with a low cost.)
Which of the following statements best describes individual large amount pooling?
- ANSWER- It protects the plan sponsor from claims payments with respect to any
one insured individual in excess of the pooling limit or pool ceiling.
Nevaeh works full¬time as a business manager on her family's dairy farm. She has
an allergy to grain that is triggered by direct contact. If she becomes sick and is
unable to work, she loses her only source of income and her lifestyle will change
significantly. Which of the following risk management approaches would BEST
address Nevaeh's need to protect her income? - ANSWER- Transfer the risk of
becoming sick (Assuming Nevaeh wants to stay in farming, avoidance is not an
option. Nevaeh can do everything she can to take measures to reduce her exposure,
but if becoming sick jeopardizes her only source of income, Option C, purchasing
insurance, is the best option.)
Under the coordination-¬of-¬benefits (COB) provision, which of the following
plans is the first payer in respect of a claim for a covered dependent child under a
single-custody arrangement? - ANSWER- Plan of the parent with custody of the
child
In terms of designing a group benefits plan, which of the following statements
correctly describes a benefit/needs-oriented philosophy? - ANSWER- An example
of a needs-oriented benefit is health care
,Which of the following statements correctly describes static tables and tables with
projection? - ANSWER- In "mortality tables with projection," it is assumed that
the mortality rate at a particular age will improve in the future by a certain
percentage per year (Static tables include mortality rates that are not adjusted for
expected future mortality improvements. Option B: Instead of replacing tables,
actuaries typically make adjustments for unexpected improvements in mortality.
Option C: Setbacks method uses the same mortality rate but assumes that it applies
to a lower age.)
Which of the following statements correctly describes participation ratios in a
benefits plan? - ANSWER- A noncontributory life insurance plan with liberal
eligibility requirements should have a reasonably high participation ratio (The
level of benefits under a mandatory, noncontributory life insurance plan does not
affect participation ratios. Option C: An optional life insurance plan should have a
lower participation ratio if eligibility requirements are tight. Option D: The level of
plan member contributions under a voluntary, contributory plan has an impact on
participation ratios.)
Vivienne's health care plan pays a maximum of $5,000 if she is hospitalized. She
was recently hospitalized and her actual expenses were $4,000. Vivienne's insurer
will pay the actual amount of expenses and not the $5,000 maximum stipulated in
the plan. This is an example of: - ANSWER- A contract of indemnity (A valued
contract specifies in advance the amount payable when a loss occurs regardless of
the actual loss amount. Option B: Face value is the amount of insurance payable
under the policy. Option D: Liability risk is the risk of economic loss resulting
from an individual being held accountable for harming others or their property.)
Which of the following statements correctly describes processing health care
claims under a group benefits plan? - ANSWER- The plan member must submit a
completed claim form and written proof of the expense within a specified time
period to recover eligible expenses
Which of the following statements correctly describes marketing a group benefits
plan? - ANSWER- If a plan sponsor decides to cancel a plan, it typically must
notify the insurer within 30 to 60 days before the effective date of cancellation
How is the funding arrangement for a nonunionized single-employer plan
determined? - ANSWER- By the amount the employer is willing and/or able to
contribute from revenue
, Which of the following statements correctly describes an income replacement
benefit provided under a group benefits plan? - ANSWER- Sick leave plans
typically provide full pay for absences from work due to sickness or injury for a
short period (A long-term disability (LTD) plan is the most common method of
providing extended income replacement benefits to plan members who are
disabled and unable to work due to prolonged illness or injury. Option C: Salary
continuance plans typically provide benefits for the full period of short-term
disability up to the end of the elimination period under an LTD plan. Option D: An
LTD plan typically replaces 55¬-75% of a disabled plan member's gross earnings,
subject to a maximum monthly amount.)
Which of the following statements correctly describes the financial accounting of a
self-insured group benefits plan using a billed-in-advance administrative services
only (ASO) arrangement with an insurer? - ANSWER- Year-end plan surpluses
may be carried forward as a positive cash balance to the next contract period for
payment of claims
Eagle Assurance is expecting to pay total death benefits of $150,000 at the end of
four years. Assuming the interest rate is 6% per year compounded semiannually,
what reserve level must be held today to meet this future obligation? - ANSWER-
$118,412: Use the present value formula or present value table to determine the
reserve level.
r = 6%/2
= 3%
and t = 4 x 2 = 8
PV = $150,000/(1 + 0.03)^8
PV = $118,412
OR
PV = CF8
= PVIF(3%,8)
PV = $150,000
= 0.78941 [from the present value interest factor (PVIF) table]
= $118,412.
QUESTIONS AND CORRECT ANSWERS|COMPLETE
EXAM(VERIFIED ANSWERS)
CEBS - GBA 1
Which of the following statements correctly describes eligibility requirements
under most group insurance plans? - ANSWER- Unmarried children under a
specified age and dependent on the plan member for support are eligible for
coverage
Which of the following statements correctly describes the negotiated placement
method of marketing a group benefits plan? - ANSWER- Once potential insurers
are identified, each company submits a brief report that highlights its general
strategy, philosophy and proposed group benefits plan
True North Insurance has established a waiver-of-premium reserve of $100,000
and will have to pay out an optional life insurance benefit of $200,000. With an
interest rate of 6% compounded annually, how many years will it take for the
reserve of $100,000 to accumulate to $200,000? - ANSWER- 12 years (Use the
relationship between future value and present value to solve for the number of time
periods.
FVt = PV x (1 + r)^t
$200,000 = $100,000 x (1 + 6%)^t
$200,000/$100,000 = (1.06)^t
2.00 = (1.06)^t
The number of time periods can be approximated using the future value table. With
an interest rate of 6%, it will take 12 years to accumulate to a sum of $200,000 (or
2.01220).)
,Which of the following statements correctly describes a group insurance policy? -
ANSWER- It is issued on a group of individuals for protection against financial
hazards, such as death, accident and sickness
Last year, a small town reported that 20 people under the age of 50 died. If the
population of people under the age of 50 in the town is 10,000, what is the
probability of a resident under the age of 50 dying? - ANSWER- 0.2% (Probability
of a resident under the age of 50 dying is 20/10,000 = 0.002 = 0.2%.)
Which of the following statements correctly describes the predictability of an event
and the cost of insurance under a group benefits plan? - ANSWER- An out-of-
country emergency is an unforeseen event with a potentially high cost (Disability
is an unforeseen event with a potentially high cost. Option C: Basic dental services
are a predictable event with a low cost. Option D: Paramedical services are an
unforeseen event with a low cost.)
Which of the following statements best describes individual large amount pooling?
- ANSWER- It protects the plan sponsor from claims payments with respect to any
one insured individual in excess of the pooling limit or pool ceiling.
Nevaeh works full¬time as a business manager on her family's dairy farm. She has
an allergy to grain that is triggered by direct contact. If she becomes sick and is
unable to work, she loses her only source of income and her lifestyle will change
significantly. Which of the following risk management approaches would BEST
address Nevaeh's need to protect her income? - ANSWER- Transfer the risk of
becoming sick (Assuming Nevaeh wants to stay in farming, avoidance is not an
option. Nevaeh can do everything she can to take measures to reduce her exposure,
but if becoming sick jeopardizes her only source of income, Option C, purchasing
insurance, is the best option.)
Under the coordination-¬of-¬benefits (COB) provision, which of the following
plans is the first payer in respect of a claim for a covered dependent child under a
single-custody arrangement? - ANSWER- Plan of the parent with custody of the
child
In terms of designing a group benefits plan, which of the following statements
correctly describes a benefit/needs-oriented philosophy? - ANSWER- An example
of a needs-oriented benefit is health care
,Which of the following statements correctly describes static tables and tables with
projection? - ANSWER- In "mortality tables with projection," it is assumed that
the mortality rate at a particular age will improve in the future by a certain
percentage per year (Static tables include mortality rates that are not adjusted for
expected future mortality improvements. Option B: Instead of replacing tables,
actuaries typically make adjustments for unexpected improvements in mortality.
Option C: Setbacks method uses the same mortality rate but assumes that it applies
to a lower age.)
Which of the following statements correctly describes participation ratios in a
benefits plan? - ANSWER- A noncontributory life insurance plan with liberal
eligibility requirements should have a reasonably high participation ratio (The
level of benefits under a mandatory, noncontributory life insurance plan does not
affect participation ratios. Option C: An optional life insurance plan should have a
lower participation ratio if eligibility requirements are tight. Option D: The level of
plan member contributions under a voluntary, contributory plan has an impact on
participation ratios.)
Vivienne's health care plan pays a maximum of $5,000 if she is hospitalized. She
was recently hospitalized and her actual expenses were $4,000. Vivienne's insurer
will pay the actual amount of expenses and not the $5,000 maximum stipulated in
the plan. This is an example of: - ANSWER- A contract of indemnity (A valued
contract specifies in advance the amount payable when a loss occurs regardless of
the actual loss amount. Option B: Face value is the amount of insurance payable
under the policy. Option D: Liability risk is the risk of economic loss resulting
from an individual being held accountable for harming others or their property.)
Which of the following statements correctly describes processing health care
claims under a group benefits plan? - ANSWER- The plan member must submit a
completed claim form and written proof of the expense within a specified time
period to recover eligible expenses
Which of the following statements correctly describes marketing a group benefits
plan? - ANSWER- If a plan sponsor decides to cancel a plan, it typically must
notify the insurer within 30 to 60 days before the effective date of cancellation
How is the funding arrangement for a nonunionized single-employer plan
determined? - ANSWER- By the amount the employer is willing and/or able to
contribute from revenue
, Which of the following statements correctly describes an income replacement
benefit provided under a group benefits plan? - ANSWER- Sick leave plans
typically provide full pay for absences from work due to sickness or injury for a
short period (A long-term disability (LTD) plan is the most common method of
providing extended income replacement benefits to plan members who are
disabled and unable to work due to prolonged illness or injury. Option C: Salary
continuance plans typically provide benefits for the full period of short-term
disability up to the end of the elimination period under an LTD plan. Option D: An
LTD plan typically replaces 55¬-75% of a disabled plan member's gross earnings,
subject to a maximum monthly amount.)
Which of the following statements correctly describes the financial accounting of a
self-insured group benefits plan using a billed-in-advance administrative services
only (ASO) arrangement with an insurer? - ANSWER- Year-end plan surpluses
may be carried forward as a positive cash balance to the next contract period for
payment of claims
Eagle Assurance is expecting to pay total death benefits of $150,000 at the end of
four years. Assuming the interest rate is 6% per year compounded semiannually,
what reserve level must be held today to meet this future obligation? - ANSWER-
$118,412: Use the present value formula or present value table to determine the
reserve level.
r = 6%/2
= 3%
and t = 4 x 2 = 8
PV = $150,000/(1 + 0.03)^8
PV = $118,412
OR
PV = CF8
= PVIF(3%,8)
PV = $150,000
= 0.78941 [from the present value interest factor (PVIF) table]
= $118,412.
