CEBS - GBA 1 & 2 LATEST 2023 Exam 200+ QUESTIONS AND CORRECT ANSWERS|COMPLETE EXAM(VERIFIED ANSWERS)

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-ofcountry 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.