MARYLAND STATE
LIFE & HEALTH INSURANCE TEST BANK
Consist of 400+ multiple choices Questions and Answers
Inside, you'll discover:
• Everything you need to know about Life Policies, Provisions, Riders, and Exclusions • Essential Retirement and Taxation strategies • A complete breakdown of Health Insurance Policies and Social Insurance • Powerful study tips and practice tests that mirror the real exam
No confusion. Not fluff. Just results.
This guide was designed with one goal in mind: to get you licensed on your first try and help you start reaping the rewards of a successful career in insurance.
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- Which of the following is not a requirement to obtain a resident producer's
license?completing at least 40 hours of prelicensing education submitting an application appointment by at least two insurers successful completion of the licensing examination Answer> Appointment by at least two insurers
- To qualify for an insurance producer's license, a person must have all of
the following EXCEPT a college degree a good reputation and character 18 years of age the licensing fee Answer> A college degree
- Abby lives in Ohio, where she is licensed as an insurance producer. She
wants to apply for a nonresident producer license in Maryland. Which of the following conditions must she satisfy?Answer> She must show her ohio license to be in good standing
- Larry, Brian, Susan, and Jennifer work for AllPro Insurance Company in
Maryland. Based on their job descriptions below, which of them is not acting as a producer?Larry, who receives insurance applications from the public Brian, who is a vice president in AllPro's human resources department and does not receive commissions Jennifer, who advertises and solicits insurance policies for AllPro Susan, who collects insurance premiums for AllPro Answer> Brian, who is a vice presi- dent in AllPro's human resources department and does not receive commissions
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- Jeff is a licensed insurance producer in both New York and Maryland. He
is charged with embezzlement in New York and his first pretrial hearing is set for March 1. He must notify the Maryland Commissioner of Insurance of this charge within how many days of the hearing?Answer> 30 days
- Within how many days should the Maryland Insurance Administration be
notified of a change of a producer's name or address?Answer> 30 days
- May an insurance producer use a trade name to sell insurance in Mary-
land?Answer> Trade names may be used in Maryland if on file with the Commissioner.
- Within how many days should the Maryland Commissioner of Insurance
be notified of a change of a producer's address?Answer> 30 days
- The Commissioner may issue an emergency cease and desist order to an
insurer in all of the following circumstances EXCEPT The insurer's activity could cause irreparable loss to the general public.The insurer's business is threatened with insolvency.The insurer's business may be subject to conservation or liquidation proceed- ings.The insurer's business has substantially decreased from prior years Answer> The insurer's business has substantially decreased from prior years
- The Commissioner of Insurance cannot suspend or revoke an agent's
license for which of the following reasons?failing to meet projected sales goals having an agent's license denied or suspended in another state forging an individual's name on an insurance application 3 / 10
accepting insurance from an unlicensed individual Answer> Failing to meet projected sales goals
- Which of the following is not a remedy available to the Maryland Insurance
Commissioner for a producer who commits a violation of an insurance law?imprisonment revocation of license cease and desist order suspension of license Answer> Imprisonment
- What is required before an insurance company may transact insurance
business in Maryland?Answer> Certificate of Authority
- Which of the following is not considered an unfair claims settlement
prac- tice?failing to acknowledge a request for claims forms
requiring the insured to submit a formal proof of loss form
settling claims based on an application that the agent altered without inform- ing the insured
making claims settlements without stating the coverage under which pay- ments are made Answer> requiring the insured to submit a formal proof of loss form
- Which of the following is not an unfair claims settlement practice if
commit- ted by an insurance company in Maryland?failing to promptly acknowledge communications about claims failing to promptly settle a claim for which liability is uncertain appealing from an arbitration award in favor of an insured to compel the 4 / 10
insured to accept a lower settlement failing to affirm or deny coverage within a reasonable time after completing a claim investigation Answer> failing to promptly settle a claim for which liability is uncertain
- Insurance producers who do not promptly remit funds to principals
must deposit the funds in what type of account?Answer> Premium Account
- Life insurance has been purchased by ABC Company on the lives of
two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business?The company can only retain its coverage on June because she is not a principal of the company.The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not.The company would have to drop its coverage for both Hugh and June within 30 days of their departures.Answer> The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.
- Which of the following most accurately describes "insurable interest" in a
life insurance policy?Insurable interest is the financial relationship at the time of application be- tween the person applying for life insurance and the person whose life is to be insured.Insurable interest is the relationship between the person applying for insur- ance and the insured at the time of the insured's death.Insurable interest is the primary factor in determining how much life insurance 5 / 10
the insurer will issue on a person.Insurable interest is the relationship between the person paying for the insur- ance and the designated beneficiary.Answer> Insurable interest is the financial relation- ship at the time of application between the person applying for life insurance and the person whose life is to be insured.
- All of the following are automatically deemed to represent an insurable
interest EXCEPT Karen (the disabled applicant, age 28), and her father who cares for her.Sue (the applicant) and her husband Frank (the applicant) and his elderly neighbor ABC Corp. (the applicant) and its key executive Answer> Frank (the applicant) and his elderly neighbor
- Which of the following best describes insurable interest?
It describes the basic relationship between the insurance company and the policyowner.It refers to the role life insurance can play in protecting policyowners from investment fraud.It refers to the financial relationship between the policyowner and the insured person or property.It refers to the maximum amount of insurance that may be purchased on the insured person or property.Answer> It refers to the financial relationship between the policyowner and the insured person or property.
- Which characteristic is true of ALL types of life insurance?
Answer> The policy is noncancellable by the insurer (except for nonpayment of the premium). 6 / 10
- Under group insurance coverage, one policy covers a number of people.
Who owns these group polices?the insureds representatives of the sponsoring companies the organization that represents the group and which sponsors the coverage the insurance company who issues the policy Answer> the organization that represents the group and which sponsors the coverage
- Which one of the following statements about term life insurance is correct?
It is intended to cover the insured to age 120.It is permanent insurance.The policy pays a death benefit only if the insured dies during the term.A cash value accumulates in term life policies.Answer> The policy pays a death benefit only if the insured dies during the term
- All of the following statements about fixed whole life insurance cash values
are correct EXCEPT Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit.Cash values grow over the life of the policy and are calculated to equal the policy's face amount at the insured's age 120 (age 95 in the case of universal life insurance).As long as premiums are paid, the insurance stays in force, the cash values grow, and the policy is guaranteed to pay its specified death benefit.The policyowner owns the cash value in the policy and can access it.Answer> With- drawing or borrowing from the cash value will have no impact of the policy's death benefit.
- Dan owns a fixed whole life insurance policy. What type of death benefit is
Dan guaranteed?The policy guarantees a fixed death benefit amount.The policy guarantees a death benefit will be paid, but not the amount. 7 / 10
The amount depends on the number of premium payments Dan has made.The policy has no guaranteed death benefit.Answer> The policy guarantees a fixed death benefit amount.
- 3 factors of life insurance premiums
Answer> Mortality Charge Basic cost of insur- ance that you reflect to the company. (Age, Sex).Interest credit Company invests the money they get from you so money accumu- lates. More this earns, less the premium Expense Charge
- Which of the following best describes the premium tax insurance compa-
nies must pay when they receive premiums?It is a state tax imposed by relatively few states.It is federal tax paid to the U.S. Treasury.It is a federal tax that is collected at the state level by all states.It is a state tax imposed by all states.Answer> It is a state tax imposed by relatively few states.
- Which of the following do variable life insurance premiums generally
include to cover the cost of managing the investment element of the contract?compensation fee premium surcharge maintenance fee quarterly administrative fee Answer> Maintenance fee
- How do actuaries compensate for the cost of running the business when
determining the gross premium charged to the policyowner?They assume there will be fewer deaths than their past mortality experience would predict, which provides a safety margin by increasing the gross premi- um. 8 / 10
They increase the mortality charge, increasing the net premium.They assume a higher rate of interest than actually expected, which provides a safety margin by increasing the gross premium.They add an expense load, which includes a safety margin factor, to the net premium to produce the gross premium.Answer> They add an expense load, which includes a safety margin factor, to the net premium to produce the gross premium.
- What do actuaries use to predict the likelihood of an individual dying at
any certain age in the premium rate-making process?mortality morbidity industry-wide rating history company experience Answer> Mortality
- William dies two years after creating an irrevocable life insurance trust
which bought a life insurance policy on him. Will the policy's death benefit be subject to the bring-back rule?Answer> No. The bring-back rule applies only when policy ownership is transferred from the insured to a trust or other party. Since the trust was the original owner of the policy, the bring-back rule does not apply and the policy will not be included in William's estate.
- The primary reason for using third-party ownership in personal life insur-
ance for estate planning purposes is to transfer the estate tax liability from the owner to the beneficiary remove the life insurance proceeds from the insured's estate and thus reduce the value of the taxable estate reduce the tax rate used in calculating the estate tax convert the life insurance proceeds from an estate taxable asset to an income taxable asset Answer> remove the life insurance proceeds from the insured's estate and thus 9 / 10
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reduce the value of the taxable estate
- All the following statements regarding stranger-owned life insurance
(STOLI) are correct EXCEPT STOLI is financed through premium loans during the first several years, until it is transferred from the insured to the investors.The insured retains the right to designate the policy's beneficiary.STOLI and investor-owned life insurance (IOLI) are the same thing.STOLI is an arrangement in which investors convince an individual to pur- chase a life insurance policy on himself which is transferred to the investor in exchange for a sum of money.Answer> The insured retains the right to designate the policy's beneficiary.
- For a third-party life insurance policy to be valid, insurable interest must
exist between the policyowner and the insured when the policy is issued.the insured dies.the application for insurance is made.a claim is filed.Answer> The policy is issued
- In a third-party life insurance contract, the parties to the contract are the
the owner, the insured, and the beneficiary the insurance company, the owner, and the beneficiary the insured, the beneficiary, and the insurance company the owner, the insured, and the insurance company Answer> the owner, the insured, and the insurance company
- Alex sold an insurance policy before his license lapsed and earned a
commission on the sale. Which of the following statements is true regarding his commission if the policy is renewed?Answer> He can receive a commission because he was licensed when the policy was sold.