Download Maryland Life & Health Insurance Test Bank: 400+ Practice Questions and more Exams Insurance law in PDF only on Docsity!
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.
- 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
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 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 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
- 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).
- 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.
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. 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 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.
3 / 61
disparaging comments about the financial stability and reputation of a com- petitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed? Answer> Defamation
4 / 61
- When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's com- pany. What has Melanie engaged in? Answer> Twisting
- Agent Johns offers potential clients courtside tickets to a professional basketball game in exchange for purchasing a life insurance policy. What prohibited sales practice is Agent Johns committing? Answer> Rebating
- Sandy and Cindy are healthy, 45 years old, and have similar life expectan- cies. Though they are insured by the same company, Sandy's life insurance premiums are considerably lower than Cindy's. What may this indicate a case of? Answer> Unfair Discrimination
- Health vs Life Insurance Interest Answer> Health Insurable interest must always be present Life Insurable interest must only be present at a policy issue
- When Tom, an agent for ABC Insurance, receives an approved policy, he MUST do all of the following, EXCEPT review it to make sure that it is what the applicant applied for and expected mail the policy to the applicant by certified mail and set up a time for the policyowner to meet with Tom to review it verify that any requested backdating has been done verify that any applied-for benefit riders have been added Answer> mail the policy to the applicant by certified mail and set up a time for the policyowner to meet with Tom to review it
6 / 61
replacing a policy usually results in a lower premium replacement can be achieved without requiring the applicant to prove insura- bility once again the new policy may be cancellable by the insurer Answer> replacing a policy will require the insured to go through a new contestability period
- Which of the following statements regarding life insurance policy cost comparison methods is correct? There are two types, the traditional net cost method and the interest-adjusted net cost method, and the traditional net cost method is most commonly used today. There are two types, the traditional net cost method and the interest-adjusted net cost method, and most states forbid either type from being used. There are two types, the traditional net cost method and the interest-adjusted net cost method, and the interest-adjusted net cost method is most commonly used today. There are two types, the traditional net cost method and the interest-adjusted net cost method, and both types are used equally. Answer> There are two types, the traditional net cost method and the interest- adjusted net cost method, and the interest-adjusted net cost method is most commonly used today.
- Replacement occurs if a life insurance policy is purchased and, in conjunc- tion, any of the following happen EXCEPT The existing policy is amended with a reduction in benefits. The existing policy's beneficiary designation is changed. The existing policy is converted to reduced paid-up insurance. The existing policy is surrendered. Answer> The existing policy's beneficiary designation is changed.
- Life insurance underwriters are most likely to request a consumer (inspec-
7 / 61
tion) report on which of the following? applicants who are seeking very high amounts of life insurance applicants whom the agent does not know well all applicants business life insurance applicants who have already been issued high amounts of life insurance Answer> applicants who are seeking very high amounts of life insurance
- The Fair Credit Reporting Act (FCRA) generally requires insurers that seek a credit report to notify the applicant of the request within seven days of requesting the report 15 days of requesting the report
9 / 61
having to provide evidence of insurability Answer> renew the policy at lower current rates rather than guaranteed renewal rates convert the term policy to a permanent life insurance policy
- All the following are standard types of term life insurance EXCEPT annually renewable term variable term insurance increasing term insurance level term insurance Answer> Variable term insurance
- Bob bought a $100,000 ten-year level term insurance policy on March 1,
- What will happen if he dies on April 1, 2022? Bob's beneficiary will not get any benefits. The beneficiary of Bob's policy will be entitled to the policy's cash value but not the death benefit.
10 / 61
The beneficiary of Bob's policy will get $100,000. The beneficiary of Bob's policy will be permitted to pay a one-month premium to extend the policy coverage to April 1, 2022, in which case he or she would be entitled to the $100,000 death benefit. Answer> Bob's beneficiary will not get any benefits.
- Amanda, age 45, bought a $50,000 ten-year renewable and convertible term life policy. Regarding this, all the following statements are correct EXCEPT premiums for this policy will be more than for a $50,000 ten-year nonrenewable and nonconvertible term life policy. premiums for this policy will be more than for a $50,000 permanent life insurance policy. premiums for this policy will be more than for a $50,000 ten-year nonrenewable but convertible term life policy. premiums for this policy will be more than for a $50,000 ten-year renewable but non-convertible term life policy. Answer> premiums for this policy will be more than for a $50,000 permanent life insurance policy.
- Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own? single premium whole life graded premium whole life 10-pay whole life modified premium whole life Answer> Graded Premium Whole life
- Barb, age 40, buys a ten-pay life policy while Jill, age 40, buys a life paid up at age 65 policy. All other factors being equal, which of the following
