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Maryland Life Insurance Producer Final Exam
Questions with Verified Answers
Guarantee Passing score: 85% or higher
Consist of 90 multiple choices Questions and Answers
- What kind of life insurance policy allows a policyowner the choice of invest- ments along with flexible premium payments?
A. Variable universal life B. Modified endowment contract C. Adjustable life D. Graded premium whole life Answer> A. Variable universal life
- All of these statements concerning universal life insurance are false EX- CEPT
A. Death benefits are normally taxable B. Policy loans are not permitted C. Premiums or face amount cannot be changed D. Policy indicates how much of the premium is used toward company expens- es Answer> D. Policy indicates how much of the premium is used toward company
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expenses
- How does the cost for a survivorship life policy compare to the cost of combining two separate life insurance policies?
A. Survivorship life policy is lower B. Survivorship life policy is higher C. Depends on the investment performance of the underlying accounts D. Both have the same actuarial costs Answer> A. Survivorship life policy is lower
- Which statement regarding universal life insurance is correct?
A. Cash value accumulations have a guaranteed minimum interest rate B. Policyowner can change the face amount but not the premium C. Policyowner can change the premium but not the face amount D. Partial withdrawals cannot be made from the policy's cash value Answer> A. Cash value accumulations have a guaranteed minimum interest rate
- Which statement regarding whole life insurance is accurate?
A. Cash value loans are not permitted B. Insurance coverage can continue for life C. Policy normally matures at retirement D. No cash value accumulations Answer> B. Insurance coverage can continue for life
- How does a continuous premium whole life policy differ from a limited pay whole life policy?
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D. Policy loans are allowed Answer> C. Initial premium is lower than for an equivalent amount of term insurance
- Which of these policies is considered a whole life policy?
A. Credit life B. Single premium life C. Renewable life D. Convertible life Answer> B. Single premium life
- What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured?
A. Joint and survivorship B. Survivorship life C. Universal life D. Joint life Answer> D. Joint life
- Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?
A. Remain the same B. Decrease but never increase C. Increase but never decrease D. Fluctuate with changes in the cash account
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Answer> D. Fluctuate with changes in the cash account
- An individual who purchases a modified life insurance policy expects
A. a higher rate of return B. coverage for two people C. an improvement in future income D. a flexible face amount Answer> C. an improvement in future income
- Assets that back the non-guaranteed values of variable life insurance products are held in which account?
A. Trust account set up by the insured B. Separate account set up by the insurer C. General account of the insurer D. Money market account Answer> B. Separate account set up by the insurer
- When a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for
A. Ten year term insurance for a person aged 55 B. Ten year term insurance for a person aged 45 C. Yearly renewable term insurance for a person aged 55 D. Yearly renewable term insurance for a person aged 45 Answer> A. Ten year term insurance for a person aged 55
- What kind of life policy typically offers mortgage protection?
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Group insurance COBRA plan Industrial insurance Answer> Group insurance
- What minimum percentage of all eligible employees must participate in a group life insurance plan if the premiums are completely paid for by the employer?
0% 50% 75% 100% Answer> 100%
- Which statement about group life insurance is INCORRECT?
Cost can be shared between employer and employee Each participant requires evidence of insurability A minimum number of employees participating may be required Employer is issued a master policy Answer> Each participant requires evidence of insurability
- Which statement regarding the certificate of insurance is accurate?
It is an insurance contract between the employer and insurer Indicates evidence of an employee's insurance coverage Each certificate of insurance is underwritten on an individual basis
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It is issued by the employer to the employee Answer> Indicates evidence of an employ- ee's insurance coverage
- What is the reason that insurance companies require a minimum number of employees participating in a group insurance plan?
Efficiency is maximized Adverse selection is minimized Profits are maximized Claims are minimized Answer> Adverse selection is minimized
- The policy provision that permits an employee to change from a group plan to an individual plan is called the
assignment provision conversion provision certificate provision modification provision Answer> conversion provision
- An employer has a group life insurance plan in place for his employees. How would an employee in poor health be treated in this situation?
Approved on a graded basis Not eligible for insurance on this plan Eligible for the same type of coverage as the other employees
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Answer> tax deductible to the business
- Which of these occurrences could improve an insurer's ability to reduce premiums?
Expense factor increase Mortality rates increase Rate of earnings on investments increase Requiring monthly premium payments instead of annual Answer> Rate of earnings on investments increase
- Which life insurance settlement option pays lifetime benefits to two or more people?
Life income with period certain Joint Joint and survivor Life income Answer> Joint and survivor
- Which life insurance settlement option pays a stated monthly payment until both principal and interest are exhausted?
Fixed amount installment option Fixed period installment option Life income option Interest only option Answer> Fixed amount installment option
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- Life insurance premiums are based on what three factors?
Mortality, interest, dividends Morbidity, interest, expenses Mortality, interest, expenses Morbidity, interest, dividends Answer> Mortality, interest, expenses
- Which statement most accurately describes a single premium whole life policy?
Premiums that can only be paid from a single source A single premium that is due annually Paid-up policy that offers lifetime protection Paid-up policy that offers limited protection Answer> Paid-up policy that offers lifetime Protection
- During the early years of a whole life insurance policy, the cash value will normally be
equal to the total premiums paid more than the total premiums paid less than the total premiums paid unavailable as a policy loan Answer> less than the total premiums paid
- The highest mortality rate belongs to which group?
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Consumer report Eye examination
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Urine sample Blood sample Answer> Eye examination
- What must be given to a life insurance applicant when the agent receives an application and the initial premium?
Agent's report Conditional receipt Commission disclosure Good health statement Answer> Conditional receipt
- Which of these is NOT considered the responsibility of a producer in the underwriting process?
Collecting additional medical information if needed Promptly sending the completed application to the insurance company Forwarding any material personal observations to the insurer Selecting the final approval date Answer> Selecting the final approval date
- When a producer submits an application that discloses personal informa- tion regarding the applicant, who supplies the privacy notice?
Producer Insurer Underwriter Fiduciary Answer> Producer
- The reason for backdating a policy is
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Acquire a statement of good health signature Gather the initial premium Review policy with applicant Leave a conditional receipt with client Answer> Leave a conditional receipt with client
- A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true?
Premium will be refunded with interest and no death benefit paid Premium received by insurer is considered to be unearned Proceeds are prorated to 1/12th of the full amount Beneficiary receives $50,000 income tax-free Answer> Beneficiary receives $50,000 income tax-free
- Where is the difference between a standard risk and a substandard risk reflected?
backdating coverage is not offered premium charges back-end charges Answer> premium charges
- The premiums paid by an employer for his employee's group life insurance are usually considered to be
tax-deductible to the employer partially deductible to the employee tax-deductible to the employee
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taxable income to the employee Answer> tax-deductible to the employer
- Which of these is NOT considered to be a cost connected with an individ- ual's death?
Funeral expense Tax liability Business expenses Probate costs Answer> Business expenses
- Which of the following is NOT a reason for a business to buy key person life insurance?
The reduction in sales as a direct result from death of the key employee A void in leadership if the key person were to die
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family members of a deceased wage earner?
Estate taxes Unemployment tax expenses Funeral expense Living expenses Answer> Unemployment tax expenses
- Which of the following disability buy-sell agreements is best suited for businesses with a small number of partners?
Split dollar plan Entity agreement Cross-purchase agreement Key person plan Answer> Cross-purchase agreement
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- XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?
Split-dollar Cross puchase Key employee Deferred compensation Answer> Split-dollar
- Which of these is NOT relevant when determining the amount of personal life insurance needed?
Existing life insurance coverage Local unemployment rates Household income Household debt Answer> Local unemployment rates
- What is considered a valid reason for small businesses to insure the lives of its major shareholders?
To provide an income for the surviving dependents Reduce the company's tax liability To pay for final expenses Fund a buy-sell agreement Answer> Fund a buy-sell agreement
- Which of these pays an income to two or more annuitants until the death of the last annuitant?
Joint life annuity
