Maryland Exam ALL

Insurance Exam Questions Study Notes

Deferred Annuity

• The purchaser of a deferred annuity normally refers to income benefits starting:
    - A. Upon the death of the annuitant
    - B. Upon request of the designated beneficiary
    - C. Within several weeks after the annuitant is purchased
    - D. On a specified date of many years after the purchase (correct answer)

Insurance Marketing Systems

• Insurers solicit customers by mass media advertising and mail without the service of a producer under the:
    - A. Branch office
    - B. Contingent
    - C. Captive agent
    - D. Direct response (correct answer)

Defamation in Insurance

• A producer making false statements about an insurance company's financial status may be guilty of:
    - A. False advertising
    - B. Defamation (correct answer)
    - C. Commingling
    - D. Alteration

Misrepresentation in Maryland Insurance

• Misrepresenting a life insurance product in Maryland results in:
    - A. No issue if about a competitor’s product
    - B. Committing an illegal act (correct answer)
    - C. Prohibition from representing similar products for 30 days
    - D. Requirement to take an additional 30 hours of continuing education

Coercion

• Producer attempting to intimidate a prospective insured is guilty of:
    - A. Defamation
    - B. Coercion (correct answer)
    - C. Twisting
    - D. Discrimination

Unfair Claims Settlement Practices

• An unfair claims settlement practice includes:
    - A. Attempting to settle disputed claims by arbitration
    - B. Denying sustained claims on a timely basis
    - C. Failing to provide a reasonable explanation for denying claims (correct answer)
    - D. Refusing to pay fraudulent claims

Retirement Savings and Life Insurance Policy

• The amount received for a life insurance policy in retirement is:
    - A. Equal to all premiums paid
    - B. Equal to the death benefit
    - C. Greater than the death benefit
    - D. Less than the death benefit (correct answer)

Regulation of Insurance Advertising

• The purpose of insurance advertising regulation includes:
    - A. Establishing minimum standards of conduct
    - B. Preventing unfair competition among insurers
    - C. Maintaining a low profile for insurance products
    - D. Presenting an accurate description of insurance to the public (correct answer)

IRA Transfers

• A direct transfer of retirement savings from one IRA to another of the same type means:
    - A. The participant pays income tax
    - B. The participant pays a 10% penalty tax
    - C. Distribution must be reinvested within 60 days
    - D. No funds are distributed to the participant (correct answer)

Risk Management

• Elimination of a hazard is an example of:
    - A. Avoidance (correct answer)
    - B. Transfer
    - C. Pooling
    - D. Retention

Misrepresentation Practices

• The following practices by a producer are not considered misrepresentations:
    - A. Comparing benefits of several policies (correct answer)
    - B. Exaggerating financial strength of the insurer
    - C. Changing policy role in sales presentation
    - D. Advising the policy is a share of stock

Proposal of Contract Terms

• A proposal of contract terms by one party to another is:
    - A. An oral contract
    - B. A binder
    - C. An agreement
    - D. An offer (correct answer)

Automatic Premium Loans Provision

• The true statement about automatic premium loans is:
    - A. It is a required provision for purchasing additional insurance
    - B. It provides bank loans to finance split-dollar insurance
    - C. It waivers premiums due to total disability
    - D. It provides a policy loan for unpaid premiums after grace period (correct answer)

Loans under Life Insurance Policies

• Loans under personally owned life insurance policies are:
    - A. Not secured by policy’s cash value
    - B. Interest rate defined by the contract
    - C. Reduces final death proceeds
    - D. Policy owner's interest payments are not deductible (correct answer)

Life Insurance and Estate Creation

• The financial service product that creates an instant estate regardless of death timing is:
    - A. Deferred annuity
    - B. Life insurance (correct answer)
    - C. Savings account
    - D. Stocks

Employee Group Coverage to Individual Life Insurance

• The policy provision allowing employees to change from group coverage to individual life insurance is:
    - A. Nonforfeiture
    - B. Conversion (correct answer)
    - C. Assignment
    - D. Inconvertibility

Tax Advantages of Pension Plans

• Pension and profit-sharing plan investment growth is not taxable as current income, and the beneficiaries are:
    - A. The employer
    - B. The plan fiduciary
    - C. The employees in the plan (correct answer)
    - D. The Internal Revenue Service

Life Insurance Delivery Requirements

• A policy of Life Insurance may not be delivered unless it contains:
    - A. A legible description on the first page (correct answer)
    - B. Notary seal
    - C. Premium coupon book
    - D. Financial statement of the company

Commissioner’s Order Contents

• An order from the Commissioner must include:
    - A. Its effective date
    - B. Its purpose
    - C. The grounds for it
    - D. The signature of the Governor (correct answer)

Business Insurance for Key Employees

• Small corporations often purchase life insurance on key employees to:
    - A. Take a federal income tax deduction
    - B. Make a charitable bequest
    - C. Reduce social security taxes
    - D. Fund a buy-sell agreement (correct answer)

First-time Home Buyer IRA Distribution Limit

• The qualified first-time home buyer distribution available in IRA has a maximum lifetime limit:
    - A. $2,000
    - B. $5,000 (correct answer)
    - C. $10,000
    - D. $20,000

Group Life Insurance Beneficiaries

• Group life insurance beneficiaries who are not individually specified are:
    - A. Contingent beneficiaries
    - B. Class beneficiaries (correct answer)
    - C. Irrevocable beneficiaries
    - D. Trust beneficiaries

Immediate Annuities

• The annuity that pays a monthly benefit starting roughly one month after insurance is:
    - A. Retirement annuity
    - B. Survivorship annuity
    - C. Retirement income policy
    - D. Immediate annuity (correct answer)

Tax Withholding on IRA Transfers

• The tax withheld from IRA to IRA funds transferred directly is:
    - A. 10%
    - B. 15%
    - C. 50%
    - D. None (correct answer)

Life Insurance Beneficiary Limits

• If the insured dies within 6 months of policy issuance, the full death benefit will not be paid if caused by:
    - A. Accidental injury
    - B. Lung cancer
    - C. Suicide (correct answer)
    - D. Heart attack

Policy Loan Provisions

• Policy loan provisions do not apply to the following:
    - A. 20-payment life
    - B. 5-year term life (correct answer)
    - C. Whole life
    - D. Universal life

Effect of Insured’s Failures on Life Insurance Policy

• If the insured fails to repay loans taken against a life insurance policy, the effect is:
    - A. Policy becomes void
    - B. Premium is increased
    - C. Dividends are suspended
    - D. Death benefit is reduced (correct answer)

Violations Leading to Disqualification of Retirement Plan

• A company owner obtaining unsecured loans from the firm’s retirement plan may cause disqualification due to:
    - A. Age and service requirements
    - B. Top Heavy Rules
    - C. Vesting Standards
    - D. Exclusive Benefit Rule (correct answer)

Nature of Insurance

• All statements about insurance are true except:
    - A. It transfers risk.
    - B. It is a means of sharing losses.
    - C. It eliminates risk (correct answer).
    - D. It protects against uncertainty.

Renewable Term Life Insurance

• Renewable term life insurance is described as:
    - A. Always terminated at the end of the term period.
    - B. Converts to a whole life contract after the term.
    - C. Renewable after evidence of insurability at the same premium.
    - D. Renewable without evidence of insurability, but premium based on attained age (correct answer).

Law of Large Numbers in Insurance

• According to the law of large numbers, with an increase in similar insured units:
    - A. Predictability of loss is impaired.
    - B. Losses cannot be predicted.
    - C. Predictability of losses improves (correct answer).
    - D. Number of losses decreases.

Health Conditions in Group Life Insurance

• If an employee in poor health is part of a large group eligible for group life insurance:
    - A. Ineligible for coverage
    - B. Eligible on a rated basis
    - C. Eligible for same coverage as others
    - D. Eligible for more limited coverage than others (correct answer).

Life Insurance Misstatements at Death

• If misstatement of age is discovered at the insurer’s death:
    - A. All premiums returned with interest, policy canceled
    - B. Amount payable is the cash value for current age
    - C. Payable amount adjusted to premium
    - D. All premiums returned without interest, policy canceled (correct answer).

Annuity Benefits Without Value Post-Death

• The annuity that promises benefits for life but expires without value:
    - A. Temporary annuity
    - B. An annuity certain
    - C. A life annuity with a period certain
    - D. A straight life annuity (correct answer).

Premium Payments in Life Insurance

• The liability of the insurer's future obligations is:
    - A. Surplus
    - B. Reserves (correct answer).
    - C. Contingency Fund
    - D. Capital account.

Mortgage Protection Life Insurance Premiums

• The premium for individual mortgage protection life insurance typically:
    - A. Remains level (correct answer).
    - B. Increases at 5-year intervals.
    - C. Increases at 10-year intervals.
    - D. Fluctuates with mortgage interest rates.

Purpose of Qualified Profit-Sharing Plans

• A purpose of a qualified profit-sharing plan is to:
    - A. Motivate management to a 25% profit margin.
    - B. Distribute a portion of company earnings to employees (correct answer).
    - C. Liquidate corporation assets.
    - D. Reward stockholders.

Juvenile Life Insurance Policy

• A juvenile life insurance policy:
    - A. Insures the juvenile's parents.
    - B. Available only for children less than 5 years old.
    - C. Insures the life of a minor (correct answer).
    - D. Activates only as decreasing term for a minor.

Life Insurance Premium Rates in Maryland

• In Maryland, insurance companies must charge the same rate for life insurance for individuals:
    - A. Of the same class and equal life expectancy (correct answer).
    - B. Of the same age.
    - C. With the same occupation.
    - D. With the same income.

Loans under Life Insurance Policies

• Taking out a loan under a life insurance policy affects:
    - A. Distribution of taxable income to policy owners.
    - B. Loss of tax-exempt status of proceeds.
    - C. Changes the policy into a modified endowment contract (MEC).
    - D. Reduces amount receivable upon contract surrender (correct answer).

Guarantees for Participating Life Insurance Policies

• Participating life insurance policies guarantee:
    - A. Gross premiums.
    - B. Cash values.
    - C. Annual dividend payments.
    - D. Face amount (correct answer).

Funding Life and Health Guarantee Corporation

• The Life and Health Guarantee Corporation acquires the necessary operational funds by:
    - A. Raising premiums.
    - B. Securing state funds.
    - C. Assessing all policyholders (correct answer).
    - D. Assessing member insurance companies.

Renewed Term Life Insurance Premium Rates

• When renewing a 5-year renewable term insurance policy at age 35:
    - A. Current rate for 5-year term insurance for a 40-year-old (correct answer).
    - B. Current rate for 5-year term insurance for a 35-year-old.
    - C. Early renewable term insurance at the current age.
    - D. Early renewable term insurance for a person aged 35.

Life Insurance Buyer’s Guide

• The Life Insurance Buyer’s Guide contains information including all except:
    - A. Single action against an insurer.
    - B. Deciding how much insurance to buy.
    - C. Comparing life insurance rates.
    - **D