MD TEST PREP Flashcards
All of the following factors may affect premium determination in individual life insurance except
Race
How often must insurance licensees subject to continuing education meet the educational requirements?
Every two years
Who normally receives dividends in a stock insurance company?
Shareholders
False Advertising of an insurance policy is an example of
Misrepresentation
The entire contract provision in a life insurance policy states that the policy includes
The application attached to the policy
An insurance producer who on behalf of a viator for a fee, offers or attempts to negotiate viatical settlement contracts between a viator and one or more viatical settlement providers is a viatical settlement
Broker
After completing an application for insurance the insurance producer collects the premiums but deposits the check in the insurance producer’s checking account. What crime has been committed?
Fraud
The income benefits distributed during the liquidation phase of annuitant contract are normally payable to
The annuitant
The penalty tax incurred for premature distributions from an IRA is
10%
When a wage earner dies the surviving family members may have all of the following expenses except
Unemployment liabilities
The beneficiary of a life insurance policy is the
Person or entity designated in the policy to receive the death proceeds
How many days does a former employee have to convert a group term policy to an individual policy after employment is terminated?
31
In order to solicit insurance an individual must achieve all of the following except
Be at least 21 years of age
Advertisements in general shall be
Truthful
According to the level premium concept in life insurance
The policy owner pays the same premium amount throughout the policy period
Splitting the commission with the buyer on a sale of insurance is an unfair trade practice known as
Rebating
A transaction in which a new life insurance policy is purchased and an existing life insurance policy is surrendered is called
Replacement
The Maryland Insurance Administration is an agency of the
State government
What does the annuitant usually receiving during the liquidation phase of an annuity?
Benefit payments at regular intervals
A valid contract requires all of the following except
Written evidence
The process of analyzing exposures that create risk and designing programs to handle them is called risk
Management
Which one of the following statement about participating life insurance is true?
Policy owners may be entitled to receive dividends
All of the following statements about the life insurance protection provided by a family life insurance policy are true except
Most of the premium amount purchases whole life insurance for the head of the household
Publishing a derogatory article about the financial condition of an insurer which is false and calculated to inquire the insurer is an example of
Defamation
A life insurance policy beneficiary’s life expectancy has a direct bearing upon
The total amount of payable under the policy as a result of insureds death
The purpose of the Life and Health Insurance Guaranty Corporation is to guarantee
That an insurance company will never fail
If after submitting an application a producer becomes aware of a material fact that may affect the underwriting decision the producer’s ethical responsibility requires that the producer
Report the fact to the insurance company
A premium receipt which may provide immediate protection but only if the applicant is incurable is called
A conditional receipt
The Maryland Insurance Administration may suspend an agent’s license for all the following reasons except
Sharing commissions with agents holding the same license type
What is the minimum length of time a life insurance company may legally defer paying the cash value of a surrendered policy
6 months
Which is normally true about a mortgage protection life insurance policy?
The death benefit is intended to decrease with the balance of the insured’s mortgage loan
An insurance producer MUST do as of the following in order to review the insurance producer’s license except
File the renewal application with the Commissioner
What is the purpose of backdating a life insurance policy?
To use premiums based on an earlier age
If an insurer knowingly fails to enforce a policy provision on one occasion, the insurer may be prevented from enforcing it on a subsequent occasion by the principle of
Adhesion
In surrendering a life insurance contractor for its cash value, the total of premiums paid less the total of any dividends received in cash or used to offset premiums is
The cost basis
Which financial institution may issue annuity contracts?
Life insurance companies
Which activity is an unfair claims settlement practice?
Including an arbitration provision in the insurers policies
In the event of a death claim under a life insurance policy what happens to the amount of any existing policy loan?
The beneficiary has an obligation to pay the amount to the insurance company
A policy owner uses a Section 1035 exchange to replace an existing life insurance policy. If the new policy is later surrendered the gain realized on termination is taxed as
Ordinary income
All of the following are common underwriting factors used by life insurance companies except
Family health history
A non-smoker who is in good health and follows sound health practices is usually classified as a
Preferred risk
Which one of the following causes of death typically would be included under an accident death rider attached to a life insurance policy?
Automobile accidents resulting from the insured’s negligence
A group policy may be issued to a labor union. The members eligible for insurance under the policy shall be
All of the members of the union
Under the Maryland law, the agreement between an insurance producer and insurer under which the insurance producer for compensation may sell, solicit, or negotiate policies issued by the insurer is defined as
An appointment
An insurance producer’s license may be suspended or revoked by
The Attorney General
A universal life insurance policy can be described most accurately as a combination of
A flexible premium deposit fund and a monthly renewable term insurance policy
A contract which depends on an unforeseen event and in which the exchange of values may be unequal is
An aleatory contract
The Medical Information Bureau may release information in the proposed insured’s file to
Any physician
A life insurance policy becomes incontestable after it has been in force for
2 years
An insurance agent’s license may be revoked for all of the following reasons except
Having no insurer appointment in effect for ten days
How long will income benefit payments continue under a life annuity with ten years certain?
Only until the annuitant dies, regardless of when death occurs
Which one of the following statements about the grace period in life insurance policies is true?
It is designed to prevent unintentional lapses
The head of the Maryland Insurance Administration is the
Commissioner
An existing life insurance policy is sold by the policy owner to help finance the cost of a terminal illness. This is an example of
A viatical settlement
The purpose of licensing insurance agents is to
Demonstrate that the agents qualified to act on behalf of insurers in Maryland
It is unlawful for a person to provide an advertisement that
Uses a policy title to misrepresent a coverage
An insurance interest in each other’s lives may exist in the absence of an economic interest when the individuals are
Marriage partners
Which advantage does an employer gain by providing a qualified retirement plan as contrasted to a non-qualified plan?
The employer’s contributions to the plan are tax deductible
Which of the following reinforces the rule that ambiguities in insurance contracts should be interpreted in favor of the policyholder?
Reasonable expectations
A licensee must report each of the following to the Maryland Insurance Administration except
Change in financial status
The annual addition to an employee’s account in a qualified retirement plan
Cannot exceed maximum limits set by the Internal Revenue Service
The free look period provided in a life insurance policy is usually
10 days
In determining the payment of accelerated life insurance benefits, which activity is NOT considered an activity of daily living?
Speaking
What is a decreasing term insurance rider that can be attached to some forms of permanent life insurance?
Family income
Which statement about benefit payments under a life annuity with period certain is NOT true?
The benefits are adjusted for inflation
Which life insurance settlement option pays a predetermined monthly benefit until principal and interest are exhausted?
The fixed amount installment option
What is true about cash values in whole life insurance policies?
They result from the level premium concept
The Maryland Insurance Administration may suspend an agents license for all of the following reasons EXCEPT:
Sharing commissions with agents holding the same license type
What is a requirement of an insurable risk?
The chance of loss must be calculable
All of the following could be considered unfair trade practices EXCEPT:
Selling insurance at cheaper rates than competitors
Life insurance policy dividends normally are subject to federal income tax
When the total of dividends received exceeds the total of premiums paid
What happens when the insured’s willful failure to disclose a material fact is discovered shortly after the policy is issued?
The policy is voidable at the insurer’s option
Written consent to the viatication must be received from
Beneficiary, insured and viator.
To determine whether unfair trade practices have been violated, Who has the power to examine an insurer’s books and records?
The National Association of Insurance Commissioners
How often must insurance licensees subject to continuing education meet the educational requirements?
Every two years
All of the following would be considered an unfair trade practice EXCEPT:
Sharing commissions with agents who have equivalent licenses
An insurance producer who conducts business under an assumed or fictitious name must
File the name with the Insurance Administration
In Maryland, insurance companies must charge the same rate for life insurance for individual
Of the same class and equal life expectancy
How many lives are normally insured by a survivorship life insurance policy?
Two
An attending physician statement (APS) sometimes used in life insurance underwriting is:
Information provided by a physician on the applicant’s medical history
All of the following are reasons for a business organization to purchase key person lifo insurance EXCEPT
The increased pension liability resulting from the key person’s death
When the business of insurance is no longer conducted under an assumed name, who must a producer notify?
The Maryland Insurance Administration
Which annuity promises to make a specific number of benefit payments regard lose of when the annuitant dies?
A fixed period annuity certain
Publishing a derogatory article about the financial condition of an insurer which is false and calculated to injure the insurer is an example of:
Defamation
The needs approach in life insurance is most useful in determining:
The amount of life insurance to be recommended to a client
When the owner of a life insurance policy reserves the right to change the beneficiary, the arrangement is called
A revocable designation
One reason for naming a trust rather than an individual as the beneficiary of a life insurance policy is to:
Avoid probate
What is the tax status of interest credited to the cash values of personally owned non-qualified annuities?
Deferred.
The purpose of the Life and Health Insurance Guaranty Corporation is to guarantee
benefits if the insurer is unable to pay benefits due to Impairment or insolvency
Based on the law of large numbers, what happens if the number of similar insured units increases?
Predictability of losses improves
The head of the Maryland Insurance Administration is the
Commissioner
a producer who misrepresents a life insurance product in the state of Maryland:
Has committed an illegal act
The purpose of licensing insurance agents is to:
Demonstrate that the agent is qualified to act on behalf of insurers in Maryland
It is unlawful for a person to provide an advertisement that:
Uses a policy title to misrepresent a coverage
Which life insurance settlement option provides the highest monthly income guaranteed for the lifetime of the beneficiary?
Life income only
In accordance with Maryland Insurance law, which of the following is the MAXIMUM amount of life ineurance coverage an individual can purchase for a dependent without completing an Evidence of Insurability (EO)?
$25,000
A policy of individual life insurance may include a rider that offers an insured
long-term care benefits
False advertising of an insurance policy is an example of:
Misrepresentation
In 1980, an individual paid $20,000 to purchase a non qualified single-premium deferred annuity. When the cash value had grown to 535,000 after eight years, the owner made one withdrawal in the amount of $10,000. The amount withdrawn was
Entirely taxable as ordinery income
An immediate annuity:
Pays a lump sum benefit to the annuitant
An immediate annuity may be appropriate for all of the following EXCEPT
A parent saving to build a large fund for a child’s education
A licensee must report each of the following to the Maryland Inaurance Administration EXCEPT:
Change in financial status
Policy loan provisions may be found in all of the following lifo ineurance policies EXCEPT:
Five year term life
A valid contract requires all of the following EXCEPT:
Written evidence
Which one of the following causes of death probably would be EXCLUDED from coverage under an accidental death rider attached to a life insurance policy?
Injuries that are intentionally self-inflicted by the insured
Which annuity would pay income benefits of $200 per month for the annuitant’s lifetime or for ten years,
whichever is longer?
A fixed life annuity with installment refund
Keogh plans are also known as:
HR 10 plans
Twisting is an unfair trade practice defined as:
Persuading an insured, to the insured’s detriment, to switch policies
Which activity is an unfair claims settlement practice?
Offering settlements that are less than the fair value to offset insurer expenses
All of the following factors about applicants may be considered by companies in underwriting life insurance applications EXCEPT:
Race
All of the following are unfair trade practices EXCEPT:
Reinsurance
A notice of information practices must be given in the sale of all of the following policies EXCEPT:
Workers compensation
In a case where the meaning of an insurance policy is not clear, a court of law will usually interpret the policy in favor of the insured because an insurance contract is:
A contract of adhesion
All of the following are examples of unfair claims settlement practices EXCEPT:
Denying unsubstantiated claims on a timely basis
Which one of the following statemente about the extended term insurance nonforfeiture option in a life insurance policy is true?
The cash value is used as a premium to purchase the coverage.
A life Insurance producer is normally responsible for all of the following EXCEPT:
Approving policies for issue on behalf of the insurer
All of the following statements about a life income sellement option in a life insurance policy are true EXCEPT:
Benefit payment levels are based on the beneficiary’s age
All of the following are exclusions or restrictions sometimes found in life insurance policies EXCEPT:
Accidental death
Giving policyholders some part of the agents commission as an inducement to purchase insurance is an unfair trade practice known as:
Rebating
An Investor wants maximum income for life, and temporary ineome for a surviving spouse if the Investor dies first. The spouse has no Income now, but will receive substantial income from a trust in ten years. The investor should buy:
A joint and survivor annuity with ten years certain
During the first two years a life insurance policy is in force, the insurer may contest a policy for all of the following reasons EXCEPT:
Material concealment in the purchase of the policy.
Which is true about a universal life insurance policy?
The premium is flexible for the duration of the policy.
A definite and unqualified proposal of contract terms by one party to another is:
An offer
Which one of the following statements about a decreasing term life insurance policy is true?
The face amount of the policy decreases throughout the policy period.
An insurance agent’s license may be revoked for all of the following reasons EXCEPT?
Having no insurer appointment in effect for ten days.
Which is true about ownership of a deferred annuity contract?
An owner may be the annuitant or the beneficiary or neither.
One possible advantage of owning a flexible-premium life insurance policy is that
Changes may be made with relative ease by the policyowner
Which of these is a qualified distribution from a Roth IRA?
A distribution made after age 59 1/2 and five years of participation
Which statement about an adjustable life insurance policy is true?
It is a form of variable annuity
An individual age 45, received a distribution of 15.000, less $3,000 income tax withholding, from a former employers 401k plan. None of the money was rolled over.
Which federal taxes apply?
Income taxes plus a 10% penalty tax on $15,000
The needs approach to personal life insurance planning includes the creation of an emergoncy reserve fund. This fund is designed primarily to
Cover the cost of unexpected expenses
All of the following practices by a producer are considered misrepresentations EXCEPT:
Comparing the benefits of several policies
Splitting the commission with the buyer on a sale of insurance is an unfair trade practice known as
Rebating
Which table shows the rate of death by age for given groups of people?
Mortality table
Benefit payments under a joint and survivor annuity normally continue until the death of
One annuitant
When payment of the initial premium does NOT accompany the application, the applicant under a life insurance policy normally begins:
When the producer delivers the policy to the insured and collects the required premiun
A premium receipt which may provide immediate protection, but ONLY if the applicant is insurable, is called
A conditional receipt
How many hours of continuing education are required each biennium for a producer who holds more than one major line of authority?
24 hours
Which financial services product creates an instant estate, regardless of when death occurs
Life Insurance
All of the following normally indicate the presence of insurable interest in the life of another person EXCEPT
Co-signing a mortgage with the other person
A universal life insurance policy can be described most accurataly as a combination of
A flexible premium deposit fund and a monthly renewable term insurance policy
If a producer misleads or fails to adequately disclose the title and true nature of a policy offered to a potential insured, it may be considered:
Misrepresentation
