Practice Free Life-Producer Maryland Life Producer Exam (Series 20-27) Exam Questions Answers With Explanation

Comprehensive and Detailed Step by Step Explanation:

A “period certain” provision ensures payment for a specified period regardless of whether the annuitant survives:

Period certain (B) guarantees payments for a set number of years, protecting beneficiaries.

Cost recovery (A) and refund options (C and D) relate to refunding premiums or unpaid amounts but do not guarantee a payment period.

References: Maryland Annuity Regulations, Payment Options.

Comprehensive and Detailed Step by Step Explanation:The Maryland Insurance Administration (MIA) has sole authority to regulate, suspend, or revoke an insurance producer’s license for violations of state insurance laws:

Maryland Insurance Administration (C):Correct. The MIA oversees producer licensing, compliance, and disciplinary actions.

Appointing insurer (A):Can terminate an appointment but cannot revoke a license.

Continuing education provider (B):Only offers training and has no regulatory authority.

Attorney General (D):Handles legal actions but does not directly manage licensing.

References:Maryland Insurance Article §10-126, Producer Regulation Guidelines, COMAR 31.03.13.

Comprehensive and Detailed Step by Step Explanation:Theneeds approachassesses financial requirements to determine the appropriate amount of life insurance.

Covering unexpected expenses (B):Emergency reserve funds help beneficiaries handle unforeseen costs, such as urgent repairs, medical emergencies, or temporary loss of income.

College tuition and books (A):This falls under education funding needs, not emergency reserves.

Paying off mortgages (C):This is categorized as debt repayment, separate from the reserve fund.

Providing retirement income (D):This is a long-term goal that requires separate planning, not immediate financial reserves.

References: Maryland Insurance Needs Analysis Guidelines and Life Insurance Planning Practices.

Comprehensive and Detailed Step by Step Explanation:The principle ofestoppelprevents a party from asserting rights or enforcing terms if their prior actions contradicted such enforcement.

Estoppel (C):If the insurer knowingly disregards a policy provision (e.g., a late premium payment), they may be barred from enforcing it later if the policyholder relied on the prior inaction.

Adhesion (A):Refers to contracts where terms are dictated by one party (e.g., the insurer), not applicable here.

Waiver (B):Occurs when an insurer voluntarily relinquishes a known right but does not necessarily create future obligations like estoppel does.

Subrogation (D):Involves transferring the insured’s claim rights to the insurer after a loss, unrelated to this scenario.

References: Maryland Legal Doctrines on Insurance Enforcement and Contractual Estoppel.

Comprehensive and Detailed Step by Step Explanation:Maryland law allows insurers to considermedical conditions (A)as part of the underwriting process, provided it is done fairly and within legal boundaries.

Race (B), Gender (C), and Creed (D):Discrimination based on these factors is strictly prohibited under Maryland’s anti-discrimination laws and the Unfair Trade Practices Act.

Insurers must comply with state and federal regulations, ensuring underwriting decisions are based on actuarially justified factors, such as health and lifestyle, rather than prohibited discriminatory criteria.

References:Maryland Insurance Article §27-501, Anti-Discrimination Guidelines, and COMAR 31.15.03.

Comprehensive and Detailed Step by Step Explanation:Insurance producers using an assumed or fictitious name for their business must file the name with the Maryland Insurance Administration (MIA).

File the name with the Insurance Administration (A):This ensures transparency and compliance with regulatory standards.

Apply for an additional license (B):Not required; the existing license covers the producer.

Apply for an additional appointment (C):Applies when a producer represents multiple insurers, not for fictitious names.

Post a $10,000 bond (D):Irrelevant to this context.

References: Maryland Insurance Administration Guidelines on Producer Licensing and Business Names.

Comprehensive and Detailed Step by Step Explanation:Individual life insurance policies often allow riders or supplementary coverage options, but they do not cover workers' compensation, which is a separate insurance category.

Disability (A):Can be included as a rider, such as a waiver of premium or disability income benefit.

Long-term care (B):Often available as an optional rider to address extended medical care expenses.

Burial (D):Final expense policies or riders can be added to cover funeral and burial costs.

Workers’ compensation (C):Not covered under life insurance policies; this is a specific insurance product regulated differently.

References:Maryland Life Insurance Rider Guidelines, Workers' Compensation Insurance Regulations, and COMAR 31.09.03.

Comprehensive and Detailed Step by Step Explanation:Thebeneficiaryis the individual or entity named in the life insurance policy to receive the death benefit upon the insured’s death.

Designated recipient of proceeds (B):The policyholder nominates this party in the policy documents.

Ownership interest in the policy (A):Refers to the policyowner, who controls and funds the policy but may not be the beneficiary.

Insurer (C):Issues and administers the policy but is not a recipient.

Owner of the cash value fund (D):This pertains to cash value accumulation, separate from death benefit designation.

References: Maryland Life Insurance Policy Provisions and Beneficiary Designation Rules.

Comprehensive and Detailed Step by Step Explanation:A “period certain” option ensures benefit payments are made for a set duration even if the annuitant dies before the end of the period.

Period certain (B)guarantees a minimum payment period to beneficiaries.

Cost recovery (A)andrefund options (C and D)relate to returning unused premiums or unpaid balances but do not ensure a minimum payout period.

References: Maryland Annuity Regulations and Contract Features.

Comprehensive and Detailed Step by Step Explanation:

The Life and Health Insurance Guaranty Corporation provides financial protection to policyholders:

Guarantees benefits in case of insurer insolvency (C), ensuring policyholders do not lose coverage.

It does not guarantee the issuance of policies (A and B), as policy issuance depends on underwriting.

It cannot ensure an insurer will never fail (D) but mitigates the impact of failure.

References: Maryland Life and Health Guaranty Corporation Act, Maryland Insurance Code.

Comprehensive and Detailed Step by Step Explanation:Universal life insurance is a flexible product that combines features of term insurance and a savings component:

Flexible premium deposit fund and a monthly renewable term insurance policy (D):Universal life allows policyholders to adjust premiums and coverage amounts. The policy includes a savings element (cash value) and provides renewable term insurance protection.

Mutual fund and whole life insurance policy (A):Incorrect, as universal life does not involve mutual funds or strict whole life coverage.

Term insurance and an annuity (B):Universal life lacks the payout structure of an annuity.

Endowment and interest-sensitive deposit fund (C):While it includes interest-sensitive growth, it is not structured as an endowment policy.

References:Maryland Life Insurance Product Guidelines, Universal Life Policy Features, and COMAR 31.09.13.

Comprehensive and Detailed Step by Step Explanation:

Qualified retirement plans are regulated by IRS rules:

Contributions cannot exceed IRS limits (C), which are updated annually.

Contributions are not arbitrarily determined by employers (A) or based on employee performance (D).

Employers may make varying contributions, invalidating (B).

References: IRS Regulations for Qualified Retirement Plans, Maryland Employee Benefits Guidelines.

Comprehensive and Detailed Step by Step Explanation:Insurance licensees in Maryland are required to report certain changes to the Maryland Insurance Administration (MIA):

Change of name (A):Must be reported promptly to ensure accurate licensure records.

Change of residence address (B):Also required for communication and compliance purposes.

Felony convictions (D):Mandatory disclosure to maintain transparency and evaluate fitness for licensure.

Change in financial status (C):Not required unless it directly affects the licensee’s ability to meet financial obligations tied to the license (e.g., bonding requirements).

References:Maryland Insurance Code §10-118, COMAR 31.03.01.

Comprehensive and Detailed Step by Step Explanation:The Maryland Insurance Administration (MIA) is the regulatory body responsible for ensuring compliance with state insurance laws, including identifying unfair trade practices:

The Maryland Insurance Administration (A):Has statutory authority to examine insurers’ books and records to investigate potential violations and protect consumers.

National Association of Insurance Commissioners (B):Provides guidance but lacks enforcement powers in Maryland.

Federal Deposit Insurance Corporation (C):Regulates banks, not insurers.

PCIGC (D):Handles claims for insolvent insurers but does not investigate trade practices.

References:Maryland Insurance Article §2-209, COMAR 31.15.07, and MIA EnforcementGuidelines.

Comprehensive and Detailed Step by Step Explanation:Thefree-look periodis a consumer protection feature allowing policyholders to cancel a policy within a specified period for a full refund.

10 days (A):Maryland requires a minimum free-look period of 10 days for most individual life insurance policies. This provides enough time for policy review.

31 days (B), 45 days (C), and 60 days (D):These periods exceed Maryland's legal minimum and are typically not required unless specified by the insurer.

References:Maryland Free-Look Provisions, COMAR 31.09.09, and Maryland Consumer Protection Insurance Guidelines.

Comprehensive and Detailed Step by Step Explanation:The buyer’s guide helps policyholders understand life insurance by offering:

Advice on deciding coverage needs (B)to ensure adequate protection.

Rate comparison tools (C)to evaluate costs effectively.

Guidance on policy requirements (D)to make informed choices.

The guide does not address legal actions such astaking civil action against an insurer (A), as such matters require legal consultation or regulatory support.

References: Maryland Life Insurance Buyer’s Guide Provisions.

Comprehensive and Detailed Step by Step Explanation:Allowing an applicant to sign a blank or incomplete application (B) violates ethical and legal standards, as it undermines transparency and could lead to disputes about coverage or claims.

Selling insurance to family members (A):Permitted as long as the transactions areconducted ethically and comply with Maryland laws.

Countersigning policies (C):Required in certain situations to validate contracts in Maryland.

Splitting commissions with nonresident producers (D):Permissible under Maryland law, provided both producers are licensed and involved in the transaction.

References:Maryland Insurance Administration Producer Conduct Rules, COMAR 31.03.13, and Ethical Standards for Insurance Producers.

Comprehensive and Detailed Step by Step Explanation:In astock insurance company, dividends are distributed to shareholders, who are the owners of the company.

Shareholders (B):Receive dividends based on the company’s profitability, as determined by the board of directors.

Members of the board of directors (A):May also be shareholders, but their role as directors does not entitle them to dividends.

Beneficiaries (C):Receive death benefits, not company dividends.

Producers (D):Earn commissions or fees, not dividends.

References:Maryland Corporate Insurance Guidelines, Stock vs. Mutual Insurer Framework, and COMAR 31.05.03.

Comprehensive and Detailed Step by Step Explanation:Under Maryland insurance law, a terminated employee has31 days (D)to convert a group term life insurance policy into an individual policy without providing evidence of insurability.

This grace period allows individuals to maintain coverage while securing individual insurance.

10 (A), 20 (B), or 30 days (C)are incorrect, as Maryland mandates a specific 31-day window.

References: Maryland Conversion Rights in Group Life Insurance Policies, Section 15-401 of the Insurance Article.

Comprehensive and Detailed Step by Step Explanation:Thecost basisis the total of all premiums paid minus dividends received or used to offset premiums. This figure is used to calculate the taxable portion of the cash value upon surrender.

Cost basis (D):Represents the non-taxable portion of the surrender value; any amount exceeding this is considered taxable income.

Cash value (A):The policy’s accumulated value, which may include taxable gains.

Loan value (B):Refers to the amount available for borrowing against the policy.

Gross proceeds (C):The full amount received upon surrender, not accounting for cost basis deductions.

References:IRS Guidance on Life Insurance Taxation, Maryland Life Insurance Surrender Rules, and COMAR 31.09.14.

Comprehensive and Detailed Step by Step Explanation:To be legally enforceable, a contract must meet the following requirements:

Offer and acceptance (A):One party must propose terms, and the other must agree to them.

Competent parties (B):Individuals must have the legal capacity to enter a contract (e.g., not minors or mentally incapacitated).

Consideration (C):Each party must provide something of value (e.g., money, services, or promises).

Written evidence (D)is not required for all contracts, as some verbal agreements are enforceable depending on the type of contract (except for specific cases like real estate).

References: Maryland Contract Law Principles.

Comprehensive and Detailed Step by Step Explanation:Ethical responsibilities and state laws mandate that insurance producers act in good faith when handling applications.

Reporting material facts to the insurer (D):Producers must disclose any information that could impact underwriting decisions. Transparency ensures that policies are accurately priced and legally enforceable.

Denying knowledge (A):Violates ethical and legal obligations.

Acknowledging facts only if asked (B):Demonstrates bad faith and can lead to legal penalties.

Advising applicants to amend (C):While this helps, it does not fulfill the producer’s duty to inform the insurer.

References: Maryland Insurance Administration Producer Code of Ethics, COMAR 31.03.13.