Maryland Exam Simulator - Life - 200 Questions Flashcards
(200 cards)
1
Q
The annuitant in a single premium deferred annuity (SPDA)
A
makes only one premium payment
2
Q
An example of replacement is
A
canceling a term life policy to buy a whole life police
3
Q
Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?
A
Treaty reinsurance
4
Q
Which of the following would NOT be a reason for purchasing life insurance on a child’s life?
A
Provide benefits for the child if the parents die
5
Q
Field underwriting by a producer
A
may result in the disclosure of hazardous activities of the applicant
6
Q
Which statement best describes a single premium whole life policy?
A
Paid-up policy that offers lifetime protection
7
Q
A Maryland resident producer must meet specified continuing education requirements within a ____ - year period.
A
two
8
Q
What is considered the collateral on a life insurance policy loan?
A
The policy’s cash value
9
Q
Taking a sum of money and decreasing it in size is called
A
capital liquidation
10
Q
A producer must maintain customer records for ___ year(s) following the completion date of the insurance transaction.
A
five
11
Q
An individual appointed by an insurance company that represents the company and presents policies on its behalf is a(n)
A
producer
12
Q
A life insurance policyowner would like a dividend option that results in a limited current outlay of funds. Which dividend option would be chosen?
A
Reduction of premium payment
13
Q
Which life insurance policy provision allows a policyowner to cancel the policy and receive a full refund within a limited time period after policy delivery?
A
Free-look period
14
Q
How are qualified Roth IRA distributions normally treated for tax purposes?
A
Received income tax-free
15
Q
When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does need analysis involve?
A
Identifies the needs of an individual and the individual’s dependents
16
Q
Which of these policies is considered a whole life policy?
A
Single premium life
17
Q
Which of the following statements about the installments for a fixed period settlement option in life insurance policies is NOT true?
A
The periodic payment amount is determined by the beneficiary’s age
18
Q
When there is a named beneficiary on a life insurance policy, the death benefits
A
are paid directly to the beneficiary without interference from the insured’s creditors
19
Q
Which of the following is a requirement for an individual to receive an insurance license in Maryland?
A
Passing the appropriate examination
20
Q
How long after its effective date will an individual life insurance policy become incontestable?
A
2 years
21
Q
Which of the following would prevent a person from obtaining a Maryland resident producer license?
A
Residing in a state outside of Maryland
22
Q
A teacher recently retired at age 63 and has a tax sheltered annuity (TSA). Periodic deposits total $120,000 and the value of the contract is now worth $200,000. How much is taxed if the current value is surrendered today?
A
$200,000
23
Q
When a producer is replacing an existing ordinary life insurance policy, the producer must take all of the following actions EXCEPT
A
obtain the beneficiary’s signature
24
Q
A producer may be found guilty of misrepresentation for
A
failing to disclose a policy’s exclusions
25
A single-life annuity only has ONE
annuitant
26
Which of these is NOT considered to be an unfair trade practice?
Reinsurance
27
The __________ is required to notify the Maryland Insurance Administration of a licensee's change in name or address.
licensee
28
What kind of arrangement gives the policyowner the right to change the beneficiary?
Revocable designation
29
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
30
Tim is retired and has recently separated from his wife. He receives benefits from a qualified retirement plan through his former employer. The plan's trustee has decided to split these benefit payments between Tim and his estranged wife. This decision is likely in violation of which IRS rule?
Alienation of benefits
31
Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for
The policy is surrendered for less than what was paid into it
32
Which of the following is NOT a valid contract exchange?
An annuity exchanged for a life insurance policy
33
Which of these is an accurate statement regarding the fixed period settlement option on a life insurance policy?
A portion of the payments paid to the beneficiary comes from interest calculated on the proceeds of the policy
34
Which of the following is NOT guaranteed in a whole life policy?
Dividend scale
35
Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?
Net payment cost index
36
During the early years of a whole life insurance policy, the cash value will normally be
less than the total premiums paid
37
A description of a qualified plan's insurance contract may be found in which ERISA reporting form?
Annual return/report (Form 5500)
38
A large corporation pension plan purchased an accumulation annuity contract where all of the participating employees received certificates of participation. What is this contract called?
Group deferred annuity
39
When a policy loan is requested by a policyowner and it requires the consent of the beneficiary, what kind of beneficiary designation is this?
Irrevocable beneficiary
40
What is the purpose of the Life and Health Insurance Guaranty Corporation?
Provides benefits in the event of an insurer's impairment or insolvency
41
Carlos' producer license has been suspended due to non-renewal. He may apply for reinstatement within the ____ month period following the date when the license should have been renewed.
12
42
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits?
5
43
When does the producer give a premium receipt for a life insurance application?
When the initial premium has been paid with the application
44
A producer MUST notify the Commissioner for
conducting business under an assumed name
45
A minor may receive a life insurance policy's death benefit ONLY
if the minor has an appointed guardian
46
A life policy that has premiums that are lower than normal during the early years is called
Modified life
47
How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?
Taxed as ordinary income in the year received
48
Purchasing insurance is an example of risk
transference
49
How can an insurance company minimize exposure to loss?
Reinsuring risks
50
What is payable to the policyowner if a whole life policy is surrendered prior to its maturity date?
The case value
51
A producer who sells an individual life insurance policy in Maryland MUST deliver to the policyowner a(n)
Policy Summary and Buyer's Guide
52
Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments?
Variable universal life
53
Which of the following actions is REQUIRED by a producer who is replacing an existing life insurance policy?
Submit to the replacing insurer a list of the policies to be replaced
54
Which of the following contracts offer deferred taxation, flexible payments, a guaranteed interest rate, and death benefits equal to the cash value?
Flexible premium fixed annuity
55
In Maryland, false advertising is an example of
misrepresentation
56
The ________ is required to notify the Commissioner in the event of appointment termination.
insurer
57
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rates
58
The absolute assignment of a life insurance policy results in
all incidents of ownership transferred to the assignee
59
What happens to the cash value of a market value adjusted annuity if it's surrendered prior to the end of the stated guarantee period?
Subject to market value adjustment
60
A life insurance policy that contains an accelerated (living) benefit rider will provide funds if the
insured is expected to be confined to a nursing home for life
61
Which of the following BEST defines the illegal act of twisting?
Misrepresenting a policy for the purpose of inducing a policyholder to change or replace an existing policy
62
How long does protection normally extend to under a limited pay whole life policy?
Until age 100
63
Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
The gain is treated as taxable income and a penalty tax is imposed on the gain
64
All of the following are typically included in a life insurance policy illustration EXCEPT
Names of the beneficiaries
65
Which of these is NOT an Unfair Claims Settlement Practice?
Refusing to pay persons bringing false or fraudulent claims
66
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
67
Who is required to notify the Commissioner in the event of a producer's appointment termination?
Insurer
68
What happens when a policyowner borrows against the cash value of his life insurance policy?
The policy proceeds would be reduced by the outstanding loan balance
69
When must insurable interest exist for a life insuance contarct to be valid?
Inception of the contract
70
The owner's cost basis for a non-qualified deferred annuity is typically the same as the
total premiums paid
71
Who typically makes the purchase payments in an individual annuity?
Owner
72
A material change in a modified endowment contract (MEC) results in
the seven pay test, adjusted for cash value, applies again
73
According to the needs approach, an emergency reserve fund's primary purpose is to
cover the cost of unexpected expenses
74
A licensee who is required to take continuing education must complete 24 hours of continuing education, which includes ____ hour)s) of ethics coursework.
3
75
An individual may sell insurance products in Maryland for an unauthorized insurer only if he/she obtains a(n)
surplus lines license
76
The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called
implied authority
77
Proceeds payable under a life insurance contract to a policyowner in anticipation of death or upon the occurrence of specified life-threatening conditions as defined by the policy are best described as:
accelerated benefits
78
What is considered a valid reason for an insurer's refusal to pay policy proceeds directly to a minor?
Minors are normally not capable of handling money in a reasonable manner
79
A(n) ________ agent is an insurance agent who represents only ONE insurance company.
captive
80
The interest paid during an annuity's payout period is considered
taxable as ordinary income
81
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security
82
Voluntarily terminating an insurance policy is also known as
cancellation
83
An order issued by the Commissioner that prohibits a specific practice listed in the order is called a(n)
cease and desist order
84
Insurance is NOT characterized as which of the following?
As the number of insureds increase the number of losses decrease
85
What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?
Less than the policy's face amount
86
When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?
Producer
87
An insured has a $25,000 whole life insurance policy with $6,000 cash value available. Under the extended term nonforfeiture option, what is the amount of insurance available to the insured?
$25,000
88
How is a collateral assignment used in a life insurance contract?
Transfers specific ownership rights to a creditor
89
Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate
for federal income tax reasons
90
Which of the following is an example of illegal inducement?
Publishing guaranteed dividend rates on an insurance policy
91
To be eligible for Social Security disability benefits, an employee must be unable to perform
any occupation
92
Which of the following is NOT a reason for a business to buy key person life insurance?
An increased pension liability if the key employee dies
93
A policyowner is permitted to take out a policy loan on a whole life policy at what point?
When the policy has a cash value
94
What type of risk involves the potential for loss AND the possibility for gain?
Speculative
95
What determines how much an annuitant is paid for a variable annuity?
The market value variations of the securities backing it
96
Tori has an annuity that pays her a $500 per month income benefit for life or for ten years, whichever is longer. What kind of annuity is this?
Fixed life annuity with period certain
97
When a deferred annuity is surrendered, who must sign the authorization to do so?
Owner
98
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
99
Which type of life insurance policy is best suited for paying off the outstanding balance of a 30-year mortgage in the event of the insured's death?
30-year decreasing term
100
The Life and Health Insurance Guaranty Corporation protects the public in the event of
the impairment of a member insurer unable to pay claims
101
When an annuity contract has been fully surrendered, how will the surrender charges affect the final contract settlement?
Final contract settlement will be reduced
102
A Maryland resident producer must be at least ____ years of age.
18
103
Misrepresenting pertinent policy provisions relating to coverage after a loss is a(n)
unfair claims settlement practice
104
Which of these would likely be considered an Unfair Claims Settlement Practice?
Offering settlements that are less than the fair value to offset insurer expenses
105
Replacement regulation is designed to protect
policyowners from misrepresentations and loss of benefits
106
In what way is a life insurance policy affected by an accelerated benefit payment?
Decreases the death benefit
107
Tony the producer induces a policyholder to cancel her existing insurance policy and take out a new one by misrepresenting the benefits of the inferior new policy. Tony has engaged in the unfair trade practice of
twisting
108
Which of these is NOT common life insurance nonforfeiture option?
Life income annuity
109
XYZ Corp has implemented a qualified retirement plan. This plan may NOT discriminate
in favor of highly compensated employees
110
Which of the following is NOT required to be reported by a producer?
Producer's change of financial status
111
Mike applied for life insurance and was issued a conditional receipt. He is later found to be insurable and is issued a policy. When does his coverage become effective?
Date of issuance of the conditional receipt
112
Which settlement option makes minimum guaranteed dollar payments over a stated number of years?
Fixed-Period
113
Which of the following is NOT information found in a life insurance buyer's guide?
How to take legal action against an insurance company
114
Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg's false statement is called a(n)
material misrepresentation
115
A qualified profit-sharing plan is designed to
distribute a portion of company earnings to its employees
116
What happens to a life insurance policy when the policy loan balance exceeds the cash value?
Policy will no longer be in force
117
The following are all elements of a valid contract EXCEPT
written evidence
118
What kind of life policy typically offers mortgage protection?
Decreasing term
119
After the extended term life nonforfeiture option is chosen, the available insurance will be
level term for a stated period of time
120
An advantage of owning a flexible premium life insurance policy would be
The policyowner can make policy changes without difficulty
121
Dividends from a stock insurance company are normally sent to
shareholders
122
How is the insured protected if a payor benefit rider is attached to the life insurance policy?
Premium payments are waived in the event the premium payor dies or becomes disabled
123
An annuity's accumulation period may
continue after the purchase payments stop
124
An example of misrepresentation is
falsifying the terms, benefits, advantages, or conditions of an insurance policy
125
Which of these is a true statement regarding survivor benefits under a qualified retirement plan?
Survivor benefits can only be waived with the written consent of a married employee's spouse
126
Which statement regarding whole life insurance is accurate?
Insurance coverage can continue for life
127
What must be disclosed when a producer advertises a life insurance policy?
Name of the actual insurer
128
A life insurance beneficiary died after receiving only six payments under the policy's life income settlement option. What happens with the remaining balance of the death proceeds?
Kept by the insurance company
129
Which term describes the elimination of a hazard?
Risk avoidance
130
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds could be forfeited
131
Which tax is normally associated with an individual's death?
Federal estate tax
132
Which of the following actions may result in a producer's license being suspended?
Rebating a portion of the commission to the insured
133
When premiums are determined, one factor would be the expenses of the
insurer
134
The insurance coverage in a variable life insurance policy may vary based on the value of
its underlying investments
135
Which of the following is a TRUE statement regarding universal life insurance?
Policy states how much of each premium is used toward company expenses
136
The automatic premium loan provision can be accurately described as a
provision that provides a policy loan to pay an y premiums by the end of the grace period
137
When a ceding insurer transfers a portion of its risk to an assuming insurer on a case by case basis, this process is referred to as
Facultative reinsurance
138
An insured may be required to sign which document at policy delivery to ensure there has not been any adverse medical conditions since the time of the application?
Good health statement
139
What is considered interstate travel under the Federal Fraud and False Statements Act?
Puerto Rico
140
Which life insurance clause prohibits an insurance company from questioning the validity of the contract after a stated period of time has passed?
Incontestable clause
141
Which statement regarding the waiver of premium rider is accurate?
Cash payment is not directly provided to the policyowner
142
How much is normally paid to a policyowner in a life (viatical) settlement?
Less than the death benefit
143
Scott has a life insurance policy in which the dividends are left with the insurance company. This particular policy may be paid up when the cash value plus accumulated dividends
equal the net single premium for the same face amount at the insured's attained age
144
A life insurance policy's waiver of premium rider has the ability to
relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled
145
During the application process, a statement made by an applicant that becomes part of the contract is considered to be a(n)
warranty
146
A life insurance policy that is paid annually usually contains a grace period of at least ____ days.
30
147
Which statement concerning adjustable life insurance is accurate?
The face amount and premiums can be changed simultaneously by the policyowner
148
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
149
What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued?
Under $50,000, initially, but increases annually until fully insured
150
Greg had recently been terminated from his job that covered him for group life insurance. How long does he have to convert his coverage to an individual policy?
31 days
151
Which statement regarding a single premium life insurance policy is NOT correct?
Additional premiums may be required under certain conditions
152
Which of the following is associated with an immediate annuity?
Lack of an accumulation period
153
How many quarters must an employee have worked in a covered occupation to be considered fully insured for Social Security disability income?
40
154
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
155
Which of the following actions may result in the suspensions of a producer's license?
Rebating part of a commission to the applicant
156
Employers often purchase life insurance on a key employee in order to
pay for finding and training a replacement if the employee dies prematurely
157
What type of risk involves the potential for loss with no possibility for gain?
Pure risk
158
When does the owner's contractual rights begin under an individual annuity contract?
Time of purchase
159
Kiara filled out a life insurance application and was given a policy illustration that showed future premiums being paid out of nonguaranteed values. This illustration MUST disclose that
she may need to resume premium payments, depending on actual results
160
Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner?
Unemployment tax expenses
161
What may be the result of replacing an existing life insurance policy with a new one?
Surrender charge
162
With life insurance, the needs approach is used primarily in determining
how much life insurance a client should apply for
163
the license required for an insurer to conduct business in the state is referred to as a(n)
certificate of authority
164
If a producer commits an unfair trade practice, all of these actions by the Maryland Insurance Administration are true EXCEPT
Maryland Insurance Administration's decision is final
165
Where is the difference between a standard risk and a substandard risk reflected?
Premium charges
166
How long must a life insurance policy be in effect before the policyowner may use the nonforfeiture provision?
3 years
167
A producer who sells an individual life insurance policy in Maryland MUST deliver to the policyowner a(n)
Policy Summary and Buyer's Guide
168
A life insurance policy sold in Maryland can be cancelled for nonfraudulent misstatements for up to
2 years
169
Jim recently sold his whole life insurance policy under a viatical settlement contract. The proceeds of this contract could be subject to the claims of
creditors
170
When compared to a fixed annuity, a variable annuity has what distinguishing feature?
Investment risk is assumed by the purchaser
171
What effect can a long-term care benefit rider have on a life insurance policy?
Reduced death benefit
172
Which of the following must clearly be illustrated in ALL sales material for market value adjusted annuities?
The market value adjustment can be either upward or downward
173
Which of the following has the power to examine the books and records of Maryland insurers?
Maryland Insurance Administration
174
What is a life insurance producer authorized to do?
Solicit, receive, and forward applications to the insurer
175
A producer may share commission with
another licensed but unappointed agent
176
If an insured dies during the grace period without having paid the premium, how much will the insurer pay?
Policy's face amount minus any premiums due
177
Which of these is NOT an underwriting responsibility of a life insurance agent?
Determining the final rate classification
178
Which of these statements regarding a managing general agent is NOT true?
A managing general agent generally represents the insured
179
An individual who purchases a modified life insurance policy expects
an improvement in future income
180
The standard grace period for a life insurance policy sold in Maryland is
30 days
181
Which of the co-annuitants listed below would receive the largest monthly benefit payments in a joint and 100% survivor annuity?
Ages 71 and 73
182
According to federal fraud and false statements regulation, what is required for a prohibited person to transact insurance business in this state?
Written consent from the state insurance regulatory agency
183
Which of the following relationships demonstrates insurable interest in the absence of economic interest?
Marriage partners
184
A business may purchase an annuity for all of the following reasons EXCEPT
informally funding a non-qualified deferred compensation plan
185
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
186
Tim's individual life insurance policy has just recently lapsed. His policy may be reinstated at any time within ____ year(s).
3
187
Which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy?
It allows a policy loan to cover premium payments if the policyowner becomes totally disabled
188
Which benefit supplement added to a life insurance policy insures an entire family?
Family term rider
189
Which of the following is an example of defamation?
Making a statement that is false or maliciously critical of the financial condition of an insurer
190
Which tax cost is normally associated with death?
Federal estate tax
191
The principal source of information concerning an applicant's identity, age, and marital status is found in the
completed application
192
What typically changes at the re-entry option date found in some term life policies?
premium
193
All of these are considered to be a benefit under Social Security EXCEPT for
unemployment
194
Prior to conducting an HIV-related test, the insurer must obtain a(n)
written authorization from the proposed insured
195
A life policy loan in Maryland cannot charge a fixed rate of interest higher than
8%
196
A terminally ill policyowner decides to sell his life insurance policy at a discount to help support his family. This sale is called a(n)
viatical settlement
197
Which of the following types of insurers limits the exposures it writes to those of its owners?
Captive insurer
198
How may an insurance company classify an accidental death benefit on a life policy?
As an optional policy rider
199
Which life insurance policy would be eligible to include an automatic premium loan provision?
Whole life
199
A life insurance policy provision that has the ability to reduce the death benefit is called the
accelerated (living) benefit
