Final MD Test
A nonparticipating whole life insurance policy was surrendered for it's $20,000 cash value. The total premiums paid had totaled $16,000. What are the federal income tax consequences to the policyowner on receipt of the cash value?
$16,000 was received tax-free and $4,000 as ordinary income
A "premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of
10%
A change in a licensee's name or address must be provided to the commissioner within __ days.
30
A life insurance policy that is paid annually usually contains a grace period of at least __ days
30
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
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
What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
50%
which of these statements regarding a managing general agent is not true
A managing general agent generally represents the insured
Which of the following would NOT be appropriate for an immediate annuity?
A parent saving for a child's college
A producer working for an insurance company may be personally liable for
Acts performed which are prohibited in the agency contract
An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true?
Applicant has a right to receive a copy of the report
The Maryland Life and Health insurance Guaranty Corporation is funded by
Assessments of member insurers
Which of the following types of insurers limits the exposures it writes to those of it's owners?
Captive insurer
Which statement regarding the waiver of premium rider is accurate?
Cash payment is not directly provided to the policyowner
AI surrenders his life insurance policy for its cash value. The total of premiums paid into the policy minus total dividends in cash or used to offset premiums is referred to as the
Cost basis
An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement?
Equity
The powers directly given to a producer in an agency contract are called
Express
An example of misrepresentation is
Falsifying the terms, benefits, advantages, or conditions of an insurance policy
Which tax is normally associated with an individual's death?
Federal estate tax
What are premiums for group credit life insurance based on?
Flat rate unrelated to the borrower's age
Which insurance policy provision allows a policyowner to cancel the policy and receive a full refund within a limited time period after policy delivery?
Free-look period
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
The administrator for a corporate pension plan bought an accumulation annuity contract for it's 2,000 employees. All 2,00 participating employees received certificates of participation. What kind of contract is this?
Group deferred annuity
A policyowner has borrowed from a life insurance policy's cash value. Which of these statements is true
In the event of death, the loan amount is deducted from the policy proceeds.
An insurer's life insurance premium rate must be the same for all individuals
In the same risk class with an equal life expectancy
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
The Maryland Life and Health Guaranty Corporation protects the ___ in the event of insurer insolvency.
Insured
Where will a life insurance policy's proceeds be directed to if all the beneficiaries die before the insured?
Insured's estate
Which of the following is associated with an immediate annuity?
Lack of an accumulation period
Laura added a children's rider to her life insurance policy. What type of coverage was added?
Level Term
What type of premiums are associated with individual mortgage protection life insurance policies?
Level premiums
The ___ is required to notify the Maryland Insurance Administration of licensee's change in name or address
Licensee
Which of these do NOT indicate the presence of insurable interest in a life insurance contract?
Lifelong Friendship
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
Why do insurers require a minimum number of employees participate in a group insurance plan?
Minimize adverse selection
What must be disclosed when a producer advertises a life insurance policy?
Name of an actual insurer
which statement best describes a single premium whole life policy?
Paid-up policy that offers lifetime protection
What happens to life insurance policy when the policy loan balance exceeds the cash value?
Policy will no longer be in force
Which of the following accurately describes a participating insurance policy?
Policyowners may be entitled to receive dividends
How are level term policies able to provide level premiums?
Premiums are averaged over the term of the policy.
An individual appointed by an insurance company that represents the company and presents policies on it's behalf is a(n)
Producer
When must a claim on a life insurance policy be paid after proof of loss has been received by the insurer?
Promptly
What is the purpose of the Life and Health insurance Guaranty Corporation?
Provides benefits in the event of an insurer's impairment or insolvency
What type of risk involves the potential for loss with no possibility for gain?
Pure risk
What effect can a long-term care benefit rider have on a life insurance policy?
Reduced death benefit
which of these is NOT an unfair claims settlement practice?
Refusing to pay persons bringing false or fraudulent claims OR offering to settle a claim by arbitration
Switching Life insurance policies without tax consequence is permitted under
Section 1035 rules
Which of these is NOT considered the responsibility of a producer in the underwriting process?
Selecting the final approval date
Which of these factors does not influence how an individual's need for life insurance?
Self-maintenance expenses
What is a life insurance producer authorized to do?
Solicit, receive, and forward applicant ions to the insurer
Which one of these is NOT considered to be an element of an insurable risk?
Speculative risk
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
An example of rebating would be
Splitting commissions with a policyholder
How does the cost for a survivorship life policy compare to the cost of combining two separate life insurance policies?
Survivorship life policy is lower
Which of the following statements is TRUE if the owner of an IRA names their spouse as beneficiary but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
When would evidence of insurability be required for a person already covered with a variable universal life policy?
The death benefit is increased
Which of the following is NOT a reason for a business to buy a key person life insurance?
The increased pension liability resulting from the key person's death
Which of the following must be clearly be illustrated in ALL sales material for market values adjusted annuities?
The market value adjustment can be either upward or downward
Which of these must be disclosed in a universal life policy?
The policy's surrender charges
a life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insured's death?
Total premiums paid plus the policy face amount
What would be the disadvantage of naming a trust as beneficiary of a life insurance policy?
Trust administration fees would reduce policy proceeds
Insurance crimes which affect interstate commerce are prosecuted by the
US Attorney General
When does interest income for a flexible premium deferred annuity get reported for federal income taxes?
Upon receiving distributions from the contract
Which event triggers a deferred annuity to start making benefit payments to the annuitant?
When the contract is annuitized
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
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
life insurance replacement can be best defined as
a transaction in which a new life insurance policy is purchased and an existing life insurance policy is surrendered
A producer may share commission with
another licensed but unappointed producer
Before an individual is permitted to act as an insurance agent, he/she must hold a valid insurance licensee and be ____ by an authorized insurer
appointed
An order issued by the Commissioner that prohibits a specific practice listed in order is called a(n)
cease and desist order
What must be given to a life insurance applicant when the agent receives an application and the initial
conditional receipt
Which report contains information regarding an individual's general reputation and credit standing?
consumer report
An annuity's accumulation period may
continue after the purchase payments stop
group life plans sold in Maryland typically contain a conversion option. if the insured elects this option, the new policy
does NOT require evidence of insurability
When determining the accumulation value of deferred annuity, the total is calculated by taking the premiums paid plus interest earned minus
expenses and withdrawals
Insurable interest in one's own life is legally considered as
generally unlimited
When the disclosure of an insured's nonpublic information is involved, what is the insurer obligated to do?
give notice, explain, and allow opting out
A producer's license may only be suspended or revoked if the producer
has been afforded a right to hearing
An annuity which starts paying monthly benefits within a month after issuance is called a(n)
immediate annuity
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
When premiums are determined, one factor would be the expenses of the
insurer
Which statement is INCORRECT about the interest-only settlement option in a life insurance policy?
interest on proceeds must be paid by the beneficiary
How much is normally paid to a policyowner in a life (viatical) settlement?
less than the death benefit
An employer that offers a qualified retirement plan to its employees is eligible to
make tax-deductible contributions to the plan
Employers often purchase life insurance on a key employee in order to
pay for finding and training a replacement if the employee dies prematurely
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 disable
The commissioner is empowered to perform each of the following acts EXEPT
prosecute producers who violate state insurance laws
Any employee insured under a group life insurance plan is normally
protected by term life insurance
which of the following is NOT an objective of the National Association of Insurance Commissioners?
regulate state insurance commissioners
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
Exchanging a new policy for one already in force is called
replacement
Statements made by an insurance applicant on an application are considered to be
representations
Licensed producers in Maryland are authorized to
solicit, receive, and forward applications to the insurer
An individual may sell products in Maryland for an unauthorized insurer only if she/he obtains a(n)
surplus lines license
An insurable risk
that the chance of loss be calculable
Which of the following statements about the installments for a fixed period settlement option in life insurance policies is NOT true?
the periodic payment amount is determined by the beneficiary's age
A hold-harmless clause is an example of risk
transfer
__ can be defined as "replacing a policy when it is NOT in the best interest of the client"
twisting
A producer may NOT advertise an insurance product if he/she
uses a policy title to misrepresent the coverage
An insurance company's failure to enforce a contract provision is called a(n)
waiver
