MD State Insurance Exam
What is the Max the benefits Payments Provision will pay for Funeral Expenses?
$2000
In a joint life annuity when do the payments stop?
At the first death
What are the general requirements of a qualified plan?
Must be permanent, written, and legally binding Exclusively beneficial to employees and their beneficiaries Must be communicated to all employees
Are insurance rates based off the cost of living?
NO
Do accelerated death benefits cover disability?
NO
For True Life Settlements, does the seller need to be terminally ill?
NO
In credit life insurance can a creditor require a debtor buy insurance from a certain insurer?
NO
Is a term policy being converted to a life policy considered replacement?
NO
Is proof of insurability required for renewing your annually renewable term insurance?
NO
does the waiver of the of cost of insurance rider expire when you turn 60?
NO
If an insurance company has issued a policy even though some of the application questions were unanswered when can the insurance company request the answers?
Never, they waived their right
does a fixed period annuity settlement have a life contingency option?
No
When concerning insurable risk, Can insureds be randomly selected?
No, Insureds cannot be randomly selected
T/F When someone has been divorced too many times it will affect their policy coverage
No, Limiting coverage based on marital status is illegal
T/F when a policy is established the agent needs to recieve a waiver of premium from the applicant
No, They need to recieve a payment of premium, statement of good health, and a delivery reciept
T/F a divorcee who gets a share of her 52 year old husbands disability retirement income must pay a 10% penalty tax on the income
No, Under normal circumstances yes but because she is a divorcee she does not have to pay
What Policy does not pay dividends to policyholders?
Nonparticipating Policies
Group Life insurability is different from other insurance options because
Not all members have to have a proof of insurability
Under Straight Life Annuity, the annuitant dies before principal gets paid out, what will he recieve?
Nothing, Straight life promises payments until death.
Social Security Serves to provide benefits to people who are
Old, Retired, or Survivors
How often must the commissioner examine domestic insurers?
Once every 5 years
What stays the same if you use an extended term option on your whole life policy? (Shifting of a life policy to a term policy)
The Death Benefit/Face Value
What method is used to determine the taxable portion of each annuity payment?
The Exclusion Ratio
Who is responsible for enforcing insurance laws?
The Insurance Administration
If a BreadWinner under a Family Policy dies, what rights does the covered family have to do with the policy?
They can convert their policy to universal life without evidence of insurability
Under Pure Life ( also known as Straight Life & Life Only) How long do the annuity payment last?
They last until the death of the annuitant and the remaining money goes to the insurance company
If an annuitant dies during the accumulation phase, will they receive the cash value or the interest accumulated?
They will recieve whichever is greater
In life insurance policies, what purpose do disclosure statements serve?
To DISCLOSE the policy and benefits to the consumer
Why would an insurance producer backdate an insurance application?
To avoid an increase in premium for the insured (set premiums at younger age)
What are the goals of risk retention?
To fund losses that cannot be insured To increase control of fund losses To reduce expenses Increase Cash Flow
What purpose do Life Insurance Illustrations serve?
To identify nonguaranteed values Can only be used as approved
T/F Group Life insurance is based off of the average age of the group and the ratio of men and women in the group
True
Under the installments of a fixed amount option the ______ selects the time period of the benefits and the _____ determines how much the payment will be
Under the fixed amount option the annuitant selects the period of benefits and the insurer selects how much the payment will be
Which policy allows partial surrenders or withdraws?
Universal Life
Which Type of Insurance policy allows the insured to pay more or less than the planned premium?
Universal Life has a flexible premium amount allowing flexible premium payments as long as the cash value in the policy is sufficient
What is the main difference between Variable Whole Life and Variable Universal Life?
Variable Whole Life has a guaranteed Death Benefit
When is the earliest a policy can go into affect?
When an application is signed and a check is given to the agent
Class designations are normally talking about what?
When beneficiaries are not mentioned by name, "Give my money to My Children".
The Paid Up addition Option uses the the dividend to...
buy a small amount of the same type of insurance as the existing policy
Do employees in a noncontributionary group plan receive individual policies?
no, The employer receives the master policy and the employees receive certificates on insurance
The reduction of premium option uses the dividend to
reduce next years premium
To qualify for the role of insurance advisor, An applicant must post a single surety bond of
$1000
Fraud is considered a felony if it is greater than
$300
What is the maximum dollar amount allowed to before it is considered a rebate?
$50
What characteristic must an annuity have if its used to accumulate funds in an IRA?
Tax-Qualified (grow tax deferred, subject to IRA MAX contribution limits
What provides an UnderWriter with information about an applicants medical history?
The Medical Information Burea
Who can make a fully deductible contribution to an IRA?
Those who are not already covered by an employee sponsored plan & Have earned income
Are Insurance Underwriters allowed to discrimanate?
Yes, But not unfairly
What happens if I want to pull money out of a MEC to pay medical bills?
You will pay a penalty if under 59 1/2
What is a hazard?
Anything that increases the chance a peril could occur (smoking)
When an insurance provider is rocking insurance company gear people may assume they have
Apparent Authority
SGLI provides members of the armed forces with what kind of insurance?
Term Group Life Insurance
When an annuity is written, whos life expectancy is taken into account?
The Annuitant
What is a peril?
A cause of loss (fire)
Cancelling your life policy and transferring the cash value into an annuity is called a
1035 exchange, (non taxable)
How long is a temporary agents license valid for?
15 Months
How soon must an insurer notify the applicant that an investigative consumer report has been requested?
3 Days
If a policyowner transfers his life insurance policy how long after will the face value officially be in the new beneficiary's name?
3 years, if not the death benefit will be in the previously insureds taxable estate
If you are convicted of a felony how soon does an insurance provider have to notify the commissioner?
30 Days
How long is the free look period on a replacement policy?
30 days
How long is a commisioners term?
4 years
How many years does one have to be in a group life policy in order to leave and convert that into an individual policy?
5 years
Policy loan requested can be delayed for how long?
6 months
What is the max amount of time that an application be backdated?
6 months
After the completion of an examination, The commissioner has how many days to file the final report?
60 Days
How soon must a rollover occur?
60 days
Upon Policy Delivery, a producer may be required to obtain what from the applicant?
A statement of Good Health An initial payment of Premium A delivery Reciept
A tax Sheltered Annuity is a retirement plan made for who?
A tax plan that favors certain people, (employees at non profits, churches, teachers
In group life what kind of insurance is used and is the employer the beneficiary?
Annually renewable term insurance and the employer is not the beneficiary
An insurance policy that is not negotiated and the applicant does not have a large say in what is written is considered what kind of contract?
Adhesion, Prepped only by the insurer and the applicant just says yes or no
For HIV testing, when must the applicant be notified
Before the test
What cant insurance companies do when creating ads for their products?
Cant use caveats (warnings) as often as possible
The insured recieves an annual life long nontaxed dividend check, Which term is she using?
Cash Option
What three things are fundable by anuities?
Cash accumulation for any reason Estate Liquidation Retirement Income
When a beneficiary is not specifically named this is concerning a
Class designation
If a husband wife combo are both involved in a head on collision and die, and the estate is paid to the estate of the insured, what provision was on the policy?
Common Disaster
What riders cause the death benefit to increase? COL/AD/GI
Cost Of Living Rider Accidental Death Rider Guaranteed Insurability Rider
The rider that allows face value to rise with inflation is
Cost of Living Rider
What happens when a policy is surrendered for its cash value?
Coverage ends and the policy cannot be reinstated
If the owner of an IRA dies without having named a beneficiary, by what point must the interest be fully distributed?
DEC 31st of the 5th year of the death anniversary
The policyowner of an adjustable life policy wants to increase their death benefit, Can they do this? How?
Death Benefit can be increased by providing evidence of insurability
What insurance policy is most commonly used in credit life insurance?
Decreasing Term (Can Take out loans)
When does an insurance provider have to notify the applicant of policy practices?
During the application process and every year after that
What kind of returns do Equity Indexed Annuities Seek?
Equity Indexed Annuities seek higher returns
If a change needs to be made on an application, an agent may not
Erase the incorrect answer and write the correct one
How often must a viatical settlement broker be registered with the commissioner?
Every other year
When an employer gives an employee a bonus in the amount of an insurance premium, what is this called?
Executive Bonus
What is the benefit of choosing extended term as a nonforfeiture option?
Extended Term has the highest amount of insurable Protection
T/F policy loans taken out are taxable as income
FALSE
T/F in credit Life Insurance, a borrowers beneficiary recieves the benefits
FALSE, in credit life insurance the creditor is the beneficiary
An Agent selling variable annuities must be registered with
FINRA
(T/F) Section 1035 exchanges must be completed within a 30 day period
False
If an insurance company lies about its financial health this is considered...
False Financial Statement
T/F a minor son would be able to collect death benefits directly from the insurer
False, A minor son does not have the legal strength to collect death benefits without it running through a trustee
If your fraud is valued at more than 300 dollars you are guilty of a..
Felony bruh
A producers License can be reinstated retroactively after it has expired...
For no longer than 60 days
Saying you are not going to raise the price of premiums but still doing it anyway is considered...
Fraud
If a loan request of policy premiums is made, how soon must the loan be approved?
IMMEDIATELY
If a life insurance policy is surrendered, is it taxed as income? If so, what part?
If surrendered the amount that exceeds the cash value is taxed as ordinary income
When does your death benefit go down even if you have the incontestability clause?
If you misrepresented your age, sex, or identity.
Life income joint and survivor settlement option guarantees
Income for 2 or more recipients until they die
What are the two components of a Universal Policy?
Insurance and Cash Amount
Based on the Human Life Value Approach, What factors are included in the determining the value?
Insureds current and future income Insured Expenses Insureds income effected by inflation
Who makes up the Medical Information Bureau?
Insurers (& their information)
Which settlement option pays only the interest to a beneficiary then the principal to another beneficiary at a later date?
Interest Only option
Does a MEC pass or fail the 7 pay test?
It has to PASS the 7 pay test
What is annually renewable term insurance?
It is a level term insurance that offers the most coverage at the lowest cost
Making unauthorized corrections to an applicants claim is okay if?
It is not okay, it is a violation of insurance code
The premium on a childrens rider in an insurance policy is unique because
It remains the same no matter how many children are added to the policy
Will My insurance Policy Cover me on the day of my initial premium payment or my date of medical examination?
It will be whichever one is later
Variable Whole Life insurance is based on what type of premium?
Level Fixed
In Maryland, Willful breaking of insurance laws are considered
Misdemeanors
What benefit relieves a minor from paying premiums if their parent becomes disabled or dies?
Payor Benefit
Apparent Authority is also known as
Perceived authority, based on the actions of the principal
What is a nonforfeiture option?
Provision that allows policyholders to get a refund of premium or benefits after nonpayment of
Offering free tickets to an NBA game in exchange for the purchase of an insurance policy is considered...
Rebating
promising benefits that are not offered in a policy to induce someone to purchase the policy is called
Rebating
Which Nonforfeiture Option Provides Coverage for the LONGEST period of Time?
Reduced Paid up
Name the Nonforfeiture Options
Reduced Paid up Cash Surrender Extended Term
If i have an employer sponsored independent retirement account and my employer contributions are not included in my gross income, what kind of plan am I in?
SEP Simplified Employement Pension
What does an extended term nonforfeiture option do?
Takes your life policy and converts to Extended term, keeping the same face amount
What is used to determine customer annuity suitability?
Tax Status Financial Experience Annual income
cash in a deferred annuity grows...
Tax deferred
If a beneficiary is NOT named for annuity benefits, where will the benefit be paid?
The annuitants estate
In a group life insurance policy, the insurer may select everything except
The beneficiary
In group life insurance, employers cannot select...
The beneficiary, employees get to choose that
Who can legally suspend a license?
The commisioner
Whole Life policy loans are limited by what amount?
The current cash value
Who gives the information in investigative consumer reports
The customers friends, associates, neighbors,
The policy and the application together form what?
The entire contract
What happens to the face amount of the policy when a reduced, paid up nonforfeiture option is chosen?
The face amount is reduced to what the amount would buy of a single premium
When an employee terminates their employers group life plan, who determines the type of coverage on the new individual plan?
The insurer determines the coverage, which is usually permanent insurance
If an annuitant dies before the annuity date, what happens to the money accumulated?
The interest is taxable
What are the three components that make up an insurance policy premium?
The investment return The mortality cost Insurer Expenses
Insurance Licenses expire every 2 years on...
The last day of the insurance producers birth month
What is the advantage of reinstating a policy instead of getting a new one?
The original application age is used for premium determination
Who is the annuity owner?
The person who buys the annuity
How are policy loans calculated?
The policys cash value minus unpaid loans and minus accrued interest
In Adjustable Life Insurance, the PolicyOwner can change the...
The premium The type of insurance The length of coverage
A level premium term policy has a level premium payment until...
The term is up then when you request the new term policy your premium will increase
If a policy application is filled out, but an initial premium is not paid, nor is a conditional reciept given out, when will coverage begin?
When the agent delivers the policy, collects the initial premium, and recieves an statement of Good Health
When would a 20-whole pay life policy endow?
When the indured reached age 100
In a group life policy, when do the premiums count as taxable income to the employee?
When the premium costs exceed 50,000 bucks
Graded Premium can be found in what kind of insurance?
Whole Life
What is not allowable for a 1035 exchange?
Whole life policy exchanged for a term policy
An applicant buys a nonqualified annuity, what beneficiary would have to be chosen in order for the interest accumulated to not be taxed?
Wifey
How are buy-sell agreements normally funded?
With the life insurance policy
Do you have to provide evidence of insurability every time you renew your annually renewable term insurance?
YES
Does a reduced paid up nonforfeiture option policys cash value continue to increase
YES
Events or instances that could increase the chances of an insured loss
Hazards
A 60 year old has a 401k, he takes a distribution, then rolls the money over to an IRA all within 60 days, what fees, if any, will he have to pay?
He will have to pay a 20% withholding tax on the distribution only
What is the difference between a Medical examination and the Medical Information Burea
The Medical Info Burae provides medical history of the applicant while medical exams provide info on the applicants CURRENT health
Model insurance legislation and regulations are determined by
The NAIC
Group Life Insurance Premiums are not determined by what..
The age, sex, or occupation of each individual certificate holder
Traditional IRA's are tax deductible based on what?
The owners Income
If a producer is given a cease and desist, What happens to the agents liabilities to his clients?
The producer still has to fill his responsibilities to his clients
If a producers license is terminated, What also must be terminated?
The producers appointments
Are Dividends Taxable?
No
Are Equity indexed Annuities Securities? But what are they tied to?
No Equity Indexed Annuities are not securities, They are tied to the S&P 500, and have a guaranteed minimum interest rate of
Would dividends from a mutual insurer be considered a rebate?
No because dividends paid to a policy holder is specifically mentioned in the mutual insurance policy
Is there a life contingency option in a fixed period annuity settlement option?
No, The annuitant selects the time period and the insurer selects the pmt, only for a specific amount of time, not for life
When can you Comingle premiums with personal funds?
Only if you have written consent from the principal (insured)
What are some characteristics of Joint and Survivor Settlements?
The surviving annuitant may recieve reduces payments A period certain option may be included Guarantees income for 2 or more survivors
What are some characteristics of NonContributionary Plans
They help reduce adverse selection against the insurer They require 100% Employee Participation The Employee pays 100% of the premium
What is a settlement option in life insurance known as straight life
Life Income(income that goes until death
SEP (Simplified Employee Pension Plan) Have what benefits?
Made for small businesses Have a higher tax deductible contribution limit than IRA's SEPs allow the employer to make contributions tax deductible up to 25% of the employees earned income Employer Contributions are not added in employees gross income
What does the incontestability clause do?
Makes it so any miswritten application info does not affect policy claim after 2 years
What Annuity guarantees a fixed interest rate for a specific period of time?
Market Value Adjusted Annuity