Life-Producer Exam Dumps - Maryland Insurance Administration Maryland Insurance Questions and Answers

Comprehensive and Detailed Step by Step Explanation:Rebatingoccurs when an insurance producer offers a portion of their commission, premium reductions, or other inducements to buyers that are not explicitly stated in the policy. It is prohibited under Maryland law to ensure fair competition and maintain ethical standards.

Rebating (D):Involves returning part of the commission or providing benefits not in the policy to incentivize a sale, violating Maryland Insurance Article §27-212.

Twisting (A):Refers to persuading a policyholder to lapse or replace a policy through misrepresentation, unrelated to commission-sharing.

Binding (B):Relates to confirming coverage but does not involve commissions.

Soliciting (C):Refers to seeking potential clients, not the unfair practice of rebating.

References:Maryland Unfair Trade Practices Act, COMAR 31.15.05, and Maryland Insurance Article §27-209.

Comprehensive and Detailed Step by Step Explanation:ASection 1035 exchangeallows a policyholder to replace a life insurance policy, annuity, or endowment without immediate tax consequences. However, when the new policy is surrendered:

The gain is taxed asordinary income (A), calculated as the difference between the policy’s cash surrender value and the cost basis (total premiums paid).

Capital gain (B):Incorrect. Gains from life insurance policies are classified as ordinary income, not capital gains.

Ordinary income plus a 10% surcharge (C):The 10% penalty applies only to premature distributions from retirement accounts, not life insurance.

Deferred capital gain (D):Incorrect, as life insurance gains are not subject to capital gain rules.

References:IRS Code §1035, Maryland Tax Code on Life Insurance, and COMAR 31.09.12.

Comprehensive and Detailed Step by Step Explanation:Maryland law mandates that life insurance policies include aclear and concise description of the policyon the first page to ensure transparency and understanding for policyholders.

Legible and brief description (A):Correct. This ensures the buyer can quickly identify key terms and benefits of the policy.

Notary seal (B):Not required for delivering life insurance policies.

Premium coupon book (C):Optional, often replaced with digital billing methods.

Financial statement of the insurer (D):Not required in the policy itself, although insurers must provide financial stability information upon request.

References:Maryland Insurance Article §16-206, COMAR 31.09.04, and Policy Form Filing Standards.

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.