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

Comprehensive and Detailed Step by Step Explanation:Defamationinvolves publishing or circulating false, malicious statements intended to harm an insurer’s reputation. It is prohibited under Maryland law to protect the integrity of insurers.

Defamation (A):Includes any written or spoken communication that is untrue and harms the insurer’s business standing.

Intimidation (B):Relates to coercing individuals through threats, not publishing falsehoods.

Extortion (C):Involves demanding something through threats, unrelated to false statements.

Coercion (D):Involves forcing a party to act under duress, not relevant to publishing false information.

References:Maryland Insurance Article §27-205, Unfair Trade Practices and Consumer Protection Act.

Comprehensive and Detailed Step by Step Explanation:Theincontestability clauseprevents insurers from voiding a policy after a specified period, except in cases of fraud or non-payment of premiums:

2 years (C):Maryland law mandates a maximum incontestability period of two years. After this period, the insurer cannot deny claims due to misstatements on the application.

30 days (A) and 6 months (B):Too short for standard incontestability clauses.

3 years (D):Exceeds the Maryland limit.

References:Maryland Insurance Article §16-203, Incontestability Clause Guidelines, and COMAR 31.09.09.

Comprehensive and Detailed Step by Step Explanation:An agent’s license can be revoked for serious infractions that violate Maryland’s insurance laws:

Rebating (B):Prohibited under Maryland’s Unfair Trade Practices Act.

Felony conviction (C):Grounds for revocation as it questions the agent’s moral character.

Violating insurance statutes or regulations (D):Includes infractions such as fraud, misrepresentation, or failure to meet ethical standards.

Having no insurer appointment for ten days (A):Incorrect. A lack of appointment does not constitute a violation; it only affects the ability to conduct business temporarily.

References:Maryland Insurance Article §10-126, COMAR 31.03.02, and Licensing Enforcement Guidelines.

Comprehensive and Detailed Step by Step Explanation:Maryland law requires insurance licensees to complete continuing education (CE) everytwo years (B)to maintain their licenses:

CE ensures that agents remain informed about current laws, practices, and products.

Each year (A):Too frequent for most state requirements, including Maryland.

Every three years (C):Exceeds Maryland’s regulatory timeframe.

No requirement (D):Incorrect, as CE is mandatory for license renewal.

References:Maryland Insurance Code §10-116, Continuing Education Guidelines, and COMAR 31.03.02.

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.

Comprehensive and Detailed Step by Step Explanation:Thetaxable portion of benefit payments under a life income settlement optiondepends on the beneficiary’s life expectancy:

Life expectancy impacts (B)how the payments are taxed, as longer payment durations result in more taxable income over time.

Thepolicy’s inclusion in the estate (A)is unrelated to the beneficiary’s life expectancy.

Thetotal death benefit (C)is fixed and not influenced by the beneficiary’s lifespan.

Premium rates (D)are determined during underwriting, not affected by beneficiary life expectancy.

References: Maryland Life Insurance Taxation Guidelines and IRS Settlement Option Rules.

Comprehensive and Detailed Step by Step Explanation:Areplacementoccurs when a new life insurance policy is purchased, and the existing policy is surrendered, terminated, or its benefits reduced to make way for the new policy.

Replacement (B):This is regulated to ensure the policyholder is not disadvantaged by switching policies, often requiring additional disclosures and forms, like Maryland’s "Important Notice Replacement of Life Insurance or Annuities."

Nonforfeiture (A):Refers to retaining cash value benefits when a policy lapses or is canceled, not applicable here.

Reinvestment (C):Generally relates to financial or investment accounts, not life insurance.

Rollover (D):Pertains to tax-advantaged accounts like IRAs, not applicable to insurance.

References: Maryland Replacement Regulations, Disclosure Requirements, and Consumer Protections.