Pass the Insurance Licensing Maryland Insurance Life-Producer Questions and answers with Dumpstech

The fixed amount installment option provides for a predetermined monthly benefit to the policy beneficiary. Payments continue until the principal (death benefit) and accumulated interest are fully paid out.

Fixed amount installment option (A): Ensures consistent payment amounts until the death benefit and interest are exhausted. This option is often used when beneficiaries want a steady income.

Accelerated endowment option (B): Not relevant as it refers to early payouts for policies reaching maturity.

Interest-only option (C): Only pays interest earned on the death benefit, leaving the principal untouched.

Fixed period installment option (D): Guarantees payments for a specific period, regardless of whether the principal or interest is depleted.

Group life insurance policies in Maryland typically include a conversion privilege allowing former employees to convert group coverage to an individual policy within a 31-day period after termination, regardless of premium payment status.

$50,000 under the group plan (A): Correct. During the 31-day conversion period, the original group coverage remains in effect. If the insured dies during this time, the death benefit is paid under the group plan.

$50,000 under the new policy (B and C): Incorrect, as the conversion policy does not become effective until the first premium is paid.

Nothing at all (D): Incorrect, as coverage is still active during the conversion period.

Criminal vs. administrative violations.

Not all insurance violations are crimes.

Criminal penalties apply when conduct involves fraud, theft, or embezzlement.

Define embezzlement.

Embezzlement involves misappropriating funds entrusted to the producer, such as:

Premium payments

Trust account funds

Evaluate each option.

A. Selling with a nonresident license

Typically an administrative violation, not a felony.

B. Embezzling money

Correct. This is a federal and state crime punishable by imprisonment.

C. Inducing a client to sign an application

Lawful solicitation activity.

D. Suing an insurer

A legal right, not a crime.

Maryland enforcement context.

Embezzlement may result in:

License revocation

Criminal prosecution

Restitution orders

Conclusion.

Embezzlement can result in prison sentencing.

Purpose of mortgage protection insurance.

Mortgage protection life insurance is designed to:

Pay off or reduce the mortgage balance if the insured dies.

Structure of most mortgage protection policies.

The death benefit typically decreases over time as the mortgage balance declines.

However, the premium usually remains level throughout the policy term.

Why level premiums are used.

Level premiums make budgeting easier for homeowners.

The insurer prices the policy based on average risk over the term.

Evaluate each option.

A. Remains level

Correct.

B. Increases every five years

Describes step-rate term insurance, not typical mortgage protection.

C. Increases every ten years

Not standard for mortgage protection.

D. Fluctuates with interest rate

Incorrect. Insurance premiums are not tied to mortgage interest rates.

Maryland consumer disclosure relevance.

Maryland requires producers to explain decreasing benefits and level premiums to avoid consumer confusion.

Conclusion.

Mortgage protection premiums typically remain level.

A viatical settlement allows a policyowner (often with a terminal illness) to sell their life insurance policy for immediate cash, typically to a third party.

Less than the death benefit (D): The settlement amount is a fraction of the policy's face value, reflecting the buyer's expected profit after paying premiums and collecting the death benefit.

Equal to the sum of all premiums paid (A): This is incorrect as premiums paid do not determine the settlement amount.

Equal to the death benefit (B): The buyer profits from receiving the full death benefit upon the insured’s death, so they pay less upfront.

Greater than the death benefit (C): This would result in a financial loss for the buyer, which is not the case in viatical settlements.

Defamation involves 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.

Interest guarantees in fixed annuities.

Fixed annuities promise a minimum guaranteed interest rate stated in the contract.

Protection for annuity owners.

Even if market rates decline, the insurer must credit at least the guaranteed rate.

Evaluate each option.

Expected renewal rate: Not guaranteed.

Guaranteed rate: Contractually binding.

Prime rate: Unrelated to annuities.

Front-end load: A fee concept, not interest.

Maryland suitability relevance.

Guaranteed minimums protect consumers and are a key disclosure requirement.

Conclusion.

Fixed annuities credit no less than the contract guaranteed rate.

Accelerated benefits are often triggered by the inability to perform activities of daily living (ADLs), which are standard measures of functional capacity.

Dressing (A), Eating (B), Bathing (C): Correctly identified as ADLs used to assess eligibility for benefits.

Speaking (D): Not classified as an ADL under Maryland insurance definitions or long-term care benefit triggers.

Definition of single premium whole life insurance.

A single premium whole life policy is funded with one lump-sum premium payment at issue.

No additional premiums are ever required.

What the single premium accomplishes.

That one payment is actuarially calculated to:

Provide lifetime coverage, and

Build immediate cash value sufficient to support the policy for life.

Why other time periods are incorrect.

One month / one year: These describe term or annually renewable policies, not whole life.

To age 65: This describes limited-pay whole life, not single premium.

Maryland consumer protection relevance.

Maryland requires disclosure that single premium policies may trigger tax consequences and MEC status, reinforcing that the payment funds the entire policy duration.

Conclusion.

One premium payment covers the full life of the policy.

Key facts from the question.

One lump-sum payment

No additional premiums allowed

Payments begin in the future (17 years later)

Define single premium deferred annuity (SPDA).

Funded with one premium payment

Includes an accumulation period

Income begins at a future date

Why this is not another type of annuity.

Individual life annuity: Describes payout form, not funding method.

IRA annuity: Must be held within an IRA; lawsuit proceeds are non-qualified.

Retirement annuity: A general term, not a specific contract type.

Maryland suitability and disclosure relevance.

Maryland requires clear explanation of surrender periods and deferred income timing for SPDAs.

Conclusion.

The described contract is a single premium deferred annuity.