Maryland Life & Health Insurance License, Practice Exams

An applicant for disability income earns $100,000. The insurer offers a benefit replacing about 60% of income to:

1. Preserve the incentive to return to work ✓
2. Guarantee the insurer a profit
3. Match the insured's exact monthly expenses
4. Comply with a federal maximum benefit law

Why: DI benefits are capped below full income (and are tax-free when individually paid) so the insured keeps an incentive to recover.

A distinguishing feature of adjustable life insurance is that the owner can:

1. Only ever convert it into a fixed single-premium immediate annuity
2. Invest the cash value directly in stocks and bonds of their choosing
3. Receive guaranteed dividends regardless of the insurer's experience
4. Change the premium, face amount, or coverage period as needs change ✓

Why: Adjustable life lets the owner modify premium, face amount, and protection period, effectively shifting between term and permanent coverage.

Medicare Part B approves a $1,000 charge. After the annual deductible is satisfied, the beneficiary's 20% coinsurance is:

1. $200 ✓
2. $800
3. $1,000
4. $500

Why: After the deductible, Medicare pays 80% and the beneficiary pays 20% — here $200.

An employee's dependent child loses coverage by aging out of the plan. The maximum COBRA continuation for that child is:

1. 36 months ✓
2. 18 months
3. 12 months
4. 6 months

Why: A dependent aging out is a qualifying event allowing up to 36 months of COBRA continuation.

A policy uses the fixed maximum policy-loan rate allowed by MD Ins. § 16-208. On a $10,000 loan for one year, the maximum interest is:

1. $600
2. $800 ✓
3. $1,000
4. $1,200

Why: Insurance Article § 16-208(b)(1) allows a fixed maximum effective rate of 8% per year; 8% of $10,000 = $800.

Under MD Ins. § 10-127, an insurer may not cancel a policy for nonpayment of premium if the premium due has been paid to whom?

1. The Maryland Insurance Administration
2. The Guaranty Corporation
3. The insurance producer ✓
4. A premium finance company

Why: Insurance Article § 10-127 bars cancellation for nonpayment where the premium due has been paid to the insurance producer.

A statement on an application later proves untrue but was immaterial to the risk. The insurer generally:

1. May deny the pending claim while leaving the rest of the policy in force
2. Cannot void the policy, because the misstatement was not material ✓
3. Must reunderwrite the risk and charge a substandard rate going forward
4. May rescind the contract during the two-year contestable period regardless of materiality

Why: Only a material misrepresentation (one that would have affected underwriting) permits rescission; immaterial errors do not.

Stranger-originated life insurance (STOLI) arrangements are prohibited because they lack:

1. Insurable interest ✓
2. A medical exam
3. A free-look period
4. A named beneficiary

Why: STOLI is initiated for investors with no insurable interest in the insured, which is illegal.

A 'jumping juvenile' policy is characterized by a face amount that:

1. Increases automatically at a stated age without a premium increase ✓
2. Is invested in mutual fund subaccounts the child's parents select each year
3. Declines steadily each year until the insured child reaches the age of majority
4. Is payable only after the insured child has passed a paramedical exam at age 18

Why: A jumping juvenile policy's face amount jumps (e.g., fivefold) at the age of majority with no increase in premium and no new evidence of insurability.

The National Association of Insurance Commissioners (NAIC) primarily:

1. Sets and enforces nationwide insurance premium rates
2. Directly licenses every insurance producer in the United States
3. Develops model laws and standards that states may choose to adopt ✓
4. Pays claims when an insurance company becomes insolvent

Why: The NAIC is a coordinating body of state regulators that drafts model laws and promotes uniformity; it has no direct regulatory authority of its own.

A policy was funded faster than the 7-pay limit, making it a MEC. A subsequent policy loan is:

1. Completely free of any income tax
2. Considered a tax-free return of the premiums the owner originally paid into the policy
3. Deductible by the owner as interest expense
4. Taxed on a gains-first (LIFO) basis, with a possible penalty ✓

Why: In a MEC, living distributions and loans are taxed gains-first (LIFO) and may carry a 10% penalty before age 59½.

Under MD Ins. § 15-814, coverage for breast cancer screening must be provided in accordance with the latest screening guidelines issued by:

1. The Preventive Services Task Force
2. The American College of Radiology
3. The American Cancer Society ✓
4. The Comprehensive Cancer Network

Why: Insurance Article § 15-814(c) requires coverage for breast cancer screening in accordance with the latest screening guidelines issued by the American Cancer Society.

A plan has a $1,000 deductible, 80/20 coinsurance, and a $3,000 out-of-pocket maximum. On a $20,000 covered bill, the insured pays:

1. $3,000 ✓
2. $3,800
3. $4,800
4. $1,000

Why: Deductible $1,000 + 20% of $19,000 = $3,800, but the $3,000 out-of-pocket maximum caps the insured's cost at $3,000.

Under MD Ins. § 16-402, each annuity and pure endowment contract must provide a grace period of not less than how many days for a stipulated payment after the first?

1. 15 days
2. 30 days ✓
3. 31 days
4. 60 days

Why: Insurance Article § 16-402(a) requires a grace period of not less than 30 days for stipulated payments due after the first.

Under MD Ins. § 10-119, the Commissioner waives license application requirements for a nonresident applicant who holds a valid home-state license if:

1. The home state extends the same reciprocity to Maryland residents ✓
2. The applicant passes the Maryland licensing examination
3. The applicant opens a Maryland business office
4. The applicant first completes Maryland continuing education

Why: Insurance Article § 10-119(a) waives application requirements when the home state awards nonresident licenses to Maryland residents on the same basis; therefore reciprocity is required.

A two-tier annuity is one in which the contract has:

1. Two named annuitants, both of whom must survive for the income payments to continue
2. Two declared interest rates, one for new deposits and one for older money, that the owner switches between each year
3. A higher value if annuitized and a lower value if surrendered for cash ✓
4. A death benefit equal to twice the account value if the owner dies during the accumulation period

Why: A two-tier annuity credits a higher value when the owner annuitizes and a lower value on cash surrender, incentivizing annuitization.

An applicant pays the first premium and receives a binding (temporary insurance) receipt. Coverage is effective:

1. 30 days after the application is signed and dated
2. Immediately as of the receipt date, even before underwriting finishes ✓
3. Only if underwriting later finds the applicant insurable
4. Only when the issued policy is physically delivered and the first premium collected

Why: A binding receipt provides immediate coverage as of its date; a conditional receipt instead makes coverage contingent on the applicant being insurable.

Under MD Ins. § 27-407, soliciting a motor-vehicle accident victim for personal gain to retain a lawyer or seek a health care practitioner is:

1. Protected commercial speech
2. A permitted client referral
3. A fraudulent insurance act ✓
4. Allowed with the victim's consent

Why: Insurance Article § 27-407(a) makes soliciting an accident victim for personal gain to sue, retain counsel, or seek care a fraudulent insurance act.

A terminally ill insured uses the policy's accelerated death benefit. The amount received:

1. Is added on top of the full death benefit at death
2. Must be repaid with interest before the insured dies
3. Converts the policy into a long-term care annuity
4. Reduces the death benefit later paid to the beneficiary ✓

Why: Accelerated benefits advance part of the face amount to a qualifying insured; the death benefit payable later is reduced accordingly (and the advance is generally tax-free).

A retiree with limited income and assets needs nursing-home care Medicare won't cover long term. The program that may help is:

1. Medicare Part B outpatient benefits
2. A Medicare Supplement policy covering Part A coinsurance
3. Social Security disability income
4. Medicaid (after meeting its means test) ✓

Why: Medicaid covers long-term custodial care for those who meet its income/asset limits, sometimes after a spend-down.

An employee elects COBRA after termination. The employee generally must pay:

1. Nothing, because the employer continues to pay
2. Only the share they paid as an active employee
3. Triple the active-employee premium
4. Up to 102% of the full group premium ✓

Why: COBRA lets the individual continue coverage by paying up to 102% of the full premium (the group cost plus a 2% administration charge).

Under MD Ins. § 9-403, coverage under the Life and Health Insurance Guaranty Corporation Act is provided to a person who is a resident and holds what role?

1. A stockholder or bondholder of the insolvent insurer
2. A reinsurer of the covered risk
3. Owner, certificate holder, or enrollee of a covered policy ✓
4. An unpaid vendor of the insurer

Why: Insurance Article § 9-403(b) extends coverage to a resident who is an owner, certificate holder, or enrollee under a covered policy or contract.

A final expense (burial) policy is typically:

1. A variable policy whose death benefit fluctuates with the market
2. A small whole life policy meant to cover funeral and final costs ✓
3. A large term policy intended to replace decades of lost income
4. A group policy issued automatically to all employees at hire

Why: Final expense is a modest permanent (whole life) policy designed to cover burial and end-of-life expenses, often with simplified underwriting.

An insurer posts a social-media ad that overstates its coverage benefits. Under MD Ins. § 27-203, the ad is:

1. Allowed because social media is unregulated
2. Allowed because the insurer is authorized
3. Allowed if a small disclaimer appears
4. Prohibited as a deceptive advertisement ✓

Why: Insurance Article § 27-203 applies to advertising in any medium and bars deceptive or misleading statements.

A person turns 65 and enrolls in Part B. During the six months that follow, they apply for a Medigap policy. The insurer must:

1. Issue any plan offered, regardless of health ✓
2. Charge a surcharge for pre-existing conditions
3. Require a full medical exam before issuing
4. Decline if the applicant has a chronic illness

Why: During the six-month Medigap open enrollment period (age 65 + enrolled in Part B), coverage is guaranteed issue regardless of health.

Under Maryland's long-term care insurance rule, an applicant may return the policy and obtain a full refund within how many days after receiving it (the free-look period)?

1. 10 days
2. 20 days
3. 30 days ✓
4. 45 days

Why: COMAR 31.14.01.04J requires a long-term care policy (other than an employer-employee group policy) to let the policyholder or certificate holder return it within 30 days after receipt and obtain a full refund of premium paid.

The elimination period in a disability income policy functions as:

1. A flat dollar deductible the insurer subtracts from every monthly benefit check before paying
2. A time deductible the insured must wait through before benefits begin ✓
3. The outside limit, stated in years, on how long monthly benefits will ever be paid
4. A 31-day window for paying an overdue premium

Why: The elimination (waiting) period is a 'time deductible'; a longer elimination period lowers the premium because the insurer pays for fewer short claims.

To be eligible to contribute to a Health Savings Account (HSA), an individual must be covered by a:

1. An employer-sponsored group HMO with $20 office copays
2. A Medicare Advantage Part C plan
3. A qualified high-deductible health plan (HDHP) ✓
4. State Medicaid coverage of any kind

Why: HSA contributions require enrollment in a qualified HDHP (and no disqualifying coverage).

An absolute assignment of a life insurance policy:

1. Temporarily pledges the policy to a lender solely as security for a loan
2. Transfers all ownership rights to the assignee ✓
3. Lets the original owner revoke the transfer at any time in the future
4. Applies only to the cash value and never to the policy's death benefit

Why: An absolute assignment is a complete, permanent transfer of all ownership rights; a collateral assignment is only a temporary, partial pledge.

The Health Insurance Portability and Accountability Act (HIPAA) primarily:

1. Limits pre-existing condition exclusions and protects coverage portability ✓
2. Sets the exact premium rates insurers may charge in each state
3. Eliminates the need for any individual health underwriting nationwide
4. Requires every employer to fully pay all employee health premiums

Why: HIPAA limited pre-existing condition exclusions, gave credit for prior creditable coverage, and protects the privacy of health information.

Compared with individual insurance, group insurance generally features:

1. Coverage that each member negotiates and owns personally
2. A separate master contract issued to each covered employee
3. Lower cost and little or no individual underwriting ✓
4. Higher premiums and a full medical exam for every member

Why: Group coverage spreads risk over many lives, so it is typically cheaper and issued with little or no individual evidence of insurability.

A PPO member chooses an out-of-network provider. Compared with in-network care, the member will usually pay:

1. Exactly the same as in-network care
2. More in cost-sharing, but still receive some coverage ✓
3. A flat $5 copay regardless of the charge
4. Nothing, because PPOs never cover out-of-network care

Why: PPOs allow out-of-network care at higher cost-sharing; coverage continues but at a less favorable level.

Under MD Ins. § 10-126, the Commissioner may suspend or revoke a license only after notice and opportunity for a hearing under:

1. §§ 2-210 through 2-214 of the Insurance Article ✓
2. the federal Administrative Procedure Act
3. the Title 11 rate-filing provisions
4. the Maryland Rules of Civil Procedure

Why: Insurance Article § 10-126(a) conditions discipline on notice and a hearing under §§ 2-210 through 2-214; therefore those sections.

A producer who has continuously held a Maryland license and sold insurance for 25 years qualifies under MD Ins. § 10-116 to complete how many CE hours per period?

1. The full 24 hours
2. 16 hours
3. As few as 8 hours ✓
4. No hours at all

Why: Insurance Article § 10-116(a)(4)(ii) lets a producer with 25 continuous years satisfy CE with as few as 8 hours plus an affidavit; therefore as few as 8 hours.

An insurer knowingly accepts a late premium for months without objection, then tries to deny a claim for late payment. The insurer is likely barred by:

1. Coordination of benefits
2. Waiver and estoppel ✓
3. The incontestability clause
4. The free-look provision

Why: By its conduct the insurer waived the right to insist on timely payment; estoppel prevents it from later asserting that right.

The portion of each annuity income payment that is a tax-free return of the owner's principal is determined by the:

1. Exclusion ratio ✓
2. Cost-of-living adjustment
3. Surrender charge
4. Participation rate

Why: The exclusion ratio sets how much of each payment is nontaxable return of basis versus taxable gain.

In an equity-indexed annuity, the 'participation rate' determines:

1. The fixed monthly income the annuitant will receive after annuitizing
2. The percentage surrender charge applied during the first contract year
3. The minimum guaranteed interest rate paid in a year of market losses
4. How much of the index's gain is credited to the contract ✓

Why: The participation rate sets the share of the index increase credited; a cap may further limit it, and a floor (often 0%) prevents loss.

Choosing a longer elimination period on a disability policy generally results in:

1. A shorter benefit period
2. A higher monthly benefit
3. A waiver of the first claim
4. A lower premium ✓

Why: A longer elimination period shifts more short-claim cost to the insured, lowering the premium.

Long-term care policies are generally required to be:

1. Cancelable by the insurer at any time
2. Convertible into a life insurance policy on demand
3. Guaranteed renewable ✓
4. Renewable only with new medical evidence each year

Why: LTC policies must be at least guaranteed renewable: the insurer must renew, though it may adjust premiums on a class basis.

Under MD Ins. § 27-216, when no commission is payable by the insurer, a producer may charge a service fee for placing insurance not exceeding what share of the premium?

1. 10%
2. 20%
3. 25%
4. 15% ✓

Why: Insurance Article § 27-216(b)(2)(iii) allows a producer fee not exceeding 15% of the premium when no commission is payable.

Adjustable life insurance allows the policyowner to:

1. Change the premium, face amount, or coverage type as needs change ✓
2. Receive the death benefit in cash while the insured is still living
3. Invest the cash value directly in mutual funds they personally select
4. Skip underwriting entirely no matter how much coverage is added

Why: Adjustable life lets the owner modify the premium, face amount, and protection period (shifting between term and permanent) as circumstances change.

A pure (straight) life annuity payout option provides:

1. Equal payments split between the annuitant and a surviving spouse
2. A guaranteed refund of all unused premiums to a named beneficiary
3. The largest periodic payment, but nothing to anyone after the annuitant dies ✓
4. Payments for a fixed number of years regardless of the annuitant's life

Why: Pure life pays the highest income because payments stop at death with no refund or beneficiary payment; refund and period-certain options pay less but protect a beneficiary.

An ambulatory surgical center benefit covers:

1. Inpatient psychiatric admission for a mental disorder lasting more than 72 hours
2. Ambulance transportation to the nearest emergency room equipped to treat the injury
3. Outpatient surgery that does not require an overnight hospital stay ✓
4. Long-term custodial care in a skilled nursing facility following a three-day hospital stay

Why: Ambulatory surgical centers perform same-day outpatient procedures; the benefit covers surgery without inpatient admission.

The 'reduced paid-up' nonforfeiture option uses the policy's cash value to:

1. Pay the entire surrender value to the owner in one lump sum
2. Buy a smaller, fully paid-up permanent policy ✓
3. Convert the coverage into an immediate lifetime income annuity
4. Keep the full face amount in force as term insurance for a limited time

Why: Reduced paid-up uses the net cash value as a single premium to purchase a smaller amount of fully paid-up permanent insurance; extended term instead keeps the full face for a limited period.

Under MD Ins. § 15-404, dependent children previously covered under a deceased spouse's policy may be added to the surviving certificate holder's coverage on what terms?

1. Only after a 90-day waiting period
2. Without evidence of insurability ✓
3. Only with a new medical exam
4. Only at the next annual open enrollment

Why: Insurance Article § 15-404(b) allows adding such children at any time without evidence of insurability.

A settlement option that continues income to two people until the second one dies is the:

1. Life income option
2. Interest-only option
3. Joint and survivor option ✓
4. Fixed-period option

Why: The joint and survivor option pays as long as either of two people is alive.

Self-insurance (retention) is a risk-handling method in which a business:

1. Shares the risk with other businesses by contract
2. Sets aside its own funds to pay for potential losses ✓
3. Transfers the risk entirely to an insurer
4. Avoids the activity that creates the risk

Why: Retention/self-insurance means bearing the loss with one's own funds; transfer (insurance), avoidance, and sharing are the alternatives.

Under MD Ins. § 18-107, a certificate issued under a group long-term care policy must include a statement that the governing contractual provisions are determined by the:

1. Outline of coverage
2. Certificate document itself
3. Group master policy or contract ✓
4. Buyer's guide brochure given at sale

Why: Insurance Article § 18-107(3) requires the certificate to state that the group master policy or contract determines the governing contractual provisions.

'Defamation' in insurance regulation refers to:

1. Sharing part of a commission with another licensed producer
2. Making false or maligning statements about an insurer's financial condition ✓
3. Filing a consumer complaint with the state insurance department about an unreasonably delayed claim
4. Refusing to renew a policy after a single claim is filed

Why: Defamation is making, publishing, or circulating false statements that are maligning, especially about the financial condition of an insurer.

A child covered under a major medical policy needs speech-language therapy and oral surgery to manage a cleft palate. Under MD Ins. § 15-818, the policy must:

1. Cover only the initial surgical repair
2. Treat the care as excluded cosmetic work
3. Provide benefits for that cleft palate care ✓
4. Limit benefits to a single provider visit

Why: Insurance Article § 15-818 requires policies to include benefits for the orthodontic, oral surgery, and otologic/audiological/speech treatment involved in managing cleft lip or cleft palate.

Under MD Ins. § 10-115, what happens to a producer's appointments if the license expires without renewal?

1. They continue for 30 days after expiration
2. They remain valid until the insurer cancels them
3. They automatically carry over to the next term
4. They terminate as of the day the license expires ✓

Why: Insurance Article § 10-115(a)(2) provides that appointments terminate as of the day the license expires; therefore they terminate on that day.

A key difference between a Roth IRA and a traditional IRA is that the Roth IRA:

1. Is funded with after-tax dollars, and qualified withdrawals are tax-free ✓
2. Can only be opened by employees of governmental or nonprofit employers
3. Requires the owner to begin distributions immediately at age fifty-nine
4. Always provides a current tax deduction for every contribution made

Why: Roth contributions are after-tax with tax-free qualified distributions; traditional contributions may be deductible with taxable distributions.

Under ERISA, a Summary Plan Description (SPD) must be provided to participants to:

1. Guarantee that every properly filed claim is paid in full within 30 days of receipt
2. Explain the plan's benefits, rights, and obligations in plain language ✓
3. Substitute for the formal written plan document
4. Set the premium rates and provider fee schedules the insurer may charge the plan

Why: ERISA requires plans to furnish an SPD describing benefits, eligibility, and participants' rights and procedures.

Under MD Ins. § 15-802, the benefits for mental illness and substance use disorder must be provided:

1. As one set of benefits covering both ✓
2. Only through out-of-network providers
3. With a separate lifetime dollar cap
4. Solely on an inpatient hospital basis

Why: Insurance Article § 15-802(d)(2)(i) requires the benefits to be provided as one set of benefits covering mental illnesses, emotional disorders, drug misuse, and alcohol misuse, in compliance with federal parity rules.

A residual disability benefit is payable when the insured:

1. Returns to work but still suffers a loss of income ✓
2. Reaches the end of the elimination period without ever filing a claim
3. Becomes completely and permanently unable to perform the duties of any job
4. Dies as the result of an accident during the policy's stated benefit period

Why: Residual benefits pay a partial benefit proportional to lost income when the insured works but earns less due to disability.

An insurer files an individual annuity contract for delivery in Maryland. Under MD Ins. § 16-201, the standard life insurance policy provisions of §§ 16-202 through 16-213:

1. do not apply to it ✓
2. must all appear verbatim
3. apply only in part
4. require MIA waiver

Why: Insurance Article § 16-201(b)(3) exempts annuity contracts from the standard life policy provisions.

If an employee pays the entire premium for an individual disability income policy with after-tax dollars, the disability benefits received are:

1. Taxed as a long-term capital gain in the year received
2. Fully taxable as ordinary income when paid
3. Subject to a flat federal excise tax on each payment
4. Received income-tax-free ✓

Why: When the insured pays premiums with after-tax dollars, DI benefits are tax-free; if the employer pays the premium, the benefits are taxable.

An insurer terminates a producer's appointment effective July 1. Under MD Ins. § 10-118, within 30 days the insurer must:

1. refund all commissions paid that calendar year
2. notify every policyholder the producer served
3. recover the producer's original license document
4. update its register with the termination date ✓

Why: § 10-118(e)(1)(i) requires updating the producer register with the effective termination date within 30 days; therefore update the register.

Withdrawals of earnings from a nonqualified deferred annuity are taxed:

1. At favorable long-term capital-gains rates in every case
2. On a first-in, first-out basis, returning principal first
3. On a last-in, first-out basis, so gains are taxed first ✓
4. Only after the entire account value has been withdrawn

Why: Nonqualified annuity withdrawals are taxed LIFO — earnings (gains) are considered withdrawn first and taxed as ordinary income.

Under MD Ins. § 16-203, even after the contestable period ends, the insurer may still deny a claim for:

1. a misstated birth date
2. nonpayment of premiums ✓
3. an incorrect address
4. an unsigned application

Why: Insurance Article § 16-203(a) makes the policy incontestable 'except for nonpayment of premiums'.

A policy loan taken against a life policy's cash value:

1. Is treated as taxable income in the year the loan is taken
2. Must be repaid in full within thirty days or it lapses
3. Requires the owner to submit new evidence of insurability
4. Reduces the death benefit by any unpaid loan and interest ✓

Why: Unpaid loan balance and interest are subtracted from the death benefit; loans are not taxable while the policy stays in force.

Under the uniform individual health provisions, the grace period for a policy with monthly premiums is:

1. 60 days after the calendar year ends
2. 10 days ✓
3. 24 hours from the due date
4. 6 months following any missed payment

Why: Health grace periods are 7 days for weekly premium, 10 days for monthly, and 31 days for all other modes.

Under MD Ins. § 27-405, it is a fraudulent insurance act for a person to represent to the public that the person is a producer or public adjuster when the person has not done what?

1. Paid the annual renewal fee
2. Completed an ethics webinar
3. Registered a business trade name
4. Received the appropriate license under Title 10 ✓

Why: Insurance Article § 27-405(a)(1) makes it fraudulent to represent oneself as a producer or public adjuster without the appropriate license under Title 10.

A consumer who buys insurance through a producer representing the buyer (not the insurer) is working with a(n):

1. Adjuster
2. Underwriter
3. Captive agent
4. Broker ✓

Why: A broker legally represents the insurance buyer; an agent represents the insurer.

The 'needs approach' to determining life insurance need calculates coverage by:

1. Matching the largest policy the insured can possibly afford
2. Using a fixed multiple of the insured's annual salary
3. Estimating the present value of the insured's future earnings
4. Totaling the family's specific obligations and financial goals ✓

Why: The needs approach sums specific needs (final expenses, debts, income replacement, education, etc.); the human life value approach instead values future earnings.

Under MD Ins. § 10-112, which is a kind of insurance for which an applicant may qualify for a license?

1. accident and health or sickness insurance ✓
2. title abstracting and escrow bond services
3. workers' compensation self-insurance pools
4. reinsurance treaty placement brokerage

Why: § 10-112(a)(2)(ii) lists accident and health or sickness insurance among the licensable kinds; therefore that kind.

Under the uniform 'time limit on certain defenses' provision in a health policy, after a stated period (e.g., two years) the insurer generally cannot:

1. Require the insured to furnish written proof of loss within 90 days of the date of loss
2. Deny a claim based on a pre-existing condition or application misstatement ✓
3. Enforce a named exclusion such as war or self-inflicted injury
4. Raise the premium for an entire underwriting class

Why: After the stated period, the insurer cannot void coverage or deny non-fraudulent claims for pre-existing conditions or misstatements — the health-policy analog of incontestability.

Under MD Ins. § 27-403, it is a fraudulent insurance act to present a claim knowing the supporting statement contains what?

1. An estimate prepared by an independent third party
2. A demand exceeding the policy limit
3. False or misleading information material to the claim ✓
4. A request for expedited payment

Why: Insurance Article § 27-403(2) makes it a fraudulent insurance act to present a claim with knowledge that the documentation contains false or misleading information material to the claim.

A SEP (Simplified Employee Pension) plan is funded by:

1. Premiums paid into a variable life insurance policy
2. Mandatory after-tax contributions from every employee's paycheck
3. Employer contributions made into each eligible employee's IRA ✓
4. A single lump sum the government deposits for low-income workers

Why: Under a SEP, the employer contributes to a traditional IRA established for each eligible employee; contributions are discretionary and tax-deductible to the employer.

The 'needs approach' to setting the amount of life insurance focuses on:

1. The projected cash value the policy is expected to build over twenty years
2. The total dollar amount of premium the applicant is willing to pay monthly
3. A simple fixed multiple of the insured's current gross annual salary
4. The family's actual financial obligations and goals ✓

Why: The needs approach totals the specific obligations and goals the coverage must fund, versus the human-life-value (income multiple) approach.

If an applicant understated their age on a life application, at the insured's death the insurer will:

1. Pay the amount the premium would have bought at the true age ✓
2. Treat the policy as void and pay only a refund
3. Refund the premiums paid and cancel the coverage
4. Pay the full face amount to the beneficiary with no adjustment whatsoever being made

Why: The misstatement-of-age provision adjusts the benefit to what the premium paid would have bought at the true age.

In a variable annuity, accumulation units measure the contract's value:

1. During the pay-in phase before income payments begin ✓
2. Only after the contract has been fully annuitized into a stream of income
3. While the annuitant is receiving level, guaranteed monthly income payments
4. According to a fixed interest rate the insurer declares anew each year

Why: Accumulation units track value during the accumulation phase; annuity units are used during the payout phase.

The federal Gramm-Leach-Bliley Act requires financial institutions, including insurers, to:

1. Protect the privacy of customers' nonpublic personal information ✓
2. Sell insurance only through federally chartered national banks
3. Report all claims directly to the Internal Revenue Service
4. Charge identical premiums to every applicant in the country

Why: Gramm-Leach-Bliley requires privacy notices and limits on sharing nonpublic personal financial information, with an opt-out for consumers.

Group life insurance is most commonly written as:

1. A single-premium endowment that is paid up at issue
2. Annually renewable term that renews each year ✓
3. Decreasing term tied to a mortgage balance
4. A paid-up whole life policy with no premiums

Why: Employer group life is typically annually renewable term; individual evidence of insurability is usually not required up to a guaranteed-issue limit.

A contingent (secondary) beneficiary receives the death benefit:

1. Immediately and jointly alongside the primary beneficiary at death
2. In all cases, regardless of whether the primary beneficiary is living
3. Only if the primary beneficiary dies before the insured ✓
4. Only after a probate court has approved the overall distribution

Why: The contingent beneficiary is paid only if no primary beneficiary is living when the insured dies.

The Commissioner needs to serve an order on a licensee. Under MD Ins. § 2-204, a permitted method is:

1. posting it on the door of the licensee's residence
2. announcing it during a televised press briefing
3. mailing it to the last known principal place of business ✓
4. telephoning the licensee's designated contact person

Why: § 2-204(c)(1) permits service by mailing to the last known principal place of business in the Commissioner's records; therefore that mailing.

The Medical Information Bureau (MIB) helps insurers:

1. Set the exact premium rate an applicant will be charged
2. Skip the application's medical questions, because MIB supplies full records
3. Detect omissions or fraud by sharing coded prior medical information ✓
4. Decline an applicant outright whenever an adverse MIB code is returned

Why: The MIB is a member-supported database of coded medical information; an insurer may use it as an alert but cannot decline coverage solely on an MIB report.