Maryland Life & Health Insurance License, Practice Exams

A life insurer denies coverage solely because an applicant took a past lawful vacation abroad. Under MD Ins. § 27-208, this is:

1. Permitted ordinary underwriting judgment by the insurer
2. Prohibited discrimination over past lawful travel ✓
3. Permitted if the destination was risky
4. Permitted for any foreign travel

Why: Insurance Article § 27-208(a)(4) prohibits adverse action based solely on an applicant's past lawful travel experiences — therefore it is prohibited.

Under MD Ins. § 9-405, the Maryland Life and Health Insurance Guaranty Corporation is best described as a:

1. State agency within the MIA
2. private, nonprofit, nonstock corporation ✓
3. publicly traded stock insurer
4. a federally chartered guaranty association

Why: Insurance Article § 9-405(a)(2) and (g) state the Corporation is a private, nonprofit, nonstock corporation and is not a State agency — therefore a private, nonprofit, nonstock corporation.

A long-term care policy's 'pool of money' (maximum benefit) is generally calculated as:

1. The daily benefit multiplied by the benefit period ✓
2. A single flat amount paid regardless of how long care lasts
3. The total premiums the insured has paid over the years
4. The insured's annual income at the time of the first claim

Why: The pool equals the daily/monthly benefit times the benefit period; spending less than the daily maximum can extend how long the pool lasts.

Under MD Ins. § 15-909, a Medicare supplement policy may not exclude benefits for a preexisting condition for losses incurred more than how long after the effective date of coverage?

1. 3 months
2. 12 months
3. 24 months
4. 6 months ✓

Why: Insurance Article § 15-909(d) prohibits excluding or limiting benefits for a preexisting condition for losses incurred more than 6 months after the effective date of coverage.

Under MD Ins. § 15-830, a carrier that does not allow direct access to specialists must establish a procedure by which a member may receive a:

1. Cash reimbursement for any specialist
2. Waiver of all specialist copayments
3. Second opinion from an out-of-state doctor
4. Standing referral to a specialist ✓

Why: Insurance Article § 15-830(b) requires carriers without direct specialist access to establish a procedure for a member to receive a standing referral to a specialist under stated conditions.

A graded-premium whole life policy charges premiums that:

1. Start low and increase for a period, then level off ✓
2. Stay exactly the same for the entire life of the policy
3. Are invested in equity sub-accounts chosen by the policyowner each year
4. Decrease every year until the coverage is fully paid up

Why: Graded-premium whole life begins with low premiums that rise over an initial period before leveling, easing early affordability.

Under MD Ins. § 17-306, if an insured's age is misstated under a group life policy, the policy must provide for:

1. an equitable adjustment ✓
2. automatic rescission
3. denial of all benefits
4. a full premium refund

Why: Insurance Article § 17-306 requires a provision for an equitable adjustment of premiums or benefits (or both) and the method of adjustment — therefore an equitable adjustment.

A 'warranty' on an insurance application differs from a 'representation' because a warranty is:

1. Believed to be true to the best of the applicant's knowledge
2. Guaranteed to be literally and absolutely true ✓
3. Only an estimate that the insurer expects to be approximate
4. A statement the applicant may freely revise after issue

Why: A warranty is guaranteed to be literally true (a breach can void coverage); a representation need only be substantially true to the applicant's best knowledge.

A waiver of premium provision in a long-term care policy:

1. Stops premium payments while the insured is receiving covered benefits ✓
2. Refunds every premium the insured has paid once they reach the age of eighty
3. Cancels the policy automatically after the first claim
4. Lowers the premium each year the insured stays healthy

Why: LTC waiver of premium suspends premium payments while the insured is confined or receiving qualifying benefits.

An applicant placed in a 'substandard' (rated) risk classification:

1. Pays a higher premium because of greater-than-average mortality risk ✓
2. Is always declined and cannot obtain coverage from any insurer
3. Receives the lowest premium available because of excellent health
4. Must purchase only group coverage offered through an employer

Why: Substandard (rated) applicants present above-average risk and pay higher premiums; preferred risks pay the least, declined applicants are refused.

Under MD Ins. § 16-209, the installment-benefit table requirement is triggered by a policy that provides for proceeds to be paid how?

1. In installments or as an annuity ✓
2. In a single lump sum only
3. As a paid-up addition
4. Through an automatic premium loan

Why: Insurance Article § 16-209 applies where a policy provides that proceeds may be paid in installments or as an annuity.

Under MD Ins. § 10-126, misrepresenting policy terms to induce an owner to surrender or lapse a policy in order to replace it is commonly called:

1. Churning
2. Twisting ✓
3. Rebating
4. Sliding

Why: Insurance Article § 10-126(a)(16) describes inducing surrender or lapse to replace a policy by misrepresentation — the classic term for this is twisting.

Under MD Ins. § 2-210, contested-case hearings held by the Commissioner are generally conducted in accordance with:

1. the State Government Article's Administrative Procedure Act ✓
2. the Federal Rules of Civil Procedure that govern all federal trials
3. the Maryland Rules governing criminal jury trials
4. the internal bylaws of each affected insurer

Why: § 2-210(c)(1) requires hearings to follow the State Government Article's APA (Contested Cases) — therefore the APA.

Under MD Ins. § 2-205, the Commissioner must examine each domestic insurer and health maintenance organization at least:

1. once every 10 years
2. once every 2 years
3. once every 7 years
4. once every 5 years ✓

Why: § 2-205(b)(2) requires examining each domestic insurer and HMO at least once every 5 years — therefore every 5 years.

Under MD Ins. § 18-108, when long-term care benefits are part of a life insurance policy, the carrier must provide a policy summary:

1. At the time of policy delivery ✓
2. Only upon the insured's written request
3. Within 90 days after the first claim
4. At each annual policy anniversary

Why: Insurance Article § 18-108(a) requires the carrier to provide a policy summary at the time of policy delivery when LTC benefits are part of a life insurance policy or rider.

A pregnant member's plan does not allow direct specialist access. Under MD Ins. § 15-830, she is entitled to a standing referral to an obstetrician, and a written treatment plan:

1. Is not required for that referral ✓
2. Must be signed by three physicians
3. Must be renewed every 30 days
4. Is required before each prenatal visit

Why: Insurance Article § 15-830(c) requires a standing referral to an obstetrician for a pregnant member, and provides that a written treatment plan may not be required for that referral.

Under the Fair Credit Reporting Act, if an insurer may obtain an investigative consumer report on an applicant, the insurer must:

1. Notify the applicant in advance that such a report may be requested ✓
2. Pay the applicant a fee for the use of their personal information
3. Obtain a court order before any report can be gathered
4. Share the full report with every other insurer in the state

Why: FCRA requires advance written notice to the applicant when an investigative consumer report (involving interviews about character and reputation) may be obtained.

Intentional deception by an applicant or insurer to gain an unfair or unlawful benefit is:

1. Insurance fraud ✓
2. An innocent misrepresentation
3. A permissible representation
4. A unilateral contract feature

Why: Fraud is intentional deception for unlawful gain and can void coverage and carry civil or criminal penalties.

A producer points to her license as proof she can commit the insurer to a policy. Under MD Ins. § 10-113, the license by itself gives her:

1. full power to settle claims for the insurer
2. no authority to represent or commit an insurer ✓
3. authority to appoint other resident producers
4. power to bind the insurer on any application

Why: § 10-113(c): a license creates no actual, apparent, or inherent authority to represent or commit an insurer — therefore none.

A beneficiary elects the fixed-period settlement option for $100,000 over 10 years. The insurer pays:

1. Equal installments for 10 years, the amount depending on interest credited ✓
2. A fixed dollar amount each month until the funds run out under the policy's terms
3. Only the interest, keeping the $100,000 principal intact
4. A single lump sum at the end of the 10-year period

Why: Fixed-period pays the proceeds plus interest in equal installments over the chosen period; the payment amount varies with the interest rate.

Under MD Ins. § 2-213, if a party requests a full stenographic record of a hearing, the cost is borne by:

1. The Maryland Insurance Administration
2. The insurer in every case
3. The party that requested it ✓
4. The losing party after the order

Why: Insurance Article § 2-213(e) provides the stenographic record is made at the expense of the requesting party — therefore that party.

Under MD Ins. § 27-305, the penalty for each violation of the first-party good-faith requirement of § 27-303(9) may not exceed:

1. $25,000
2. $50,000
3. $100,000
4. $125,000 ✓

Why: Insurance Article § 27-305(a)(2) sets a penalty not exceeding $125,000 for each violation of § 27-303(9) — therefore $125,000.

Under the 'three-year rule,' if an insured gives away a life insurance policy but dies within three years, the proceeds are:

1. Pulled back into the insured's taxable estate ✓
2. Treated as fully tax-free regardless of the timing of the gift
3. Taxed as ordinary income to the person who received the gift
4. Forfeited entirely back to the issuing insurance company

Why: If an insured transfers a policy and dies within three years, the death proceeds are included in the gross estate for federal estate-tax purposes.

Under MD Ins. § 15-209, what is the minimum grace period a monthly-premium individual health policy must grant for premiums falling due after the first premium?

1. Ten days ✓
2. Seven days
3. Five days
4. Three days

Why: Insurance Article § 15-209 sets minimum grace periods of 7 days for weekly, 10 days for monthly, and 31 days for all other premium policies — therefore a monthly-premium policy requires at least ten days.

Under MD Ins. § 15-818, covered treatment for the birth defect cleft lip or cleft palate must include benefits for:

1. Only inpatient surgical repair
2. Orthodontics, oral surgery, and speech treatment ✓
3. Cosmetic procedures of the insured's choice
4. Home modifications and adaptive equipment

Why: Insurance Article § 15-818(b) requires benefits for inpatient or outpatient expenses arising from orthodontics, oral surgery, and otologic, audiological, and speech/language treatment involved in managing cleft lip or cleft palate.

Under MD Ins. § 15-909, a carrier may cancel or nonrenew a Medicare supplement policy only for:

1. Nonpayment of premium or misrepresentation ✓
2. Any reason with thirty days' written notice
3. The insured's declining health condition
4. The insured attaining eighty years of age

Why: Insurance Article § 15-909(f) allows cancellation or nonrenewal only for nonpayment of premium or material misrepresentation.

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.