Insurance Licensing Life-Producer - Maryland Life Producer Exam (Series 20-27)

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.

The principle of estoppel prevents a party from asserting rights or enforcing terms if their prior actions contradicted such enforcement.

Estoppel (C): If the insurer knowingly disregards a policy provision (e.g., a late premium payment), they may be barred from enforcing it later if the policyholder relied on the prior inaction.

Adhesion (A): Refers to contracts where terms are dictated by one party (e.g., the insurer), not applicable here.

Waiver (B): Occurs when an insurer voluntarily relinquishes a known right but does not necessarily create future obligations like estoppel does.

Subrogation (D): Involves transferring the insured’s claim rights to the insurer after a loss, unrelated to this scenario.

Purpose of 403(b) plans.

403(b) plans are retirement plans designed for public education and non-profit employees.

Eligible employers under federal tax law.

Only:

Public school systems

Certain tax-exempt organizations (501(c)(3))

are permitted to sponsor 403(b) plans.

Why the other options are incorrect.

Corporations and professional firms use 401(k) plans.

Government employers generally use 457 plans.

Self-employed and partnerships use SEP or SIMPLE plans.

Maryland producer relevance.

Producers must recommend retirement products consistent with employer eligibility to meet suitability and good-faith standards.

Conclusion.

Only school districts and certain non-profit organizations may offer 403(b) TSAs.

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.

Authority of the Maryland Insurance Commissioner.

The Commissioner has independent statutory authority to issue orders, rulings, and enforcement actions.

Required elements of an administrative order.

A valid order must clearly state:

The effective date

The purpose of the order

The legal and factual grounds supporting the decision

Why the Governor’s signature is not required.

The Commissioner acts under delegated legislative authority.

Orders are administrative, not executive proclamations.

Evaluate each option.

A. Effective date – required

B. Purpose – required

C. Grounds – required

D. Governor’s signature – not required

Due process relevance.

These requirements ensure transparency and allow for judicial review.

Conclusion.

An order does not require the Governor’s signature.

Nature of qualified profit-sharing plans.

Profit-sharing plans are qualified retirement plans under federal tax law.

Tax treatment of contributions.

Employer contributions to the plan are not included in the employee’s current taxable income.

Taxes are deferred until distribution.

Why the other options are incorrect.

A. Avoid penalties: Early distributions may still be penalized.

C. Defined benefit vs. defined contribution: Profit-sharing plans are defined contribution plans only.

D. Earnings tax-free: Earnings are tax-deferred, not tax-free.

Maryland tax conformity.

Maryland generally follows federal income tax treatment for qualified plans.

Conclusion.

The key advantage is current income tax exclusion of contributions.

The entire contract clause ensures transparency by limiting the policy's terms to the policy document and any attached application materials.

The application attached to the policy (B): Correct. It becomes part of the legal agreement between the insurer and the policyholder.

The Medical Information Bureau report (A): Used for underwriting but not part of the policy.

Any attending physician's statement (C): May inform underwriting but is not included in the policy.

The producer’s report to the insurer (D): Internal to the insurer and irrelevant to the contract itself.

Universal life insurance is a flexible product that combines features of term insurance and a savings component:

Flexible premium deposit fund and a monthly renewable term insurance policy (D): Universal life allows policyholders to adjust premiums and coverage amounts. The policy includes a savings element (cash value) and provides renewable term insurance protection.

Mutual fund and whole life insurance policy (A): Incorrect, as universal life does not involve mutual funds or strict whole life coverage.

Term insurance and an annuity (B): Universal life lacks the payout structure of an annuity.

Endowment and interest-sensitive deposit fund (C): While it includes interest-sensitive growth, it is not structured as an endowment policy.

A “period certain” provision ensures payment for a specified period regardless of whether the annuitant survives:

Period certain (B) guarantees payments for a set number of years, protecting beneficiaries.

Cost recovery (A) and refund options (C and D) relate to refunding premiums or unpaid amounts but do not guarantee a payment period.

A flexible premium fixed annuity allows policyholders to make varying contributions while offering tax-deferred growth and a guaranteed minimum interest rate.

Flexible premium fixed annuity (C): Correct. Combines flexible payments with guaranteed returns and death proceeds equal to cash value.

Adjustable whole life (A): Involves fixed payments and lacks tax-deferred features.

Available deferred annuity (B): Vague and not specifically tied to these features.

Universal life (D): Provides death benefits but lacks guaranteed minimum interest rates.