Free MD Life & Health Exam Flashcards

In life insurance, insurable interest only needs to exist at the time the policy is purchased — not at the time of death. In property insurance, insurable interest must exist at the time of loss. A person always has unlimited insurable interest in their own life.

The insurer writes the entire contract and the applicant must accept it 'as is' — take it or leave it, with no negotiation of terms. Because of this, any ambiguity in the policy language is legally interpreted in favor of the insured.

Unilateral means only one party (the insurer) makes a legally enforceable promise; the insured can stop paying without breach. Aleatory means the dollar values exchanged are unequal — a small premium may produce a large claim payment, or no payment at all.

A valid contract needs an agreement (offer and acceptance), consideration (the premium and the insurer's promise), competent parties (legal age and mental capacity), and a legal purpose. Missing any element makes the contract void or voidable.

An authorized or admitted insurer holds a Certificate of Authority from the Maryland Insurance Administration and is approved to transact insurance in the state. A non-admitted insurer has no such authority and is not backed by the state guaranty association.

Level term keeps the death benefit constant for the term. Decreasing term has a death benefit that shrinks over time (often used for mortgage protection). Increasing term has a death benefit that grows. In all three, coverage ends with no cash value at term expiration.

Whole life guarantees a level premium, a fixed death benefit, and a guaranteed cash value that grows on a set schedule, with coverage lasting to age 100 (or 121). It is the most predictable form of permanent insurance, but offers no flexibility to change premiums or face amount.

Universal life lets the policyowner adjust the premium amount and the death benefit within limits, and skip premiums if the cash value can cover monthly charges. It separates the policy into a cash account and a cost-of-insurance charge, making it more flexible but less guaranteed.

In variable life, cash value is invested in separate-account subaccounts (stocks, bonds, money market) and is not guaranteed — the policyowner bears the investment risk. Because it is a security, a producer must hold a life license and a securities registration to sell it.

A renewal provision lets the insured continue term coverage for another term without proving insurability, usually at a higher premium. A conversion provision lets the insured exchange the term policy for a permanent policy without evidence of insurability.

A participating policy is eligible to receive policy dividends (a return of unneeded premium), typically from a mutual insurer. A non-participating policy pays no dividends, typically issued by a stock insurer. Dividends are not guaranteed.

After a Maryland life policy has been in force for 2 years from the issue date, the insurer can no longer contest it or deny a claim based on misstatements in the application. Exceptions are fraud, nonpayment of premium, and violation of policy conditions.

Maryland limits the suicide exclusion to 2 years from the policy issue date. If the insured dies by suicide within 2 years, the insurer typically refunds premiums paid. After 2 years, death by suicide is covered like any other death.

The grace period keeps a life policy in force for 31 days after a missed premium in Maryland. If the insured dies during the grace period, the death benefit is paid minus the premium owed. The policy cannot lapse for late payment during this window.

The policy plus the attached copy of the application together form the entire contract. The insurer cannot rely on any outside statement or document, and cannot change the contract after issue without the policyowner's written consent.

If the insured's age (or sex) was stated incorrectly on the application, the insurer adjusts the death benefit to the amount the paid premium would have purchased at the correct age. The policy is not voided — the benefit is simply recalculated.

If a policyowner stops paying premiums, the guaranteed cash value can be taken as (1) cash surrender, (2) reduced paid-up insurance — a smaller permanent policy with no further premiums, or (3) extended term insurance — the full face amount as term coverage for a limited period.

Waiver of premium pays the policy's premiums for the policyowner during a qualifying total disability. The accelerated death benefit rider lets a terminally ill insured collect a portion of the death benefit while still living, reducing the benefit paid at death.

A revocable beneficiary can be changed by the policyowner at any time without consent. An irrevocable beneficiary has a vested interest and must give written consent before the policyowner can change the beneficiary or take certain policy actions like a loan or surrender.

The primary beneficiary is paid first. If no primary beneficiary survives the insured, the contingent (secondary) beneficiary is paid. The tertiary beneficiary is paid only if no primary or contingent beneficiary is living. If none survive, proceeds go to the insured's estate.

An immediate annuity is bought with a single premium and begins paying income within about one year. A deferred annuity accumulates value over an accumulation period before income payments begin, and may be funded with a single premium or flexible premiums.

A fixed annuity guarantees a minimum interest rate and a set income amount; the insurer bears the investment risk. A variable annuity invests in separate-account subaccounts with no guaranteed value, the owner bears investment risk, and a securities registration is required to sell it.

Life with period certain pays the annuitant for life, but guarantees payments for a minimum number of years (such as 10 or 20). If the annuitant dies before the period ends, a beneficiary receives the remaining guaranteed payments. It pays less per period than a straight life option.

Maryland follows the NAIC Suitability in Annuity Transactions Model and a best interest standard. The producer must make reasonable efforts to gather the client's financial status, tax status, objectives, existing coverage, and liquidity needs, then document why the recommendation is suitable.

A surrender charge is a declining penalty applied when the owner withdraws more than the free-withdrawal amount during the early contract years. For seniors it is a key suitability concern — the surrender period should be weighed against the buyer's life expectancy and need for liquid funds.

Morbidity is the incidence of sickness and disability within a group — it drives health and disability insurance pricing. Mortality is the incidence of death within a group and drives life insurance pricing. Health underwriting focuses on morbidity risk.

A deductible is a fixed amount the insured pays before coverage begins. Coinsurance is a percentage split of costs after the deductible (e.g., 80/20). A copayment is a flat dollar fee for a specific service such as an office visit. Together they form the insured's cost sharing.

The out-of-pocket maximum is the most an insured pays in a year for covered, in-network services through deductibles, coinsurance, and copays. Once it is met, the plan pays 100% of remaining covered expenses for the rest of the benefit year.

A probationary period is the time after a policy starts before certain conditions (often sickness) are covered. An elimination period is a waiting period after a covered loss begins before benefits are payable — it functions like a time deductible on disability and LTC policies.

'Noncancelable' is strongest: the insurer cannot cancel, cannot change premiums, and cannot alter coverage during the guaranteed period. 'Guaranteed renewable' lets the insurer raise premiums by class but not cancel or change benefits. Both protect the insured far more than optionally renewable.

Insurers limit the monthly benefit to roughly 60-70% of the insured's earned income. This gap is intentional — it discourages malingering and keeps the insured motivated to return to work. Benefits from an individually owned policy paid with after-tax premiums are received income tax free.

'Own occupation' pays benefits if the insured cannot perform the duties of their specific job, even if able to work elsewhere — more generous. 'Any occupation' pays only if the insured cannot work in any job for which they are reasonably suited by education, training, or experience.

A residual benefit pays a reduced amount when the insured can work but suffers a loss of income because of a continuing disability. The benefit is usually proportionate to the percentage of lost earnings, helping the insured transition back to full-time work.

No. Maryland does not have a mandatory state-funded disability insurance program. Disability income coverage in Maryland is provided through private individual or group insurance policies, which must include standard required provisions such as a grace period.

An HMO requires using network providers and a primary care physician who gives referrals; out-of-network care is generally not covered. A PPO allows out-of-network care at higher cost with no referral needed. A POS plan blends both — a gatekeeper PCP, but out-of-network access at higher cost.

The PCP coordinates all of the member's care and must authorize referrals to specialists. This gatekeeper model controls costs by preventing unnecessary specialist visits. Without a referral, an HMO generally will not pay for specialist or out-of-network services.

ACA-compliant plans must cover ten essential health benefits: ambulatory care, emergency services, hospitalization, maternity and newborn care, mental health and substance use treatment, prescription drugs, rehabilitative services, lab services, preventive/wellness care, and pediatric services.

Maryland Health Connection is Maryland's own state-based health insurance marketplace where residents buy qualified health plans and may receive premium subsidies. Maryland operates its own exchange and does not use the federal Healthcare.gov platform.

In a fully insured plan the employer pays premiums and the insurer bears the claims risk; the plan is regulated by the Maryland Insurance Administration. In a self-funded plan the employer pays claims directly and bears the risk; it is generally regulated federally under ERISA.

Group coverage uses one master contract and underwrites the group as a whole, relying on the law of large numbers and rules like minimum participation. Members usually receive a certificate of coverage rather than a policy, and most can enroll without proving insurability.

COBRA lets eligible employees and dependents who lose group coverage continue it temporarily — generally up to 18 months (longer for certain events) — by paying the full premium plus an administrative charge. It applies to employers with 20 or more employees.

Part A is hospital insurance covering inpatient hospital stays, skilled nursing facility care, hospice, and some home health — most people pay no premium. Part B is medical insurance covering doctor visits, outpatient care, and preventive services, and requires a monthly premium.

Medicare is a federal program based primarily on age 65 (or disability), regardless of income. Medicaid is a joint federal-state program based on financial need and is a major payer of long-term care. A person who qualifies for both is called 'dual eligible'.

Medigap fills gaps in Original Medicare such as deductibles and coinsurance. Plans are federally standardized and identified by letter (A through N) — a Plan G from any insurer has identical benefits. Medigap does not work with Medicare Advantage plans.

Maryland provides a 6-month Medigap open enrollment period beginning when the person is 65 or older and enrolled in Part B, plus continuous open enrollment that lets beneficiaries change plans anytime. Maryland requires community rating, so premiums cannot vary by the applicant's age.

A life insurance death benefit paid in a lump sum is generally received income tax free by the beneficiary. If proceeds are left with the insurer under a settlement option, the interest portion of each payment is taxable, while the principal portion remains tax free.

Annuity earnings grow tax deferred. Withdrawals are taxed on a last-in, first-out basis, so taxable gain comes out first as ordinary income. Amounts withdrawn before age 59½ may also face a 10% IRS penalty on the taxable portion.

Traditional IRA contributions may be tax deductible and grow tax deferred, but withdrawals in retirement are taxed as ordinary income. Roth IRA contributions are made with after-tax dollars, and qualified withdrawals — including earnings — are completely tax free.

The Maryland Insurance Commissioner is appointed by the Governor with the advice and consent of the State Senate for a 4-year term — Maryland does not elect its commissioner. The Commissioner leads the Maryland Insurance Administration (MIA), the state insurance regulator.

A Maryland producer must be at least 18, pass the Prometric exam at 70%, and apply through NIPR; pre-licensing education was repealed effective October 1, 2024. Licenses renew every 2 years with 24 CE hours including 3 ethics hours, and changes of address or name must be reported within 30 days.