MD Life & Health Exam Flashcards

Q: How many questions are on the Maryland Life & Health exam?

The Maryland combined Life and Accident & Health producer exam (series 20-30) delivers 140 questions: 130 scored and 10 unscored pretest items. You have 150 minutes (2.5 hours) of total seat time, and the exam is administered by Prometric at testing centers or online via ProProctor.

Q: What is the passing score for the Maryland insurance exam?

Maryland requires a 70% passing score on the combined Life and Accident & Health producer exam. Building a buffer above 70% in practice tests is the safest strategy, since the exam covers heavily weighted regulation and product content.

Q: Does Maryland require pre-licensing education?

No. Effective October 1, 2024 (MIA Bulletin 24-19), Maryland repealed the pre-licensing education requirement for exam-required producer licenses. A prep course is no longer mandatory, but it is strongly recommended because the exam is comprehensive.

Q: How much does the Maryland Life & Health exam cost?

Prometric lists a $60 exam fee per attempt for the Maryland series 20-30 exam. Retakes require a new reservation and another $60 fee. Separate NIPR application and licensing transaction fees apply after you pass.

Q: What continuing education does Maryland require to keep the license?

Maryland insurance producers renew biennially (every 2 years) and must complete 24 hours of continuing education, including 3 hours of ethics. CE must be completed before submitting the renewal application through NIPR.

Question 1

What is the difference between insurable interest in life insurance and in property insurance?

Accepted Answer

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.

Question 2

What makes an insurance contract a 'contract of adhesion'?

Accepted Answer

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.

Question 3

Define a 'unilateral' and an 'aleatory' insurance contract.

Accepted Answer

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.

Question 4

What are the four elements required to form a valid insurance contract?

Accepted Answer

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.

Question 5

What is the difference between an 'authorized' (admitted) insurer and a 'non-admitted' insurer?

Accepted Answer

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.

Question 6

How do level term, decreasing term, and increasing term life insurance differ?

Accepted Answer

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.

Question 7

What guarantees does a whole life insurance policy provide?

Accepted Answer

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.

Question 8

What flexibility does universal life insurance offer that whole life does not?

Accepted Answer

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.

Question 9

Why does variable life insurance require both an insurance license and a securities (FINRA) registration?

Accepted Answer

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.

Question 10

What is the key difference between a term conversion and a renewal provision?

Accepted Answer

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.

Question 11

What is the difference between a 'participating' and a 'non-participating' life policy?

Accepted Answer

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.

Question 12

What does the incontestability clause do, and how long is the period in Maryland?

Accepted Answer

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.

Question 13

What is the maximum suicide exclusion period allowed on a Maryland life policy?

Accepted Answer

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.

Question 14

What does the grace period provision protect, and how long is it on a Maryland life policy?

Accepted Answer

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.

Question 15

What does the 'entire contract' provision mean for a life insurance policy?

Accepted Answer

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.

Question 16

How does the misstatement of age provision affect a death benefit claim?

Accepted Answer

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.

Question 17

What are the three nonforfeiture options on a whole life policy?

Accepted Answer

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.

Question 18

Compare the waiver of premium rider with the accelerated death benefit rider.

Accepted Answer

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.

Question 19

What is the difference between a revocable and an irrevocable beneficiary?

Accepted Answer

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.

Question 20

How do primary, contingent, and tertiary beneficiaries receive death proceeds?

Accepted Answer

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.

Question 21

What is the difference between an immediate annuity and a deferred annuity?

Accepted Answer

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.

Question 22

How does a fixed annuity differ from a variable annuity?

Accepted Answer

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.

Question 23

What is the 'life with period certain' annuity payout option?

Accepted Answer

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.

Question 24

Under Maryland annuity suitability rules, what must a producer do before recommending an annuity?

Accepted Answer

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.

Question 25

What is a surrender charge on a deferred annuity, and why does it matter for seniors?

Accepted Answer

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.

Question 26

What is the difference between morbidity and mortality in health insurance?

Accepted Answer

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.

Question 27

Distinguish a deductible, coinsurance, and a copayment in a medical plan.

Accepted Answer

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.

Question 28

What is an out-of-pocket maximum and what happens once it is reached?

Accepted Answer

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.

Question 29

What is the difference between the probationary period and the elimination period in health insurance?

Accepted Answer

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.

Question 30

Which health policy renewability provision gives the insured the strongest protection?

Accepted Answer

'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.

Question 31

How is benefit amount typically limited on individual disability income insurance?

Accepted Answer

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.

Question 32

What is the difference between 'own occupation' and 'any occupation' disability definitions?

Accepted Answer

'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.

Question 33

What does a residual (partial) disability benefit cover?

Accepted Answer

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.

Question 34

Does Maryland have a mandatory state disability insurance program?

Accepted Answer

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.

Question 35

How do HMO, PPO, and POS managed care plans differ?

Accepted Answer

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.

Question 36

What is the role of a primary care physician (gatekeeper) in an HMO?

Accepted Answer

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.

Question 37

What essential health benefits must ACA-compliant Maryland individual and small group plans cover?

Accepted Answer

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.

Question 38

What is Maryland Health Connection, and how does it differ from Healthcare.gov?

Accepted Answer

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.

Question 39

What is the difference between fully insured and self-funded group health plans?

Accepted Answer

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.

Question 40

Why does group life and health insurance generally not require individual medical underwriting?

Accepted Answer

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.

Question 41

What continuation rights does COBRA provide after a qualifying event?

Accepted Answer

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.

Question 42

Compare Medicare Part A and Part B coverage.

Accepted Answer

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.

Question 43

What is the difference between Medicare and Medicaid?

Accepted Answer

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'.

Question 44

What does a Medicare Supplement (Medigap) policy do, and how is it standardized?

Accepted Answer

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.

Question 45

How does Maryland regulate Medicare Supplement open enrollment and pricing?

Accepted Answer

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.

Question 46

How is the death benefit of a life insurance policy taxed when paid to a beneficiary?

Accepted Answer

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.

Question 47

How are gains taxed when a deferred annuity owner takes a withdrawal?

Accepted Answer

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.

Question 48

What is the tax difference between a Traditional IRA and a Roth IRA?

Accepted Answer

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.

Question 49

How is the Maryland Insurance Commissioner selected, and which agency do they lead?

Accepted Answer

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.

Question 50

What are the key Maryland producer licensing and continuing education rules?

Accepted Answer

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.

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