Pass the Insurance Licensing Maryland Insurance Life-Producer Questions and answers with ExamsMirror

Comprehensive and Detailed Step by Step Explanation:

Under Maryland insurance law, a terminated employee has31 days (D)to convert a group term life insurance policy into an individual policy without providing evidence of insurability.

This grace period allows individuals to maintain coverage while securing individual insurance.

10 (A), 20 (B), or 30 days (C)are incorrect, as Maryland mandates a specific 31-day window.

Comprehensive and Detailed Step by Step Explanation:

Qualified retirement plans are regulated by IRS rules:

Contributions cannot exceed IRS limits (C), which are updated annually.

Contributions are not arbitrarily determined by employers (A) or based on employee performance (D).

Employers may make varying contributions, invalidating (B).

Comprehensive and Detailed Step by Step Explanation:

Insurance producers using an assumed or fictitious name for their business must file the name with the Maryland Insurance Administration (MIA).

File the name with the Insurance Administration (A):This ensures transparency and compliance with regulatory standards.

Apply for an additional license (B):Not required; the existing license covers the producer.

Apply for an additional appointment (C):Applies when a producer represents multiple insurers, not for fictitious names.

Post a $10,000 bond (D):Irrelevant to this context.

Comprehensive and Detailed Step by Step Explanation:

Aflexible premium fixed annuityis designed to allow policyholders flexibility in premium payments while providing guaranteed growth.

Flexible deposits:Policyholders can make variable contributions based on their financial situation.

Deferred taxation:Earnings grow tax-deferred until withdrawal.

Guaranteed minimum interest rate:Fixed annuities offer this feature to protect against market downturns.

Death proceeds equal to cash value:Upon death, beneficiaries typically receive the accumulated cash value.

Other Options:

Adjustable whole life policy (A):Features adjustable premiums but lacks deferred taxation and guaranteed rates.

Deferred annuity (B):Generic and does not specify the features of fixed annuities.

Universal life (D):Provides more flexibility but differs in guaranteed returns.

Comprehensive and Detailed Step by Step Explanation:

Under a1035 exchange, policyholders can replace an insurance policy or annuity without immediate tax consequences. However, gains realized later upon surrender of the new policy are taxed as:

Ordinary income (A):The difference between the cash surrender value and the cost basis (premiums paid) is taxed as income.

Capital gains (B):Not applicable because gains on life insurance are classified as ordinary income.

Ordinary income plus a 10% surcharge (C):The 10% penalty applies only to premature withdrawals from retirement accounts, not life insurance.

Deferred capital gain (D):Does not apply, as life insurance gains are not taxed under capital gain rules.

Comprehensive and Detailed Step by Step Explanation:

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.

Comprehensive and Detailed Step by Step Explanation:

ASection 1035 exchangeallows a policyholder to replace a life insurance policy, annuity, or endowment without immediate tax consequences. However, when the new policy is surrendered:

The gain is taxed asordinary income (A), calculated as the difference between the policy’s cash surrender value and the cost basis (total premiums paid).

Capital gain (B):Incorrect. Gains from life insurance policies are classified as ordinary income, not capital gains.

Ordinary income plus a 10% surcharge (C):The 10% penalty applies only to premature distributions from retirement accounts, not life insurance.

Deferred capital gain (D):Incorrect, as life insurance gains are not subject to capital gain rules.

Comprehensive and Detailed Step by Step Explanation:

A life annuity with aten years certainprovision guarantees payments for at least ten years. If theannuitant dies before the end of ten years, payments continue to the beneficiary for the remainder of the period.

Until the annuitant dies, or for ten years, whichever is longer (A):Ensures payments for life with a minimum ten-year guarantee.

Until the annuitant dies, and for an additional ten years (B):Incorrect; payments cease after the guaranteed period or the annuitant’s lifetime.

Only until the annuitant dies (C):Incorrect; the ten-year guarantee applies.

Only for ten years (D):Incorrect; payments continue if the annuitant outlives the guaranteed period.

Comprehensive and Detailed Step by Step Explanation:

Premature distributions from an IRA (withdrawals before age 59½) are subject to a10% penalty tax (B)unless certain exceptions apply (e.g., disability, qualified education expenses, or first-time homebuyer withdrawals).

5% (A):Does not apply to IRS penalties.

10% (B):Correct. This is the standard penalty for early withdrawals.

20% (C):Represents mandatory withholding for certain distributions, not the penalty.

50% (D):Applies only to Required Minimum Distribution (RMD) failures, not premature distributions.

Comprehensive and Detailed Step by Step Explanation:

Producers are integral to facilitating insurance transactions but do not have underwriting authority:

Approving policies for issue (C)is the responsibility of the insurer’s underwriting team.

Producers are required todeliver policies (A),notify insurers about replacements (B), andcollect initial premiums (D).