Free Maryland Life & Health Insurance License Exam Practice Test

Sample MD L&H practice questions

Try a few representative questions below. Each includes the correct answer and a short explanation — the same style you'll see in the full practice test.

1. Question 1Life Insurance Policy Provisions

   A Maryland resident applies for a life insurance policy with a face amount of $500,000. The policy includes a 10-year term conversion option and a guaranteed insurability rider. The insured dies during the 5th year of the policy. The insurance company discovers that the insured misrepresented their age on the application, stating they were 45 when they were actually 55. What is the maximum amount the beneficiary can receive, assuming the policy is contestable?

   • A.The amount of premiums paid plus interest
   • B.The amount of insurance the premiums would have purchased at the insured's actual age(Correct)
   • C.The cash surrender value plus a pro-rata refund of the last premium paid
   • D.$500,000, based on the stated face amount

   Explanation

   In cases of age misrepresentation, insurers typically adjust the death benefit to what the paid premiums would have purchased at the insured's correct age. The policy's cash value and conversion options are irrelevant to the death benefit calculation in this scenario.

2. Question 2Unfair Trade Practices

   Under Maryland law, which of the following actions by an insurance producer would be considered an unfair trade practice related to rebating?

   • A.Providing a $100 gift card to a client after the policy has been issued and paid for, as a thank you for their business.
   • B.Offering to pay a portion of the insured's first year's premium in exchange for signing the application.(Correct)
   • C.Sharing a portion of their commission with another licensed producer who referred the client.
   • D.Offering a prospective client a complimentary "state of the art" financial needs analysis to demonstrate the value of the proposed policy.

   Explanation

   Rebating is offering something of value not specified in the policy contract as an inducement to purchase insurance. Paying a portion of the premium in exchange for the application is a direct violation of rebating laws.

3. Question 3Life Insurance Taxation

   A client has a "participating" whole life insurance policy. The policy has been in force for 15 years and has accumulated a significant cash value. The client is experiencing temporary financial hardship and needs access to funds. Which of the following options would provide the client with tax-free access to the accumulated cash value in Maryland, assuming no policy loans have been taken?

   • A.Surrendering the policy for its cash surrender value.
   • B.Taking a policy loan against the cash value.
   • C.Using the cash value to purchase a paid-up additional insurance rider.
   • D.Withdrawing a portion of the cash value up to the amount of premiums paid.(Correct)

   Explanation

   Withdrawals from the cash value of a life insurance policy are treated as a return of premium (cost basis) first. Therefore, withdrawals up to the total premiums paid are generally received tax-free. Policy loans and surrenders have different tax implications.

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