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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: General Insurance Concepts | 15% | - Underwriting, premium calculation, and taxation - Insurable interest and risk management - Contract law and principles |
| Topic 2: Annuities and Retirement Products | 10% | - Tax treatment and suitability standards - Fixed, indexed, and variable annuities |
| Topic 3: Insurance Regulation | 30% | - Policy delivery, replacement rules, and disclosure - Ethics, unfair trade practices, and consumer protection - State insurance laws and Maryland regulations - Licensing requirements and procedures |
| Topic 4: Life Insurance Basics and Policies | 25% | - Types of life insurance: term, whole, universal, variable - Beneficiaries, claims, and settlement options - Policy provisions, riders, and options |
| Topic 5: Accident and Health / Sickness Insurance | 20% | - HMO, PPO, group vs individual coverage - Disability income, medical expense, and long-term care - Mandatory benefits and state-specific health rules - Health insurance basics and policy provisions |
1. A policyholder uses a Section 1035 exchange to replace an existing life insurance policy. If the new policy is later surrendered, the gain realized on termination is taxed as:
A) A capital gain
B) Ordinary income plus a 10% surcharge
C) Ordinary income
D) A deferred capital gain
2. In the event of a death claim under a life insurance policy, what happens to the amount of any existing policy loan?
A) It is canceled, and the beneficiary receives the face amount of the policy.
B) The beneficiary has an obligation to pay the amount to the insurance company.
C) It is deducted from the face amount of the policy together with any interest due.
D) It represents a primary claim against the estate of the insured.
3. All of the following are underwriting criteria for individual life insurance EXCEPT:
A) Gender
B) Occupation
C) Religion
D) Ability to pay premiums
4. Which one of the following statements about the automatic premium loan (APL) provision in a life insurance policy is true?
A) It waives policy premiums if the policyowner becomes totally and permanently disabled
B) It provides for a series of bank loans to finance the purchase of split-dollar life insurance
C) It provides for a policy loan to pay any premium not paid by the end of the grace period
D) It is a required provision that provides for the purchase of additional insurance at guaranteed rates
5. Taking out a loan under a life insurance policy:
A) Reduces the amount receivable upon surrender of the contract
B) Changes the policy into a modified endowment contract (MEC)
C) Results in loss of the tax-exempt status of the death proceeds
D) Results in a distribution of taxable income to the policyowner
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: C | Question # 3 Answer: C | Question # 4 Answer: C | Question # 5 Answer: A |
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