Key details for this exam, checked against the published exam outline
Each question shows the correct answer and an explanation of why it is right
In surrendering a life insurance contract for its cash value, the total of premiums paid less the total of any dividends received in cash or used to offset premiums is:
The cost basis is the total of all premiums paid minus dividends received or used to offset premiums. This figure is used to calculate the taxable portion of the cash value upon surrender.
Cost basis (D): Represents the non-taxable portion of the surrender value; any amount exceeding this is considered taxable income.
Cash value (A): The policy's accumulated value, which may include taxable gains.
Loan value (B): Refers to the amount available for borrowing against the policy.
Gross proceeds (C): The full amount received upon surrender, not accounting for cost basis deductions.
The beneficiary of a life insurance policy is the:
The beneficiary is the individual or entity named in the life insurance policy to receive the death benefit upon the insured's death.
Designated recipient of proceeds (B): The policyholder nominates this party in the policy documents.
Ownership interest in the policy (A): Refers to the policyowner, who controls and funds the policy but may not be the beneficiary.
Insurer (C): Issues and administers the policy but is not a recipient.
Owner of the cash value fund (D): This pertains to cash value accumulation, separate from death benefit designation.
A producer who makes an incomplete comparison of policies to encourage an insured to cancel a contract of another insurer and purchase a new one is guilty of:
Definition of twisting.
Twisting involves misrepresentation or incomplete comparisons designed to induce replacement of an existing policy.
Apply the facts.
The producer:
Makes an incomplete comparison
Encourages cancellation of an existing policy
Promotes purchase of a new policy
Why this is twisting specifically.
Twisting is a replacement-related unfair trade practice, not just general misrepresentation.
Why other options are incorrect.
Rebating: Involves financial inducements.
Coercion: Involves intimidation or threats.
Defamation: Involves false statements about another insurer's reputation.
Maryland enforcement relevance.
Maryland strictly regulates replacements to protect consumers from unnecessary financial harm.
Conclusion.
The conduct described is twisting.
(One of the purposes of a qualified profit-sharing plan is to:)
Comprehensive and Detailed Step by Step
What a profit-sharing plan is: An employer-sponsored retirement plan where the employer may make discretionary contributions, often tied to profits, allocating contributions to employees under a formula.
Purpose: To share company success with employees and provide retirement/compensation benefits.
Why B is correct: It directly states the core purpose---distribute a portion of company earnings to employees.
Why others are wrong:
A: Plans are not designed to guarantee a profit margin goal.
C: Liquidation is unrelated.
D: Stockholders benefit through dividends/stock appreciation, not through an employee qualified plan.
Maryland reference (consumer-facing fairness): If these plans are sold/represented alongside insurance products, any misleading description of plan nature/benefits could be a misrepresentation; Maryland prohibits misleading disclosure of pertinent facts or provisions in the insurance context.
In general practice, which one of the following is true of the powers of the Maryland Insurance Administration with respect to access to a producer's business records?
Regulatory authority of the Maryland Insurance Administration (MIA).
The MIA is granted statutory authority to examine, investigate, and audit producers to ensure compliance with insurance laws.
Evaluate each option.
A . Court order required
Incorrect. The MIA has direct administrative authority.
B . NAIC authorization required
Incorrect. The NAIC is advisory, not regulatory.
C . Records must be produced upon request
Correct. Licensed producers are required to comply with MIA record requests.
D . No right due to privacy
Incorrect. Licensing carries an obligation to regulatory oversight.
Good-faith and compliance relevance.
Failure to provide records may itself constitute a regulatory violation and undermine good-faith conduct.
Conclusion.
Producers must produce business records upon request of the Maryland Insurance Administration.
All of the following have a restricted ability to enter into a contract EXCEPT:
Legal capacity to contract.
Maryland contract law requires parties to have legal capacity to enter into a binding agreement.
Evaluate each option.
A . Intoxicated individuals
May lack capacity if intoxication impairs understanding.
B . Mentally ill individuals
May lack capacity depending on severity and adjudication.
C . Minors
Generally lack full contractual capacity.
D . Retired individuals
Retirement status does not affect legal capacity.
Insurance relevance.
Producers must ensure applicants have legal capacity to avoid voidable contracts.
Conclusion.
Retired individuals have full contractual capacity, making option D correct.
(What is the effect on a life insurance policy if the insured fails to repay the full value of loans taken against the policy?)
Comprehensive and Detailed Step by Step
Policy loans: With cash value life insurance, policy loans may be taken against the cash value.
Loan balance at death: If not repaid, the loan balance (plus interest) is typically deducted from the policy proceeds.
Why D is correct: Unrepaid loans reduce the net death benefit payable to the beneficiary.
Why others are wrong:
A: The policy generally does not become void simply because a loan exists; lapse can occur only if loan + interest exceed cash value and the policy can't sustain charges.
B: Premium isn't automatically increased because of a loan.
C: Dividends may be affected depending on policy type, but the standard, direct effect tested is reduction of proceeds.
Maryland reference: Any insurer explanation about claim payment must be clear and not misleading; Maryland requires identifying the coverage/payment basis and prohibits misrepresentation of policy provisions.
Exam domains verified against: Official Insurance Licensing Life-Producer exam guide, last checked October 2026.
1.1 Licensing; Purpose; General Provisions and Definitions; Process (Insurance Article Annotated Code- Sec. 10-118(b)(2); Sec. 10.109;; Sec. 10-103(c)(1)); Initial Licensure Qualifications; Examination; License fee & application; Types of licensees (Insurance Article Annotated Code- Sec. 1-101(u)(1)); Producers; Advisers; Nonresidents; Business entities; Viatical Settlements; Exceptions; Temporary; Maintenance (Insurance Article Annotated Code- Sec. 10- 211(e)(2)(i); Sec. 10-115;; Sec. 10-1-05; Sect. 10- 116(a)(2)(i);)); Duration and Termination; Address and/or name changes; Assumed names; Requirement to report felony convictions; Requirement to report other states actions; Renewal (Insurance Article Annotated Code- Sec. 10- 211(e)(2)(i); Sec.; 10-115; Sec. 10-1-05; 10-116); Continuing education; Appointment procedures (Insurance Article Annotated Code- Sec. 1-101; Sec. 10- 118;; Sec. 27-209); Producer's contract with insurer versus producer's appointment with insurer; Producer's appointment versus agency's appointment; Solicitation prior to appointment; Appointment requirement after becoming licensed; Acknowledgment of appointment/notice to producer; Requirement to cease solicitation; Termination of appointment/notice to producer; Termination of license without active appointment; Disciplinary actions (Insurance Article Annotated Code- Sec. 1-301; Sec.; 10- 126(e); Sec. 27-202); Probation, suspension, revocation or refusal to issue or renew; Cease and desist order; Penalties; Hearings/Notice of Hearings; Fraud (Insurance Article Annotated Code- Sec. 27- 216(a)(1)(i); Sec. 2-401); 1.2 State regulation; Maryland Insurance Administration’s general duties and powers (Insurance Article; Annotated Code- Sec. 2-102(a); Sec. 2-103(a)(4); Sec. 2-204(b)(1); 16-601;; Sec. 1-301; Sec. 2- 101; Sec. 10-126); Insurer Regulation (Insurance Article Annotated Code- Sec. 15-204(B);; Sec. 15-208(A)(1); Sec. 15-211(A); Sec. 27-501(a)(1); Forms Sec. 12-203(a)(2); Unfair Claims Settlement Practices; Certificate of Authority Sec. 4-101; Producer regulation (Insurance Article Annotated Code- Sec. 27-209; Sec. 10-105;; COMAR- Sec. 31.03.03); Acting for an unlicensed insurer; Record retention; Activities of unlicensed individuals; Payment and sharing of commissions; Charging of fees; Illegal compensation; exceptions; Fiduciary capacity; Commingling of Funds; Responsibility of trust accounts; Advertising; Unfair trade practices (Insurance Article Annotated Code- Sec. 27-304; Sec. 27-213;; Sec. 27-305(a); Sec. 27-504(b)(1); COMAR- Sec. 31.15.02.12; Sec.31.15.02.18(A);; Sec. 31.15.02.02; Sec.31.15.02.03(B)); Misrepresentation; False advertising; Defamation; Boycott, coercion and intimidation; False Financial Statements; Prohibited Inducements; Unfair Discrimination; Rebating; Blank Forms; Twisting; Referrals; Insurance information and privacy protection; 1.3 State Insurance Requirements; Policy Replacement (COMAR- Sec. 31.09.05.10); Definitions; Provisions and Disclosure; Group Life (Insurance Article Annotated Code- Sec. 17-201(a); Sec. 17-202(b);; Sec. 17-209(a)(2)(i)(ii)); Eligibility; Dependent Coverage; Standard Provisions; Conversion; Assignment of Proceeds; Life and Health Insurance Guaranty Corporation (Insurance Article Annotated Code-; Sec. 9-405(a)(2); Sec. 9-409(b); Sec. 9-402)
Sample question from this domain above: Q7
2.1 Concepts; Risk management key terms; Risk; Exposure; Hazard; Peril; Loss; Methods of handling risk; Avoidance; Retention; Sharing; Reduction; Transfer; Elements of insurable risks; Adverse selection; Law of large numbers; Reinsurance; 2.2 Insurers; Types of insurers; Stock companies; Mutual assessment insurers; Fraternal benefit societies; Private versus government insurers; Admitted versus nonadmitted insurers; Purchasing Groups; Government Plans; Domestic, foreign and alien insurers; Financial status (independent rating services) and operating results; Marketing (distribution) systems; Life and Health Insurance Guaranty Corporation; 2.3 Producers and general rules of agency; Types; Captive; Independent; Insurer as principal; Producer of insurer; Authority and powers of producers; Express; Implied; Apparent; Responsibilities to the applicant/insured; 2.4 Contracts; Elements of a legal contract; Offer and acceptance; Consideration; Competent parties; Legal purpose; Distinct characteristics of an insurance contract; Contract of adhesion; Aleatory contract; Personal contract; Unilateral contract; Conditional contract; Legal interpretations affecting contracts; Ambiguities in a contract of adhesion; Reasonable expectations; Indemnity; Utmost good faith; Representations/misrepresentations; Warranties; Concealment; Fraud; Waiver and estoppel; 2.5 Federal Regulat; Fair Credit Reporting Act; Fraud and False Statements; Variable Products; 2.6 Industry Associations; NAIC; IIPRC (Interstate Insurance Product Review Committee)/ the Compact; NCOIL (National Conference of Insurance Legislators); Industry and Pro
Sample question from this domain above: Q6
3.1 Insurable interest; 3.2 Personal uses of life insurance; Survivor protection; Estate planning; Cash accumulation; Liquidity; Estate conservation; Debt Protection on Personal Mortgages (only); 3.3 Viatical/Life Settlements; Nature and Purpose; Viatical Settlement, Broker Authority, and Licensing; Disclosure to Consumers; General Rules; Fraudulent Acts; Definitions; Chronically ill; Fraudulent Viatical Settlement Act; Terminally ill; Viatical Settlement broker; Viatical Settlement provider; Viatical settlement purchaser; Viator; 3.4 Determining amount of personal life insurance; Human life value approach; Needs approach; Types of information gathered; Determining lump-sum needs; Planning for income needs; Social Security Benefits; 3.5 Business uses of life insurance; Buy-sell funding; Key person; Executive bonuses; 3.6 Classes of life insurance policies; Group versus individual; Ordinary; Permanent versus term; Participating versus nonparticipating; Fixed versus variable life insurance and annuities; Regulation of variable products (FINRA); Types of variable products; U.S. Government Plans; 3.7 Premiums; Factors in premium determination; Mortality; Interest; Expense; Premium concepts; Net single premium; Gross annual premium; Premium payment mode; 3.8 Producer responsibilities; Rules Governing Advertisement of Life Insurance and Annuities; Solicitation and sales presentations; Maryland Life & Health Insurance Guaranty Corporation; Advertising; Illustrations; Policy summary; Buyer's guide; Policy Cost and Benefit Information; Replacement; Use and disclosure of insurance information; Field underwriting; Notice of information practices; Adverse underwriting decisions; Application procedures; Required signatures; Changes in the application; Consequences of incomplete applications; Warranties and representations; Collecting the initial premium and issuing the receipt; Disclosures at point of sale (e.g., HIPAA, HIV consent); USA PATRIOT Act/anti-money laundering; Delivery; Policy review; Effective date of coverage; Premium collection; Statement of good health; 3.9 Individual underwriting by the insurer; Information sources and regulation; Application; Producer report; Attending physician statement; Investigative consumer (inspection) report; Medical Information Bureau (MIB); Medical examinations and lab tests including HIV; Selection criteria and unfair discrimination; Discrimination against victims of domestic violence; Classification of risks; Preferred; Standard; Substandard; Declined
4.1 Term life insurance; Level term; Annual renewable term; Level premium term; Convertible Term; Decreasing term; Increasing term; Return of premium; 4.2 Whole life insurance; Ordinary whole life; Continuous premium (straight life); Limited payment; Interest sensitive/current assumption; Indexed life; Equity indexed life; Graded Premium; Single premium; Variable whole life; Variable universal life; 4.3 Flexible premium policies; Adjustable life; Universal life; 4.4 Specialized policies; Family (Family Protection and Family Plan); Joint life (first-to-die); Survivorship life (second-to-die); Juvenile/student life; 4.5 Group life insurance; Characteristics of group plans; Types of eligible groups; Employer/employee; Debtor groups; Labor union groups; Trust; Associations; Group underwriting requirements; Benefit payments; Covered dependents; Lives covered; Conversion to individual policy; Contributory vs. noncontributory; 4.6 Credit life insurance (individual versus group)
5.1 Standard provisions; Ownership; Assignment; Entire contract; Right to examine (free look); Payment of premiums; Grace period; Reinstatement; Incontestability; Misstatement of age and misstatement of gender; Exclusions; Suicide; War clause; Interest on proceeds; Prohibited provisions including backdating; 5.2 Beneficiaries; Designation options; Individuals; Classes; Estates; Minors; Trusts; Succession; Revocable versus irrevocable; Annulment or divorce; Common disaster clause; Facility of Payment Clause; 5.3 Settlement options; Cash payment; Interest only; Fixed-period installments; Fixed-amount installments; Life income; Single life; Joint and survivor; 5.4 Nonforfeiture options; Cash surrender value; Extended term; Reduced paid-up insurance; 5.5 Policy loans; Cash loans; Automatic premium loans; Withdrawals or partial surrenders; Educational loans; Automatic Option Required; 5.6 Dividend options; Cash payment; Reduction of premium payments; Accumulation at interest; One-year term option; Paid-up additions; Paid-up insurance; 5.7 Disability riders; Waiver of premium; Waiver of cost of insurance; Disability income benefit; Payor benefit life/disability (juvenile insurance); 5.8 Accelerated benefit provision/rider; Conditions for payment; Diagnosis of terminal illness; Diagnosis of catastrophic illness; Permanent confinement; Inability to perform ADLs; Disclosure; Written disclosure required; Effect on death benefit; Cash value; Loans and loan interest; Tax consequences; Premium; 5.9 Riders covering additional insureds; Spouse/other-insured term rider; Children's term rider; Family term rider; 5.10 Riders affecting the death benefit amount; Accidental death; Guaranteed insurability; Cost of living; Return of premium
6.1 Annuity principles and concepts; Accumulation period versus annuity period; Owner, annuitant and beneficiary; Insurance aspects of annuities; Suitability; 6.2 Immediate versus deferred annuities; Single premium immediate annuities (SPIAs); Deferred annuities; Premium payment options; Nonforfeiture; Surrender charges; Bail-out provisions; Death benefits; 6.3 Annuity (benefit) payment options; Life contingency options; Pure life versus life with guaranteed minimum; Single life versus multiple life; Annuities certain (types); Installments for a fixed period; Installments for a fixed amount; 6.4 Annuity products; Fixed annuities; General account assets; Interest rate guarantees (minimum versus current); Level benefit payment amount; Variable Annuities; General Account Assets; Guarantees; Level Benefit Payment Amount; Equity indexed annuities; Market value adjusted annuities (modified guaranteed annuities); 6.5 Uses of annuities; Lump-sum settlements; Qualified retirement plans including group versus individual; Personal uses; Individual retirement plans; Tax-deferred growth; Retirement income; Education funds; Charitable gift annuity; Suitability in Annuity Transactions
7.1 Taxation of personal life insurance; Amounts available to policyowner; Cash value increases; Dividends; Policy loans; Surrenders; Amounts received by beneficiary; General rule and exceptions; Settlement options; Values included in insured's estate; 7.2 Modified endowment contracts (MECs); Modified endowment versus life insurance; Seven-pay test; Distributions; 7.3 Taxation of non-qualified annuities; Individually-owned; Accumulation phase (tax issues related to withdrawals); Annuity phase and the exclusion ratio; Distributions at death; Corporate-owned; 7.4 Taxation of individual retirement accounts (IRAs); Traditional IRAs; Contributions and deductible amounts; Premature distributions (including taxation issues); Annuity phase benefit payments; Values included in the annuitant's estate; Amounts received by beneficiary; Roth IRAs; Contributions and limits; Distributions; 7.5 Rollovers and transfers (IRAs and qualified plans); 7.6 Section 1035 exchanges
8.1 General requirements; 8.2 Federal tax considerations; Tax advantages for employers and employees; Taxation of distributions (age-related); 8.3 Plan types, characteristics and purchasers; Simplified employee pensions (SEPs); Self-employed plans (HR 10 or Keogh plans); Profit-sharing and 401(k) plans; SIMPLE plans; 403(b) tax-sheltered annuities (TSAs)
Common questions about the exam itself
