25 Free Maryland Life & Health Exam Practice Questions (2026)

Answer: A

Risk reduction involves taking actions to decrease the severity or likelihood of a potential loss. Installing a fire suppression system reduces the potential damage from a fire, making it a risk reduction strategy. Risk avoidance would be eliminating the ovens entirely, risk retention would be accepting the financial loss if a fire occurred, and risk transfer would involve purchasing insurance to shift the financial burden to an insurer.

Answer: D

The doctrine of reasonable expectations holds that ambiguities in an insurance contract (a contract of adhesion) should be interpreted in favor of the insured, based on what the average person would reasonably expect from the policy. Utmost good faith requires honesty from both parties. Indemnity relates to compensation for loss. Subrogation allows the insurer to pursue third parties after paying a claim.

Answer: A

Survivor protection is the most fundamental use of life insurance, providing immediate funds to a family when a wage earner dies, allowing them to maintain their lifestyle and cover future expenses like education. Cash accumulation (B) is a feature of permanent policies, but not the primary goal here. Estate conservation (C) and liquidity (D) relate more to preserving an estate or accessing cash value, which are secondary to the immediate need of income replacement for survivors.

Answer: D

Mortality is the factor in premium determination that represents the cost of death claims, based on mortality tables that predict the likelihood of death for individuals at various ages. Interest (A) refers to the earnings the insurer expects to make on invested premiums. Expense (B) covers the insurer's operating costs. Lapse rate (C) influences profitability but is not a direct component of the fundamental cost of death claims.

Answer: A

Insurable interest must exist at the time the policy is purchased, not at the time of death. The policy was validly issued when the insured had an insurable interest in his own life. The beneficiary can be changed at any time by the policyowner, and the proceeds are payable to the named beneficiary at death. Options B, C, and D are incorrect: proceeds do not revert to an ex-spouse, insurable interest is not required at death, and beneficiary changes are permitted.

Answer: D

In a decreasing term policy with a straight-line decline, the death benefit reduces by the same amount each year. Over 20 years, the annual decrease is $250,000 / 20 = $12,500 per year. After 15 years, the total decrease is 15 × $12,500 = $187,500. The remaining death benefit is $250,000 - $187,500 = $62,500. Options A, B, and C incorrectly calculate the remaining benefit or confuse it with level or increasing term structures.

Answer: D

The assignment provision allows the policyowner to transfer ownership rights to another party (e.g., for collateral) without needing the insurer's consent, though notice must be given to the insurer. The entire contract provision states that the policy and application constitute the full agreement. The free look allows return for refund. The grace period allows late premium payment without lapse.

Answer: A

A disability income benefit rider provides a regular monthly income if the insured becomes totally disabled. The waiver of premium rider waives policy premiums during disability but does not provide income. The accelerated benefit rider pays a portion of the death benefit early for qualifying conditions. The children's term rider provides coverage on the lives of children.

Answer: A

Accidental death benefit riders typically exclude deaths that result from intentional acts, including suicide or self-inflicted injury, even if the mechanism involves an accident (like a car crash). If the insured's intentional act caused the accident, the death is not considered purely accidental for the purpose of the rider, and the benefit is not payable. Options B, C, and D are incorrect: the benefit is not paid based solely on the accident mechanism, there is no automatic half-payment compromise, and the burden is not on the policyowner to prove lack of intent in this context; the exclusion applies if the act was intentional.

Answer: D

For non-qualified annuities, distributions are taxed on a gain-first basis (LIFO). The earnings portion is taxed as ordinary income, while the return of principal (cost basis) is received tax-free. Option A is incorrect because only earnings are taxed. Option B is wrong; annuity distributions are not capital gains. Option C is false; holding period does not exempt gains from tax.

Answer: A

A is correct: in a fixed annuity, the insurance company invests premiums in its general account and bears the investment risk, guaranteeing a minimum interest rate; in a variable annuity, the policyholder allocates funds among separate account investment options and bears the investment risk, with returns varying based on the performance of those options. Option B is incorrect because it reverses which party bears the investment risk. Option C is incorrect because variable annuities do not guarantee a minimum rate of return, and tying returns to market indices describes an equity indexed annuity, not a variable annuity. Option D is incorrect because the insurance company does not declare a rate for variable annuities, nor do variable annuities adjust based on bond yields; their returns depend on the performance of the owner's chosen investment options.

Answer: A

A qualified distribution from a Roth IRA is one made after age 59½, after the account has been open for at least 5 years, and for a permitted reason (such as retirement). Such distributions are completely free of both federal income tax and the 10% early withdrawal penalty. Since the individual is age 60 and the account has been open for 5 years, the distribution is qualified and thus tax- and penalty-free. Option B is incorrect because Roth IRA qualified distributions are not taxable; Option C is incorrect because there is no taxation of any portion; Option D is incorrect because the 5-year requirement is satisfied.

Answer: A

A hospital indemnity policy pays a predetermined fixed amount per day of hospitalization, irrespective of actual expenses, and typically does not cover physician services, outpatient care, or prescriptions. Accident-only policies cover injuries from accidents but not sickness. Specified disease policies cover only specific illnesses like cancer or stroke. Critical illness policies provide a lump sum upon diagnosis of a specified condition such as heart attack or stroke, not daily hospitalization benefits.

Answer: D

The notice of claim provision is a required uniform provision that specifies the timeframe, stated in the policy, within which the insured must notify the insurer after a loss occurs. The grace period provision relates to premium payment timing. The time limit on certain defenses provision restricts when the insurer can deny a claim based on pre-existing conditions. The reinstatement provision allows a lapsed policy to be restored after nonpayment of premium.

Answer: D

A guaranteed renewable policy ensures the insurer cannot refuse to renew the policy based on the insured's health, claims, or other risk factors. However, the insurer may increase premiums, provided the increase applies uniformly to all policyholders in the same class. Option D correctly reflects this. Option A describes a conditionally renewable policy. Option B is incorrect because renewal cannot be refused based on health or claims under guaranteed renewable. Option C describes a noncancelable policy, where premiums and provisions are locked in.

Answer: A

She becomes disabled at age 40 and remains disabled until age 62, a total disability duration of 22 years (264 months). However, the 90-day (3-month) elimination period must be satisfied before benefits begin, so no benefit is payable for the first 3 months of the disability. Benefits are therefore paid for 264 minus 3, or 261, months. The benefit period 'to age 65' sets the maximum duration benefits could be paid, but since she recovers at age 62 (before age 65), benefits stop at recovery.

Answer: D

Presumptive disability provides for total disability benefits to be paid upon the occurrence of specific catastrophic losses, such as the loss of use of both hands, both feet, sight in both eyes, hearing in both ears, or speech—regardless of whether the insured can still work in another occupation. The insured does not need to prove inability to work; the loss itself presumes disability. Waiver of premium, COLA, and FIO do not provide benefits based on specific losses like loss of use of both hands.

Answer: D

A guaranteed renewability clause ensures the policy cannot be canceled or non-renewed by the insurer except for nonpayment of premiums, though the insurer may still raise premiums for an entire class of insureds. A cost-of-living adjustment rider, a waiver of premium benefit, and a return-of-premium provision are optional features that serve different purposes and do not, by themselves, guarantee renewability.

Answer: A

During the Medigap Open Enrollment Period (which begins the month a person is 65 or older and enrolled in Part B and lasts six months), insurers cannot use medical underwriting. This means the applicant has a guaranteed right to buy any Medigap plan sold in the state, regardless of health status. Option B is incorrect because pre-existing condition exclusions do not apply during this period. Option C is wrong because the Annual Election Period is for Medicare Advantage and Part D plans, not Medigap. Option D is incorrect because Medigap cannot be used with Medicare Advantage; one must choose either Original Medicare with Medigap or Medicare Advantage.

Answer: D

Medicaid is a joint federal and state program that helps with medical costs for some people with limited income and resources. It can cover services like long-term nursing home care, which is generally not covered by Medicare. Options A, B, and D refer to Medicare, for which the individual does not qualify, and describe services that Medicare might cover, not the specific long-term care needs addressed by Medicaid.

Answer: C

Under Maryland Insurance Article §10-103(c)(1), initial licensure requires the applicant to be at least 18 years old, demonstrate good character and trustworthiness, pass the state examination, and submit an application with the required fee. Errors and omissions insurance is not a statutory requirement for initial licensure, although it may be required by an insurer or agency as a condition of appointment. Therefore, option D is not a requirement under the cited statute.

Answer: D

Under Maryland Insurance Article §1-101(u)(1), a nonresident is an individual licensed in their home state who wishes to write business in Maryland. To do so, the producer must obtain a nonresident license from the MIA by meeting their home state's licensing requirements (which Virginia does) and applying through the MIA (typically via NIPR) with the required fee. The producer does not need to become a resident or pass Maryland's exam (eliminating A), federal law does not automatically grant nationwide reciprocity (eliminating B), and while selling through an agency is possible, direct solicitation is permitted with proper nonresident licensure (eliminating C). Therefore, obtaining a nonresident license (D) is the correct path.

Answer: D

Under Maryland Insurance Article §10-116(a)(2)(i), licensees are required to report any change in address to the MIA within a specified time. Failure to do so is a violation that may result in disciplinary action, including fines, probation, suspension, or revocation, depending on the circumstances. The license is not automatically suspended or revoked, nor is retaking the exam required solely for an address change violation. Thus, option D correctly identifies the potential consequence.

Answer: A

Advertising a policy with a false guarantee of doubling in value constitutes false advertising under Maryland Insurance Article §27-304 and COMAR 31.15.02.02, as it involves a misleading or deceptive advertisement. While this could also be considered misrepresentation (D), false advertising is the more specific and directly applicable practice for advertising materials. Twisting (B) and rebating (C) do not apply, as there is no inducement to replace a policy or return of consideration.

Answer: C

Section 2-401 defines fraud as a felony and authorizes the MIA to impose penalties including fines and imprisonment, in addition to administrative actions like license revocation or cease and desist orders. While revocation (B) may occur, it is not the only penalty, and the MIA cannot impose imprisonment alone—it refers cases for prosecution. Option A is too limited, and D is not a penalty for fraud under this section.