17 Free Maryland Life & Health Practice Questions: Health Insurance Basics and Policy Provisions (2026)
How to Use This Health Insurance Basics and Policy Provisions Set
This set covers Health Insurance Basics (section 3.0 of the Maryland Accident & Health outline, 11% of that exam, 9 items) and Individual Health Insurance Policy General Provisions (4.0, 8%, 6 items). On the Combo they are sections 9.0 (7%, 9 items) and 10.0 (2%, 3 items).
The 17 questions cover advertising, field underwriting by the producer, the sources an insurer may use to underwrite, noninsurance benefits, the renewability classes, limited health policies (accident-only, specified disease), replacement and pre-existing conditions, and the reinstatement provision. Each has an answer and an explanation.
Practice Questions 1-6: Advertising, Field Underwriting and Renewability
The first six cover what a producer may say, what a producer does when completing an application, noninsurance services, the nonrenewable policy and the accident-only policy.
Question 1 (Chapter 5)
Under Maryland law, which of the following statements is correct regarding the advertising of individual health insurance policies by a licensed producer?
- A) A producer may advertise that a policy is endorsed by the Maryland Life and Health Insurance Guaranty Corporation to increase consumer trust.
- B) A producer must include the name and address of the insurer in all advertisements for individual health insurance policies.
- C) A producer may use the term 'free' in advertising if the policy provides at least one benefit at no cost to the insured.
- D) A producer is prohibited from advertising any individual health insurance policy that could be confused with a government program such as Medicare or Medicaid.
Show answer & explanation
Answer: D
Maryland insurance regulations prohibit advertising that could mislead consumers into believing a private health insurance policy is a government program or is endorsed by a government agency. The Maryland Life and Health Insurance Guaranty Corporation does not endorse policies, and producers cannot claim such endorsement. While insurer identification is required in policies, it is not mandated in all advertisements. The term 'free' is restricted and cannot be used if it misrepresents the policy's value or coverage.
Question 2 (Chapter 5)
A Maryland producer is completing field underwriting for an individual health insurance applicant. Which of the following actions is considered a proper responsibility of the producer during this process?
- A) Completing the application on behalf of the applicant without their input to ensure accuracy.
- B) Advising the applicant to omit minor health issues to avoid potential premium increases.
- C) Submitting the application to the insurer before obtaining the applicant's signature to expedite processing.
- D) Explaining the purpose of the application questions and ensuring the applicant understands the importance of complete and truthful answers.
Show answer & explanation
Answer: D
The producer's role in field underwriting includes explaining the application's purpose, ensuring the applicant understands the questions, and encouraging complete and truthful responses. Completing the application without applicant input, advising omission of information, or submitting an unsigned application are improper and may constitute misrepresentation or fraud. The applicant must sign the application to attest to the accuracy of the information provided.
Question 3 (Chapter 5)
Which of the following is an example of a noninsurance benefit or service that may be included in an individual health insurance policy as an optional provision?
- A) Waiver of premium if the insured becomes totally disabled.
- B) Double indemnity benefit for accidental death.
- C) Benefit paid if the insured is diagnosed with a specified critical illness.
- D) Access to a 24/7 nurse hotline for medical advice.
Show answer & explanation
Answer: D
Access to a 24/7 nurse hotline is a noninsurance service, often included as a value-added benefit in health insurance policies. Waiver of premium and double indemnity are insurance benefits tied to risk events. A benefit for a specified critical illness is also an insurance benefit. Optional provisions in health insurance policies may include noninsurance services like wellness programs or telehealth access, which are not tied to a loss event but provide direct value to the insured.
Question 4 (Chapter 5)
Which of the following is a characteristic of a nonrenewable (cancelable or term) individual health insurance policy?
- A) The insurer must renew the policy as long as premiums are paid, regardless of changes in the insured's health.
- B) The policy automatically renews each year unless the insurer gives notice of nonrenewal due to a change in risk.
- C) The policy guarantees renewal at the same premium rate for a fixed number of years.
- D) The insurer has the right to nonrenew or cancel the policy at any premium due date, subject to any applicable state notice requirements.
Show answer & explanation
Answer: D
A nonrenewable (also called cancelable or term) policy gives the insurer the right to decline to renew or cancel the policy at any premium due date, provided they follow state-mandated notice requirements. It does not guarantee renewal, nor does it require renewal based on premium payment. Option B describes a conditionally renewable policy, and Option C describes a guaranteed renewable policy for a term.
Question 5 (Chapter 5)
A Maryland resident is evaluating an individual health insurance policy that provides benefits only for losses resulting from accidental, external, and violent events, such as a fall or a car crash, but explicitly excludes coverage for illness or disease. Which peril is this policy designed to cover?
- A) Accidental injury
- B) Sickness
- C) Both accidental injury and sickness
- D) Neither accidental injury nor sickness
Show answer & explanation
Answer: A
Accidental injury is defined as bodily harm resulting from an unexpected, external, and violent event. A policy covering only such events, while excluding sickness, is an accident-only policy. Sickness refers to illness or disease not caused by injury. Therefore, the correct peril covered is accidental injury.
Question 6 (Chapter 5)
Under Maryland law, which of the following actions by a producer during the field underwriting process for an individual health insurance application is considered improper and potentially violates state regulations?
- A) Advising the applicant to omit a pre-existing condition from the application to avoid a higher premium or denial.
- B) Asking the applicant about their current medications and medical history to complete the application accurately.
- C) Informing the applicant about the insurer's underwriting requirements and the importance of truthful answers.
- D) Completing the application based on the applicant's verbal responses and submitting it for processing.
Show answer & explanation
Answer: A
Advising an applicant to conceal or omit material information, such as a pre-existing condition, constitutes misrepresentation and is a prohibited unfair trade practice under Maryland law. Producers must encourage full and honest disclosure. Asking about medical history, explaining underwriting requirements, and accurately completing the application based on verbal responses are all proper and ethical field underwriting activities.
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Practice Questions 7-12: Limited Policies, Replacement, Reinstatement and Advertising
Next come the lump-sum diagnosis policy, replacement and pre-existing conditions, the reinstatement provision, unfair advertising and two views of the nonrenewable policy.
Question 7 (Chapter 5)
A Maryland producer is discussing policy options with a client who wants coverage that pays a lump sum benefit upon diagnosis of a specific illness, such as a heart attack or stroke, regardless of actual medical expenses incurred. Which type of limited health insurance policy best fits this description?
- A) Accident-only policy
- B) Hospital indemnity policy
- C) Specified (dread) disease policy
- D) Critical illness policy
Show answer & explanation
Answer: D
A critical illness policy provides a lump-sum benefit upon the diagnosis of a specified serious illness, such as heart attack, stroke, or cancer, without requiring proof of actual expenses. While specified (dread) disease policies are similar, the term 'critical illness' is the modern designation used in the content outline for lump-sum benefits upon diagnosis of specific conditions. Accident-only covers injuries from accidents, and hospital indemnity pays fixed daily amounts for hospitalization. Therefore, the critical illness policy is the best match for a lump sum upon diagnosis of illness.
Question 8 (Chapter 5)
A Maryland resident is considering replacing their current individual health insurance policy with a new one. Which of the following statements about pre-existing condition exclusions in the replacement context is most accurate under Maryland law?
- A) The new policy can never exclude coverage for a pre-existing condition, regardless of when it was diagnosed.
- B) If the pre-existing condition was disclosed and accepted in the old policy, the new policy must cover it immediately without any exclusion period.
- C) Pre-existing condition exclusions are prohibited in all individual health insurance policies in Maryland, making replacement concerns irrelevant.
- D) The new policy may impose a pre-existing condition exclusion period, but it must give credit for any similar exclusion period satisfied under the old policy.
Show answer & explanation
Answer: D
When replacing individual health insurance, Maryland regulations (aligned with NAIC model rules) allow the new policy to impose a pre-existing condition exclusion period, but it must recognize and give credit for any exclusion period already satisfied under the previous policy. This prevents double exclusion periods. Option A is incorrect because pre-existing condition exclusions are permitted under certain conditions, so they are not categorically barred. Option B is incorrect because acceptance in the old policy does not guarantee immediate coverage in the new one without credit for prior exclusion time. Option C is incorrect because pre-existing condition exclusions are not prohibited outright in Maryland individual health insurance.
Question 9 (Chapter 5)
Under Maryland law, which of the following is a required uniform provision in an individual health insurance policy that allows the policy to be reinstated after lapse due to nonpayment of premiums?
- A) Reinstatement provision
- B) Grace period provision
- C) Entire contract provision
- D) Time limit on certain defenses provision
Show answer & explanation
Answer: A
The reinstatement provision is a required uniform provision that allows an insured to restore a lapsed policy by providing evidence of insurability and paying overdue premiums. The grace period allows late payment without lapse, the entire contract provision states the policy and application constitute the full agreement, and the time limit on defenses limits when the insurer can contest the policy—none address reinstatement after lapse.
Question 10 (Chapter 5)
Under Maryland insurance regulations, which of the following is an example of an unfair trade practice related to advertising individual health insurance policies?
- A) Using testimonials from actual policyholders who received benefits.
- B) Providing a brochure that clearly outlines the policy's benefits, limitations, and exclusions.
- C) Stating that the policy covers preventive care services without specifying limitations.
- D) Advertising that a policy is endorsed by the Maryland Life and Health Insurance Guaranty Corporation.
Show answer & explanation
Answer: D
Advertising that a policy is endorsed by the Maryland Life and Health Insurance Guaranty Corporation is prohibited because the Guaranty Corporation does not endorse policies; it only provides limited protection if an insurer becomes insolvent. Using actual testimonials is permissible if not misleading, providing clear policy details is required, and stating preventive care coverage is acceptable if accurate—though limitations should be disclosed if applicable.
Question 11 (Chapter 5)
Which of the following is a required uniform provision in an individual health insurance policy delivered in Maryland that specifies the timeframe within which an insured must notify the insurer of a claim after a loss occurs?
- A) Grace period provision
- B) Time limit on certain defenses provision
- C) Reinstatement provision
- D) Notice of claim provision
Show answer & explanation
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.
Question 12 (Chapter 5)
A Maryland producer is discussing renewability options with a client. Which statement accurately describes a nonrenewable (cancelable or term) individual health insurance policy?
- A) The insurer may cancel the policy only at the end of a specified term and only for nonpayment of premiums.
- B) The policy is guaranteed to be renewable at the option of the insured, regardless of health changes.
- C) The insurer may cancel the policy or refuse to renew it on any anniversary date or upon notice, subject to the policy terms.
- D) The insurer cannot increase premiums during the policy term unless the state insurance commissioner approves the increase.
Show answer & explanation
Answer: C
A nonrenewable (or cancelable/term) policy allows the insurer to terminate or decline renewal on notice, often at any premium due date or anniversary. Option A incorrectly restricts cancellation to term end and nonpayment. Option B describes guaranteed renewable. Option D is incorrect because while commissioner approval may be needed for increases, it is not the defining feature of nonrenewability.
Practice Questions 13-17: Underwriting Information and Limited Policies
The last five ask how an insurer uses a disclosed condition, what a medical release allows, which underwriting sources are permissible, the specified disease policy and the attending physician statement.
Question 13 (Chapter 5)
A Maryland producer is completing an application for an individual health insurance policy. The applicant discloses they are currently receiving treatment for a herniated disc. The producer should understand that this information will most likely be used by the insurer for which underwriting purpose?
- A) To determine if the applicant qualifies for a preferred risk classification based on excellent health.
- B) To assess whether the condition constitutes a pre-existing condition that may be subject to an exclusion or waiting period.
- C) To verify the applicant's eligibility for Medicare benefits.
- D) To calculate the applicant's premium based solely on age and gender, disregarding health status.
Show answer & explanation
Answer: B
Disclosure of a current medical condition like a herniated disc is primarily used by the insurer to assess whether it constitutes a pre-existing condition, which may be subject to an exclusion or waiting period under the policy. It is not used to determine preferred risk (which requires excellent health), verify Medicare eligibility, or calculate premiums based solely on age and gender.
Question 14 (Chapter 5)
A Maryland applicant for an individual health insurance policy is asked to sign an authorization for the release of medical records. Under state and federal law, which of the following statements is true regarding the use of this information by the insurer?
- A) The insurer may use genetic information obtained from the medical records to deny coverage or increase premiums.
- B) The insurer is prohibited from using any information in the medical records if it relates to a pre-existing condition.
- C) The insurer may use the medical records to assess risk and determine eligibility, but must comply with HIPAA privacy rules and Maryland's genetic information nondiscrimination laws.
- D) The medical records can only be used if the applicant is applying for a group health insurance policy, not an individual policy.
Show answer & explanation
Answer: C
Insurers may use medical records obtained through proper authorization to assess risk and determine eligibility for coverage. However, this use is subject to federal HIPAA privacy regulations and Maryland state laws that prohibit the use of genetic information in underwriting (e.g., denying coverage or increasing premiums based on genetic test results or family history). The insurer may consider pre-existing conditions, subject to state and federal limitations (like HIPAA portability rules). Medical records are used for both individual and group underwriting.
Question 15 (Chapter 5)
In the context of individual health insurance underwriting in Maryland, which of the following is a permissible source of underwriting information that an insurer may use to assess an applicant's risk?
- A) The applicant's credit score, without their knowledge or consent.
- B) An attending physician statement (APS) obtained with the applicant's written authorization.
- C) Genetic test results obtained from a direct-to-consumer testing company without the applicant's authorization.
- D) Information about the applicant's participation in a lawful occupation, used to deny coverage based on social status.
Show answer & explanation
Answer: B
An attending physician statement (APS) is a standard and permissible source of underwriting information that insurers may request, but only with the applicant's written authorization. Using credit scores without knowledge or consent is prohibited and not a standard underwriting source for health insurance in Maryland. Using genetic test results without authorization violates Maryland's genetic information privacy laws and federal GINA. Denying coverage based on participation in a lawful occupation due to social status constitutes unfair discrimination and is prohibited.
Question 16 (Chapter 5)
A Maryland resident purchases an individual health insurance policy that provides a lump-sum benefit upon diagnosis of a heart attack, regardless of actual medical expenses incurred. The policy does not cover any other illnesses or medical services. Which type of limited health insurance policy does this describe?
- A) Specified (dread) disease policy
- B) Accident-only policy
- C) Hospital indemnity policy
- D) Credit disability policy
Show answer & explanation
Answer: A
A specified disease policy, also known as a dread disease policy, provides benefits only for specifically named illnesses such as heart attack, stroke, or cancer, typically as a lump-sum payment regardless of actual expenses. Accident-only policies cover injuries from accidents, not sickness. Hospital indemnity policies pay a fixed daily amount for hospitalization. Credit disability policies cover loan payments if the insured becomes disabled. Therefore, the described policy matches a specified disease policy.
Question 17 (Chapter 5)
A Maryland resident applies for an individual health insurance policy. During underwriting, the insurer obtains an attending physician statement (APS) from the applicant's doctor. What is the primary purpose of this report in the underwriting process?
- A) To verify the applicant's income and employment status for disability income underwriting.
- B) To obtain detailed medical information about the applicant's health history, diagnoses, and treatment to assess risk.
- C) To check the applicant's prescription drug usage history through a pharmacy database.
- D) To confirm the applicant's participation in hazardous hobbies or occupations.
Show answer & explanation
Answer: B
An attending physician statement (APS) is a report from the applicant's treating physician that provides detailed medical information, including diagnoses, treatment history, prognosis, and current health status. This helps the insurer assess the medical risk associated with the applicant. Option A is incorrect because income verification is not the purpose of an APS; it is used for medical underwriting. Option C is incorrect because prescription history is typically obtained from pharmacy benefit managers or prescription drug monitoring programs, not an APS. Option D is incorrect because information about hazardous hobbies or occupations is gathered from the application or producer report, not an APS.
The Mistakes That Cost Marks
Mixing up the renewability classes. Noncancelable: no cancellation and no premium increase. Guaranteed renewable: renewal guaranteed, class premium increases allowed. Conditionally renewable: renewal depends on stated conditions. Cancelable or nonrenewable: the insurer may decline at a premium due date or on notice.
Matching the limited policy by the wrong feature. Accident-only covers accidental injury and not sickness. A specified disease policy covers only named illnesses. A lump sum on diagnosis is the clue to read.
Letting the producer complete the application alone. The applicant answers and signs. The producer explains and records, and never advises omitting a condition.
Using the wrong underwriting source. The attending physician statement gives detailed medical history and is obtained with written authorization. It does not verify income or hobbies.
Confusing reinstatement with other provisions. Reinstatement restores a lapsed policy, usually with evidence of insurability and overdue premiums.
Treating a guaranty association as an endorser. The Life and Health Insurance Guaranty Corporation provides limited protection if an insurer fails. A producer cannot advertise it as endorsing a policy.
Your Next Step
Missed questions point to the outline section to revisit. When you are ready, preview the Maryland Life & Health course for the audio lessons and the full question bank, or go back to the free Maryland practice question hub for the other topic sets.
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