17 Free Maryland Life & Health Practice Questions: Life Policies, Provisions, Options and Riders (2026)
How to Use This Life Policies, Provisions, Options and Riders Set
This set covers two sections of the Maryland Life outline: Life Insurance Policies (section 4.0, 10% of the Life exam, 8 items) and Policy Provisions, Options and Riders (section 5.0, 14%, 11 items). On the Combo, they are 5% (7 items) and 8% (10 items).
The questions cover term variations, joint life, the common disaster clause, riders, universal life and variable universal life mechanics, the standard provisions such as incontestability, suicide and entire contract, and the group life conversion privilege. All 17 come with answers and explanations.
Practice Questions 1-6: Policy Types, Riders and Beneficiary Clauses
These questions ask you to match a need to a policy type or rider: increasing and annual renewable term, first-to-die coverage, the common disaster clause, and facility of payment.
Question 1 (Chapter 3)
A 35-year-old purchases a $100,000 increasing term life insurance policy with a 5% annual increase in the death benefit. If the insured dies in year 10, what is the approximate death benefit payable?
- A) $100,000
- B) $125,000
- C) $150,000
- D) $163,000
Show answer & explanation
Answer: D
The death benefit increases by 5% compounded annually. After 10 years: $100,000 × (1.05)^10 ≈ $100,000 × 1.6289 = $162,890, which rounds to $163,000. Option A is the initial benefit. Option B is approximately the benefit after 5 years. Option C is approximately the benefit after 8 years.
Question 2 (Chapter 3)
Which of the following statements is true regarding joint life (first-to-die) life insurance?
- A) The death benefit is paid when the second insured dies.
- B) Premiums are based on the younger insured's age only.
- C) It is primarily used to fund buy-sell agreements between business partners.
- D) The death benefit is paid upon the death of the first insured to die.
Show answer & explanation
Answer: D
Joint life (first-to-die) insurance pays the death benefit when the first insured dies, after which the policy terminates. Option A describes survivorship (second-to-die) life insurance. Option B is incorrect because premiums are based on the joint ages and health of both insureds. Option C is more characteristic of survivorship life for estate tax funding, though first-to-die can be used for income replacement.
Question 3 (Chapter 3)
A policyowner wants to ensure that if they die simultaneously with their spouse in a common accident, the life insurance proceeds will go to their children rather than to the spouse's estate. Which provision should they include in the policy?
- A) Revocable beneficiary designation
- B) Common disaster clause
- C) Irrevocable beneficiary designation
- D) Facility of payment clause
Show answer & explanation
Answer: B
A common disaster clause specifies that if the insured and primary beneficiary die in the same accident and it cannot be determined who survived longer, the proceeds are paid as if the beneficiary predeceased the insured (e.g., to contingent beneficiaries). This prevents the proceeds from going to the beneficiary's estate. Options A and B relate to beneficiary change rights. Option D allows the insurer to pay a third party if the beneficiary cannot be located.
Question 4 (Chapter 3)
Which rider provides a monthly income benefit if the insured becomes totally disabled and is unable to work?
- A) Disability income benefit rider
- B) Waiver of premium rider
- C) Accelerated benefit rider for chronic illness
- D) Children's term rider
Show answer & explanation
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.
Question 5 (Chapter 3)
Which of the following statements accurately describes a characteristic of annual renewable term (ART) life insurance?
- A) The death benefit decreases each year while the premium remains level.
- B) The premium remains level for the entire term, typically 10, 20, or 30 years.
- C) The policy renews each year without evidence of insurability, and the premium increases annually based on the insured's attained age.
- D) The policy includes a cash value component that grows tax-deferred over time.
Show answer & explanation
Answer: C
Annual renewable term (ART) insurance is a type of term life insurance where the policy is renewed annually. The death benefit remains level, but the premium increases each year as the insured gets older, reflecting the increased risk of death. No evidence of insurability is required for renewal. Option A describes decreasing term, not ART. Option B describes level term insurance. Option D is incorrect because term life insurance, including ART, does not build cash value.
Question 6 (Chapter 3)
Which of the following is true regarding the facility of payment clause in a life insurance policy?
- A) It allows the insurer to pay the death benefit to a funeral home to cover burial expenses, up to a specified limit.
- B) It requires the policyowner to name both a primary and a contingent beneficiary when the policy is issued.
- C) It gives the insurer the right to pay the death benefit to a relative or person connected by blood or marriage to the insured if no beneficiary is living or can be found.
- D) It permits the beneficiary to assign the death benefit proceeds to a third party after the insured's death.
Show answer & explanation
Answer: C
The facility of payment clause (also called the beneficiary facility clause) protects the insurer if no designated beneficiary can be found or is living at the time of the insured's death. It allows the insurer to make a good-faith payment to a relative or person connected by blood or marriage to the insured, thereby discharging the insurer's liability. Option A describes a feature sometimes found in funeral insurance or pre-need arrangements, not the standard facility of payment clause. Option B is incorrect because naming a contingent beneficiary is optional, not required by this clause. Option D describes an assignment of proceeds, which is governed by the assignment provision, not the facility of payment clause.
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Practice Questions 7-12: Incontestability, Surrender, Backdating and Suicide
The next six test the standard provisions and the money mechanics: what incontestability stops, what surrender can cost, what backdating means, and how the suicide clause limits the benefit.
Question 7 (Chapter 3)
Which of the following statements is true regarding the incontestability clause in a life insurance policy?
- A) The insurer can contest the validity of the policy based on any misrepresentation in the application, even after the policy has been in force for two years.
- B) The incontestability period begins when the first premium is paid and lasts for five years.
- C) After the policy has been in force for two years during the insured's lifetime, the insurer cannot contest the policy except for nonpayment of premiums.
- D) The incontestability clause prevents the insurer from denying a claim based on the insured's suicide, regardless of when it occurs.
Show answer & explanation
Answer: C
The incontestability clause states that after a life insurance policy has been in force for a specified period (typically two years) during the insured's lifetime, the insurer cannot contest the policy or deny a claim based on misstatements or omissions in the application, except in cases of fraud or nonpayment of premiums. The period is generally two years, not five. The clause does not apply to suicide claims; suicide is governed by a separate exclusion (usually the suicide clause, which typically applies for the first two years). Option A is incorrect because the insurer cannot contest for misrepresentation after the incontestability period. Option B is incorrect regarding the duration. Option D is incorrect because the incontestability clause does not override the suicide exclusion.
Question 8 (Chapter 3)
A 40-year-old purchases a $500,000 variable universal life insurance policy. After 5 years, the cash value has grown to $25,000 due to positive investment performance. The policyowner decides to surrender the policy for its cash value. Which of the following statements is true regarding this surrender?
- A) The policyowner will receive exactly $25,000, as the cash value is guaranteed and not subject to surrender charges.
- B) The surrender is not permitted until the policy has been in force for at least 10 years.
- C) The policyowner must pay income tax on the full $25,000 received, regardless of premiums paid.
- D) The amount received may be less than $25,000 due to surrender charges that typically decline over the policy's early years.
Show answer & explanation
Answer: D
D is correct because variable universal life policies often impose surrender charges, especially in the early policy years, which can reduce the amount received below the accumulated cash value. A is incorrect because cash value in variable universal life is not guaranteed, and surrender charges commonly apply. B is incorrect because there is no universal rule requiring 10 years in force before surrender; surrender is typically allowed anytime after the free look period, though charges may apply. C is incorrect because only the gain (the amount received in excess of total premiums paid) is taxable as ordinary income, not the entire cash surrender value.
Question 9 (Chapter 3)
A 45-year-old purchases a $400,000 universal life insurance policy with a level death benefit option. After 8 years, the policyowner wants to increase the death benefit to $500,000. Which of the following is required to accomplish this increase?
- A) No additional underwriting is needed; the increase can be made at any time by paying higher premiums.
- B) The increase is automatic upon the policy's anniversary date if the cash value exceeds a certain threshold.
- C) The death benefit cannot be increased under a universal life policy; a new policy must be purchased.
- D) The policyowner must provide evidence of insurability, typically through a medical exam, to qualify for the increase.
Show answer & explanation
Answer: D
D is correct because increasing the death benefit on a universal life policy adds to the insurer's risk, so evidence of insurability is generally required. A is incorrect because underwriting is typically required for an increase. B is incorrect because increases are not automatic based on cash value or anniversary date. C is incorrect because death benefit increases are permitted on universal life policies, subject to underwriting.
Question 10 (Chapter 3)
A 60-year-old purchases a single premium immediate annuity with a life-only payout option. Which of the following statements is true regarding this annuity?
- A) The annuity provides a death benefit to a named beneficiary upon the annuitant's death.
- B) The annuitant can surrender the annuity at any time for its cash value without surrender charges.
- C) Payments continue for the lifetime of the annuitant and cease upon death, with no residual value.
- D) The payments are fixed and cannot be adjusted for inflation.
Show answer & explanation
Answer: C
C is correct because a life-only immediate annuity pays income for the annuitant's lifetime only, ceasing at death with no residual value paid to anyone. A is incorrect because a life-only option does not include a death benefit. B is incorrect because immediate annuities are income contracts and are generally not surrenderable for a lump-sum cash value. D is not the defining characteristic of this payout option; while payments under many immediate annuities are fixed, the key feature tested here is that payments stop at death with nothing left over.
Question 11 (Chapter 3)
Under a life insurance policy, which of the following actions is most likely to violate the 'prohibited backdating' provision?
- A) Setting the policy effective date to an earlier date to make the insured's age at issue younger for premium calculation purposes.
- B) Setting the policy effective date to match the date the application was signed.
- C) Reinstating a lapsed policy with an effective date after the lapse period.
- D) Using the date of medical underwriting completion as the policy effective date.
Show answer & explanation
Answer: A
A is correct because prohibited backdating refers to setting the policy effective date to an earlier date than the actual issuance date to achieve a younger age (and lower premium) than the insured's true age at the time of application. B is incorrect as matching the application date is standard and not backdating. C is incorrect as reinstatement after a lapse uses a date after the lapse, which is permitted. D is incorrect as using the underwriting completion date is acceptable if it reflects the actual approval timeline.
Question 12 (Chapter 3)
An insured purchased a life insurance policy in Maryland on January 1, 2023. On June 1, 2024, the insured commits suicide. What is the insurer's obligation regarding the death benefit?
- A) The insurer must pay the full death benefit because the policy was in force for over one year.
- B) The insurer is only obligated to return the premiums paid, minus any loans.
- C) The insurer must pay 50% of the death benefit under Maryland's partial suicide clause.
- D) The insurer may deny the claim and keep all premiums paid due to the intentional nature of the act.
Show answer & explanation
Answer: B
The standard suicide clause allows insurers to exclude coverage for suicide if it occurs within a specified period (commonly two years) of the policy issue date. If the insured commits suicide within this period, the insurer's liability is limited to a return of the premiums paid. Since the event occurred 17 months after issuance, the full benefit is not payable.
Practice Questions 13-17: Group Conversion and Contract Provisions
The last five cover the group life conversion privilege, why a producer's verbal promise cannot change the contract, and interest on delayed proceeds.
Question 13 (Chapter 3)
A Maryland employee is covered under a group life insurance plan. The employee resigns to start their own business. Under the group life conversion privilege, how long does the employee typically have to convert their group coverage to an individual policy?
- A) 14 days
- B) 31 days
- C) 60 days
- D) 90 days
Show answer & explanation
Answer: B
Group life insurance policies must include a conversion privilege. This allows an individual whose coverage ceases due to termination of employment to convert to an individual permanent life policy within a limited window — typically 31 days — without providing evidence of insurability.
Question 14 (Chapter 3)
During a sales presentation, a producer tells a client that the insurer will waive the suicide clause for this specific policy. The policy is issued with the standard 2-year suicide exclusion. If the insured commits suicide 6 months later, why would the claim be denied despite the producer's statement?
- A) The Incontestability provision allows the insurer to ignore verbal promises.
- B) The Entire Contract provision states that only the policy and the attached application constitute the agreement.
- C) The Misstatement of Age provision overrides any verbal agreements.
- D) The Free Look period had already expired, making the producer's statement void.
Show answer & explanation
Answer: B
The Entire Contract provision stipulates that the policy, including the application and any riders, constitutes the entire agreement. No outside statements or verbal promises by a producer can change the terms of the written contract. Only an executive officer of the insurer can typically modify the contract in writing.
Question 15 (Chapter 3)
In Maryland, if a life insurance company delays paying death proceeds after receiving proof of the insured's death, what is it generally required to do under the policy's interest-on-proceeds provision?
- A) They must double the death benefit as a penalty.
- B) They must pay interest on the proceeds from the date of the insured's death.
- C) They are required to forfeit their Certificate of Authority.
- D) They must pay the proceeds to the Maryland Life and Health Guaranty Corporation instead.
Show answer & explanation
Answer: B
Life insurance policies generally include an interest-on-proceeds provision: if an insurer does not pay a death claim within the timeframe specified in the policy, it is required to pay interest on the proceeds, typically accruing from the date of the insured's death until the claim is settled.
Question 16 (Chapter 3)
Under a group life insurance plan provided by an employer, an employee terminates employment and wishes to convert their group coverage to an individual policy. Which of the following is true regarding the conversion privilege?
- A) The employee has 31 days from the date of termination to apply for conversion.
- B) The employee must provide evidence of insurability to qualify for conversion.
- C) The converted individual policy must be of the same type and face amount as the group coverage.
- D) The individual policy is issued at a premium rate based on the group's experience.
Show answer & explanation
Answer: A
Under standard group life insurance provisions and Maryland practice, the conversion privilege allows the employee to obtain an individual policy without evidence of insurability, but they must apply and pay the first premium within a limited window, typically 31 days after termination. The converted policy is usually permanent (e.g., whole life) but not necessarily the same type or face amount as the group term coverage, and premiums are based on the individual's attained age, not group experience.
Question 17 (Chapter 3)
Under a life insurance policy, which of the following is true regarding the 'entire contract' provision?
- A) It allows the insurer to modify the policy terms after issuance without the policyowner's consent.
- B) It states that the policy and any attached application constitute the entire agreement between the parties.
- C) It requires the policyowner to notify the insurer of any changes in health status.
- D) It permits the beneficiary to assign the policy proceeds to a third party.
Show answer & explanation
Answer: B
The entire contract provision states that the life insurance policy and the application (if attached) constitute the full agreement between the insurer and policyowner. It does not allow the insurer to modify terms unilaterally (option A), does not require health status notifications (option C), and does not pertain to beneficiary assignments (option D).
The Mistakes That Cost Marks
Stretching incontestability. It limits the insurer's right to contest the policy after the stated period. It does not override the suicide clause, which is a separate provision.
Mixing up the term types. Annual renewable term renews without evidence of insurability and the premium rises with age. Level term keeps the premium level for the term. Decreasing term lowers the benefit.
Counting increasing term from the wrong year. Compounding a rate over the years gives a number larger than simple addition. Read what the question asks about the year of death.
Believing a verbal promise. The entire contract provision says the policy and the attached application are the agreement. A producer cannot waive a clause by saying so.
Confusing the group conversion rules. Conversion does not require evidence of insurability, but the application window is short and the premium is based on the individual's age, not the group's experience.
Reading a suicide-clause scenario by the headline. Check the timing against the policy's clause period, then check what the insurer owes inside that period.
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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