MD Life & Health common mistakes
MD Life & Health · Understand the traps and how to avoid them.
On a scenario where a producer moves a client from an existing whole life policy into a new one, the candidate selects 'twisting' or 'unfair trade practice' simply because a replacement occurred.
Study material stresses replacement rules, so candidates pattern-match 'replacement = violation' and stop reading the stem for the deceptive element.
What to do instead
Ask two questions before choosing: (1) was a material misrepresentation or an incomplete comparison used to induce the client to lapse the old policy, and (2) was the required replacement notice/disclosure given? A replacement with full disclosure is lawful; twisting requires the deceptive inducement.
Treating premiums collected from clients as ordinary business cash flow - depositing them into the agency's general operating account or using them for expenses before remitting to the insurer.
Premium handling feels like routine bookkeeping, so candidates underestimate that the exam frames it as a fiduciary duty with license consequences.
What to do instead
Memorize the framing: premiums are held in a fiduciary capacity, must be kept separate from personal and general business funds (no commingling), and must be remitted promptly. Mishandling is grounds for license discipline by the regulator, not just a civil billing dispute.
Assuming the insured controls the policy - answering that the insured must sign a beneficiary change, or that the insured may take a policy loan or surrender the contract.
Everyday language blurs 'the person whose life is insured' with 'the person who owns the policy,' and stems deliberately name three different parties (owner, insured, beneficiary).
What to do instead
Before reading the options, label each party in the stem as O, I, or B. Only the owner holds contract rights: naming beneficiaries, loans, surrender, assignment, and converting the policy. The insured's distinctive roles are consent/underwriting and insurability.
Judging insurable interest at the time of death or claim rather than at application, or concluding a policy is void because the relationship later ended (divorce, job change, business sale).
Property and health coverage is often evaluated at time of loss, so candidates carry that timing rule into life insurance questions.
What to do instead
Drill the rule: life insurance insurable interest is tested only at application/issue. If it existed then and the arrangement was not a stranger-originated (STOLI) scheme, the policy stays valid even if the relationship later dissolves.
Choosing 'claim denied' whenever a death occurs early or the application contained a misstatement - e.g., denying a claim in policy year 3 for a material misstatement, or denying for suicide in year 5.
The incontestability and suicide clauses feel like blanket fraud defenses, so candidates apply them without setting the time limits.
What to do instead
Set the clocks every time: incontestability (typically two years) bars rescission for misstatement once it expires, so the insurer pays; the suicide exclusion (typically two years) limits the insurer to returning premiums if death occurs inside the window; a misstatement of age or sex never voids the contract, it adjusts the benefit; nonpayment of premium is not covered by incontestability.
Distributing proceeds under the wrong rule - applying per capita where the stem says per stirpes (or vice versa) - or ignoring that a named beneficiary designation outranks the will.
Candidates draw the family tree but never apply the specific distribution term named in the stem, and they default to 'the will controls' from general estate intuition.
What to do instead
Write 'stirpes = the dead beneficiary's share splits among that branch' versus 'capita = all surviving named persons split equally,' then physically trace the shares. Also state the hierarchy aloud: named beneficiary > estate by default > state intestacy rules; a will cannot override a beneficiary designation.
Confusing riders - treating waiver of premium as a disability income payout, treating an accelerated death benefit as long-term care insurance, or treating a guaranteed insurability option as a guarantee that the existing policy's premium will never rise.
Rider names overlap with standalone products, and study time is usually spent on the base policy rather than the riders tested at the margins.
What to do instead
Build a one-line card for each rider keyed to what it pays and when: waiver of premium waives premiums during qualifying disability (policy stays in force); disability income rider pays the insured cash; accidental death benefit adds to the death benefit only for accidental death; accelerated death benefit advances the policy's own death benefit on a qualifying event; guaranteed insurability lets the owner buy additional coverage later without new evidence of insurability.
Applying life insurance logic to annuities - assuming a death benefit is always payable, treating a surrender charge and a market value adjustment as the same charge, or forgetting that annuitization generally cannot be reversed.
Annuities invert the mortality risk and contain two distinct phases, and candidates often reach the annuity unit last and skim it.
What to do instead
Draw two columns, accumulation and payout. Accumulation: the owner controls the contract; surrender charges and (on fixed contracts) market value adjustments may apply; a death benefit exists only if the contract provides one. Payout: the insurer now owns the funds, the payment amount depends on the option elected, and the election is generally irrevocable. Separately tag qualified contracts (IRA/403(b), all pre-tax, no exclusion ratio) versus nonqualified contracts (exclusion ratio applies to the investment-in-the-contract portion).
Mixing up deductible, coinsurance, copay, and out-of-pocket maximum - saying copays reduce the deductible, or that coinsurance begins before the deductible is satisfied.
Everyday usage of 'copay' and 'deductible' is loose, but exam items use the terms precisely and in a fixed payment order.
What to do instead
Memorize the order of payment: premium, then deductible, then coinsurance or copay, then the out-of-pocket maximum. Note the distinction the exam tests: fixed-dollar copays generally do not reduce the deductible, while coinsurance amounts do count toward the out-of-pocket maximum.
Studying only generic national content and guessing on Maryland items - for example, assuming the license by itself authorizes soliciting for a carrier, or that continuing education is optional after the first renewal.
Most study material is written to national model standards, so Maryland's added licensing, appointment, CE, and market-conduct rules get skipped as 'details.'
What to do instead
Build a one-page Maryland sheet: the Maryland Insurance Administration is the regulator that licenses producers, handles complaints, and imposes discipline; a license must be followed by appointment/notification by the insurer before the producer solicits; CE must be completed within each renewal cycle (Maryland requires 24 credit hours per two-year term, including at least 3 hours of ethics) or the license cannot be renewed. Verify any figure you plan to rely on against the current Maryland Insurance Article and MIA bulletin before test day.