Maryland Life and Health Insurance License Practice Exam

Which of these factors is NOT taken into account when determining an applicant's life insurance needs?

1. Income level

2. Health status

3. Age of applicant

4. Preference for certain hobbies

The correct answer is: Preference for certain hobbies

When evaluating an applicant's life insurance needs, various factors are critically examined to assess the individual's risk profile and the amount of coverage required. Income level is fundamental because it helps determine the financial obligations and future needs that the policy must cover in the event of the insured’s death. Health status is also significant, as it influences the applicant’s life expectancy and overall risk to the insurer. Age plays a crucial role as well, as it typically correlates with life expectancy and the timing of when benefits might be needed. Preference for certain hobbies, while it can provide insight into potential risk factors, is generally not a primary factor in calculating the overall life insurance needs of an applicant. This consideration may affect underwriting decisions in terms of risk assessment, particularly if the hobbies are deemed hazardous, but not directly how much coverage is needed. Therefore, while hobbies might influence underwriting and premiums, they are not a fundamental element in determining the primary life insurance needs of an individual.