State RegulationsMI specificDifficulty 2/5
An individual who has never held an insurance license negotiates the sale of a life insurance policy in Michigan and asks the appointing insurer to pay her a commission. Which statement is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
M.C.L. 500.1240 makes it unlawful for an insurer or producer to pay, and for any person to accept, a commission or service fee for selling, soliciting, or negotiating insurance when licensure is required but not held. Michigan law also bars premium-based referral fees under M.C.L. 500.1207, so relabeling the payment does not cure the violation.
Why the other options are wrong
- B) The applicant's consent is irrelevant; the prohibition protects the licensing system and applies regardless of whether the client objects.
- C) Relabeling a sales commission as a referral fee does not avoid M.C.L. 500.1240, and referral-fee prohibitions under M.C.L. 500.1207 block that workaround.
- D) Passing the examination is not enough; the commission for the unlicensed sale is unlawful, and passing an exam does not retroactively create a license.
Memory hook
No license, no commission — for the payer or the payee.