LIFE HEALTH INSURANCE KEY TERMS EXAM QUESTIONS

PDF Download LIFE & HEALTH INSURANCE KEY TERMS EXAM QUESTIONS Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -100 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Pure Risk

Answer:

The chance of loss without any chance of gain. (Insurable)

Question 2: Mortality Tables

Answer:

Life insurance mortality tables are based upon people and time. A 60 year old male has a higher mortality rate than a 60 year old female.

Question 3: Adjustable Whole Life Policy

Answer:

May be suitable for someone with fluctuating income. Adjusting the premium will affect the face amount, and vice versa.

Question 4: Variable Whole Life

Answer:

Allows the insured to self-direct the cash value investment. Variable products have no guarantees and are not backed by the guaranty fund. Investing in variable products is considered a hedge against inflation. An agent must be registered with FINRA in order to sell a variable product.

Question 5: Risk

Answer:

The chance of loss. (Speculative or Pure Risk)

Question 6: Standard Risk

Answer:

A standard risk is one with an average life span. Most applicants are a standard risk.

Question 7: Joint Life Policy

Answer:

Pays only when the first insured dies. A joint and survivor life policy pays only when the second insured dies.

Question 8: The law of large numbers

Answer:

Allows insurers to predict claims more accurately. Applies to groups of people, not individuals. The more people in the group, the more accurate the predictions are.

Question 9: Stock Redemption Plan

Answer:

An agreement whereby a corporation agrees to buy back the stock of a deceased shareholder.

Question 10: Reciprocal Insurer

Answer:

An unincorporated association of individuals who insure each other.

Question 11: Hazard

Answer:

Something that increases the chance of loss. The presence of a physical hazard increases the chance of loss occurring.

Question 12: Universal Life Insurance Policy

Answer:

Different from whole life because it has a premium that is flexible. Permit their owners to take partial surrenders. Also known as interest sensitive whole life. Universal life is a combination 1-year renewable term and a cash value account. Offers flexible premiums and a minimum guaranteed rate of return.Loans are allowed on this type of policy.

Question 13: Insurance Contracts

Answer:

Because insurance contracts are contracts of adhesion, policy ambiguities always favor the insured.

Question 14: Binding Authority

Answer:

A producer's binding authority (if any) is expressed (written down) in the producer's contract with the insurer the producer represents.

Question 15: C-O-A-L

Answer:

The elements of a legal contract can be remembered by this acronym. (Consideration, Offer, Acceptance, Legal purpose & Legal capacity)

Question 16: Variable Life

Answer:

A policy that invests its cash values in equities.

Question 17: Concealment

Answer:

Defined as failure to disclose a material fact.

Question 18: Contributory Group Life Insurance

Answer:

75% eligible employees must enroll.

Question 19: Business Continuation

Answer:

A policy that provides for business continuation in the event that a business partner dies is based upon a cross-purchase buy/sell agreement.

Question 20: Owner's Rights

Answer:

The owner's rights section of a life policy states who has the right to change the beneficiary, who can take a loan, and who can take cash surrender.

Question 21: Estate Conservation

Answer:

When life insurance is used to pay estate taxes.

Question 22: Stock Redemption

Answer:

A corporation may buy a policy on a shareholder to provide for stock redemption in the event of the shareholders death.

Question 23: Single Premium Policy

Answer:

May buy a policy that is paid up for life. Has an immediate cash value.

Question 24: Life Insurance Grace Period

Answer:

Ordinary life insurance has a grace period of 30 days. A life insurance policy provision that allows coverage to continue even if the premium is not paid on time is known as the grace period. If a terminated employee dies within the grace period of his or her employer provided group life without converting, the full death benefit will be pad to the beneficiary. When an insured dies in the grace period without paying the premium due, the face amount will be paid to the beneficiary, less the overdue premium.

Question 25: Group Life Insurance

Answer:

The employees receive a certificate of insurance that summarizes coverage and lists the employee's beneficiary. The policyowner, usually an employer, is issued the master policy. The employer may require an employee to pay the premium for dependent's coverage. A group cannot be formed just to buy insurance. Participation requirements help to avoid adverse selection. Conversion from a group life policy to an individual policy when employment is terminated is permitted for 31 days, regardless of health.

Question 26: Noncontributory Group Life Plan

Answer:

(Employer pays total premium), 100% of all eligible employees must participate. Individual policies are usually more expensive than group.