TEXAS LIFE INSURANCE GLOSSARY EXAM QUESTIONS

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TEXAS LIFE INSURANCE GLOSSARY EXAM QUESTIONS

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -100 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Limited Pay Life

Answer:

A Permanent Whole Life insurance policy on which premiums are paid for a specified number of years or to a specified age of the insured. Protection continues for the entire life of the insured. LP65 and 20-Pay Life are examples. A Life Paid up at age 65 is paid up at age 65, but the cash value does not equal the face amount of the policy until age 100 when the policy reaches maturity. Limited Pay Whole Life is more expensive than traditional Whole Life since the premiums must be paid within a shorter period of time.

Question 2: Annuity

Answer:

An agreement by an insurer to make periodic payments that continue during the lifetime of the annuitant(s) or for a specified period. Annuities are considered to be the opposite of life insurance, since annuities pay while your alive and life insurance pays when you die. Life insurance proceeds create an estate, while annuities are used to liquidate an estate over a period of time. All annuities are insurance products and a life insurance license is required.

Question 3: Brokerage

Answer:

A Producer who represents an insured in the solicitation, negotiation, or procurement of contracts of insurance. For example, you might represent only one insurer as a Producer. If that insurer declines to write coverage for your client, you might try to .broker. the business elsewhere in an effort to better serve your customer.

Question 4: Cash Surrender Value

Answer:

The accumulated, guaranteed cash value in a Whole Life or Endowment policy at any given point in time. Most contracts do not develop a cash value until after the 3rd year. On Whole Life, the cash value will equal the face amount of the policy at age 100. Synonymous with Cash Value.

Question 5: Hazard

Answer:

Any factor tending to make a policyholder a less-desirable risk for the insuring company. A hazard is something that increases the risk. Risk is defined as the chance of loss. For example, smoking is a hazard on both Life & Health insurance.

Question 6: Insured

Answer:

The party to an insurance contract to whom, or on behalf of, the insurance company agrees to indemnify for losses, provide benefits, or render services. In Prepaid Hospital Service plans (HMOs), the insured is called the subscriber.

Question 7: Group Contract

Answer:

A contract of insurance made with an employer or other entity that covers a group of people identified as individuals by reference to their relationship to the entity. A Group contract may be Life insurance, Health insurance, or an Annuity. Group insurance is usually less expensive than individual coverages.Remember, you cannot form a group just to buy insurance. It must exist for some other purpose.

Question 8: Exclusions

Answer:

Causes or conditions listed in the policy that are not covered and for which no benefits are payable. For example, in most states, suicide is excluded on a Life policy for the first 2 years. On Health insurance, intentional self inflicted injury is never covered.

Question 9: Attained Age

Answer:

The present or current age of the insured. Upon conversion, premiums are based on the current age of the insured.

Question 10: Indemnity

Answer:

Insurance is designed to restore the policyholder to the same financial condition enjoyed prior to a loss.The intent is to cover the amount of the actual loss only and to avoid paying amounts that allow an insured to profit from a loss situation. This is known as the Principle of Indemnity. Health insurance follows this concept, but Life insurance doesn't. All Life policies pay in addition to each other!

Question 11: Credit Insurance

Answer:

Insurance on a debtor in favor of a lender, intended to pay off a loan or the balance due thereon if the insured dies or is disabled. Credit Life is a type of decreasing term insurance and the face amount of the policy is limited to the amount of the loan. Generally not used as Mortgage Protection Insurance.

Question 12: Face Amount

Answer:

The amount indicated on the face of a Life policy that will be paid at death or when a Whole Life policy matures at age 100. Also known as the Death Benefit or the policy limit. Not taxable.

Question 13: Effective Date

Answer:

The date on which an insurance policy goes into effect and from which protection is furnished.

Question 14: Level Premium Insurance

Answer:

Life insurance, the premium for which remains at the same level (amount) throughout the life of the policy. For example, on traditional Whole Life, the premium is based upon the insured's original age and it will never change.

Question 15: Adverse Underwriting Decisions, Consumer Rights

Answer:

Under the Fair Credit Reporting Act, when an adverse underwriting decision is made, the insurer must provide the applicant or policyholder with specific written reasons for the decision, or advise the individual that specific reasons are available upon written request. Upon receipt of the written request, the insurer must furnish specific reasons for the adverse decision and the names and addresses of the sources that provided the information.

Question 16: Convertible Term Insurance

Answer:

A Term Life policy that can be converted any time to a permanent type of coverage without proof of insurability. Conversion premiums are based on current age and coverage cannot be increased. Most Term is convertible, but not all. Most Group insurance (which is usually Annual Renewable Term) is convertible by law during its 31 day grace period.

Question 17: Extended Term Option

Answer:

A life-insurance non-forfeiture option under which the insured uses the policy.s cash-value to purchase one-year Term insurance in an amount equal to the original policy face amount. Although the policy holder could select the Extended Term Option at any time, if the policy lapses and no other non-forfeiture option has been selected, the policy will automatically go into Extended Term. Remember, there are 3 non-forfeiture options: Cash Surrender, Reduced Paid Up and Extended Term.

Question 18: Foreign Company

Answer:

An insurer organized under laws of a state other than the one in which the insurance is written. For example, a company that is domestic to Illinois would be considered to be "foreign" in all other states

Question 19: Legal Reserve

Answer:

The amount required as a reserve, to pay claims and benefits, as prescribed by state law as administered by the Insurance Commissioner. Insurance companies must file annual financial reports with the Commissioner proving their "solvency".

Question 20: Cash Dividend Option

Answer:

A dividend option under which the policyholder receives the dividends in cash. Not subject to tax. Mutual insurers issue .participating. policies, which might pay dividends, but they are not guaranteed.

Question 21: Consideration Clause

Answer:

A clause in a Life policy specifying the premium due for the insurance protection and the frequency of payment (also called Mode). The more frequent the Mode of Payment, the higher the cost, since most insurers charge service fees for budget payments. The cheapest Mode is annual.