Insurance Vocabulary Flashcards

Questions and Answers

What can an individual do with a $200,000 convertible term life insurance policy?

Convert to a whole life policy for the same face amount without proof of insurability.

Which of the following would be an example of policy replacement?

A policy is converted to a permanent policy.

A policy has an increased death benefit.

A policy has a reduced premium.

A policy is reissued with a reduction in cash value. (correct)

What are cash value guarantees in a whole life policy called?

Nonforfeiture values.

Which settlement option should a policyowner select to guarantee income for both beneficiaries for life?

Joint and Survivor. Signup and view all the answers

Which act stated that the federal government would not regulate insurance as long as the states did an adequate job of regulating the industry?

McCarran-Ferguson Act. Signup and view all the answers

Which information needs to be included on an application for life insurance?

Medical history. Signup and view all the answers

An applicant for surplus lines authority must do all of the following EXCEPT?

Possess a certificate of authority in this state. Signup and view all the answers

Which of the following policies would NOT offer a policy loan option?

Term life. Signup and view all the answers

Which dividend option will increase the death benefit?

Paid-up additions. Signup and view all the answers

When must the policy summary be given to the policyowner if not provided during application?

When the policy is delivered. Signup and view all the answers

Who could most likely be issued a resident producer license?

Sally, who lives in a neighboring state but has an office in New Jersey. Signup and view all the answers

Which policy rider should be recommended for a couple purchasing a life insurance policy on their newborn baby to cover premium payments due to death or disability?

Payor benefit. Signup and view all the answers

All of the following are true of credit life EXCEPT?

The insured names the beneficiary. Signup and view all the answers

All of the following are true regarding the federal Fair Credit Reporting Act EXCEPT?

Reports may be sent to anyone who requests one. Signup and view all the answers

Is it possible for a whole life policy to include a Waiver of Cost of Insurance rider if the insured becomes severely disabled?

No, it is not possible. Signup and view all the answers

If a licensee wants to transact insurance under a different name, what must occur?

The change must be filed with the Department. Signup and view all the answers

What does the family term rider incorporate?

Spouse term and children's term. Signup and view all the answers

Which of the following would be an example of an insurer participating in the unfair trade practice of discrimination?

Charging the insured higher premiums based on her race. Signup and view all the answers

What happens to the cash value in a reduced-paid up policy after surrendering a whole life policy?

Continue to increase. Signup and view all the answers

When an insured terminates membership in the insured group, what can they convert to?

Whole life without proof of insurability. Signup and view all the answers

All of the following are true of a nonqualified deferred compensation plan EXCEPT?

Contributions are tax deductible. Signup and view all the answers

What does the state Life and Health Insurance Guaranty Association guard against?

Insurance insolvency. Signup and view all the answers

What happens to the face amount of a whole life policy if the insured reaches the age of 100?

The face amount is paid to the insured. Signup and view all the answers

What term describes the action of an agent guaranteeing higher dividends than possible?

Misrepresentation. Signup and view all the answers

What does the renewable provision allow the policyowner to do?

Renew the coverage at the expiration date without evidence of insurability. Signup and view all the answers

Study Notes

Life Insurance Concepts

Convertible term life insurance allows policyholders to switch to a whole life policy for the same amount without proving insurability.
Policy replacement occurs when a new policy is issued with a lower cash value.
Cash value guarantees in whole life policies are termed nonforfeiture values.

Policy Options and Benefits

The Joint and Survivor settlement option ensures income for both beneficiaries for life.
Paid-up additions are dividend options that increase the death benefit.
Payor benefit rider protects policy payments in case of the policyholder’s death or disability.

Regulatory Framework

The McCarran-Ferguson Act states that insurance will be regulated by states as long as they maintain adequate regulations.
The Fair Credit Reporting Act limits who can receive consumer reports; reports are not accessible to everyone who requests them.

Application and Eligibility

Life insurance applications should not require current health insurance policies in force.
Surplus lines authority applicants do not need a certificate of authority in the state.
For resident producer licenses, a person must be a state resident or have a registered office in the state.

Policy Limitations and Provisions

Term life policies do not offer the option for policy loans.
Whole life policies cannot include a Waiver of Cost of Insurance rider.
If a group insured member terminates, they can convert to a whole life policy without proving insurability.

Financial Insights

Nonqualified deferred compensation plan contributions are not tax-deductible.
The face amount of a whole life policy is paid when the insured reaches age 100.

Ethical Practices

Discrimination in insurance includes charging different premiums based on race.
Misrepresentation occurs when an agent exaggerates policy benefits, such as guaranteeing unrealistic dividends.

Other Relevant Information

A surrendered whole life policy for a reduced-paid up policy retains cash value that continues to increase.
The Life and Health Insurance Guaranty Association protects against insurance company insolvency.

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Description

Test your knowledge of life insurance terms with these flashcards. Each card presents a definition and a corresponding word related to various insurance policies. Perfect for anyone studying insurance concepts or preparing for a certification exam.