Life Insurance Basics Quiz

Questions and Answers

What is life insurance?

Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of an insured person.

What other events can trigger payment in a life insurance policy?

Other events such as terminal illness or critical illness can also trigger payment in a life insurance policy.

What are some examples of exclusions written into a life insurance contract?

Common examples of exclusions include claims relating to suicide, fraud, war, riot, and civil commotion.

What difficulties may arise in a life insurance policy?

Difficulties may arise where an event is not clearly defined, for example, the insured knowingly incurred a risk by consenting to an experimental medical procedure. Signup and view all the answers

How do life insurance policyholders typically pay for their policies?

Policyholders typically pay a premium, either regularly or as one lump sum. Signup and view all the answers

What are some examples of events that can trigger payment in a life insurance policy other than the death of the insured person?

Terminal illness or critical illness Signup and view all the answers

What are the benefits that may be included in a life insurance policy?

Other expenses, such as funeral expenses Signup and view all the answers

What are some examples of specific exclusions that can limit the liability of the insurer in a life insurance policy?

Suicide, fraud, war, riot, and civil commotion Signup and view all the answers

What do the terms of each life insurance contract describe?

The limitations of the insured events Signup and view all the answers

What difficulties may arise in a life insurance policy when an event is not clearly defined?

Difficulties may arise when the insured knowingly incurs a risk by consenting to an experimental medical procedure Signup and view all the answers

Study Notes

Life Insurance Overview

Life insurance provides financial protection to beneficiaries in the event of the policyholder's death.

Triggering Payment in Life Insurance Policies

Death of the insured person is a common trigger for payment, but other events can also trigger payment, such as:
- Terminal illness diagnosis
- Accidental death or dismemberment
- Critical illness diagnosis
- Permanent disability

Exclusions in Life Insurance Contracts

Exclusions are written into life insurance contracts to limit the liability of the insurer, examples include:
- Suicide within a specified period (e.g., the first two years)
- Death resulting from dangerous activities (e.g., skydiving)
- Pre-existing medical conditions not disclosed at policy initiation

Difficulties in Life Insurance Policies

Unclear or ambiguous policy terms can lead to difficulties, particularly when:
- Events are not clearly defined
- Policy terms are open to interpretation
Disputes may arise if beneficiaries disagree with the insurer's decision regarding payment

Payment of Life Insurance Policies

Policyholders typically pay premiums regularly (e.g., monthly or annually) to maintain coverage.

Benefits of Life Insurance Policies

Policies may include various benefits, such as:
- Funeral expenses
- Income replacement for dependents
- Education funding for dependents
- Business protection