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TEXAS LIFE INSURANCE GLOSSARY EXAM QUESTIONS AND ANSWERS
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TEXAS LIFE INSURANCE GLOSSARY EXAM QUESTIONS AND ANSWERS
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TEXAS LIFE INSURANCE GLOSSARYEXAM QUESTIONS AND ANSWERS
Absolute Assignment - Answer-A transfer by the policyholder of all control and rights to
a third party.
Accumulation at Interest Option - Answer-A dividend or settlement option under which
the policyholder allows his dividends or policy proceeds to accumulate interest with the
company. Although the dividends or proceeds are not generally taxable, the interest
earned is.
Actuary - Answer-One concerned with the application of probability and statistical theory
to insurance, utilizing the
law of large numbers.
ADB - Answer-Accidental Death Benefit (also known as Double Indemnity). A rider
added to a Life policy that will
pay double the face amount if the insured dies as a result of accident, generally within
90 days of the accident.
Adverse Selection - Answer-Selection not in favor of the company. The tendency of
poorer risks to want insurance
more often than standard risks. For example, a person who is already sick would like to
buy health insurance.
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.
Agent / Producer - Answer-The individual appointed by an insurance company to solicit
and negotiate insurance
contracts on its behalf. Agents or Producers represent the company, not the client.
Alien Company - Answer-An insurer organized and domiciled in a country other than the
United States.
Annuitant - Answer-The party receiving the benefits of an annuity, similar to the insured
on an insurance policy.
The annuitant usually also owns the annuity, although you can buy an annuity to benefit
another party, who
would then be the annuitant.
,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.
Applicant - Answer-The party making application to the insurance company for the
policy. Applicants must
provide the insurer with the truth to the best of their knowledge, which is known as a
"representation".
Application - Answer-A form on which the prospective insured states facts requested by
the insurer and on the basis
of which (together with any information from medical examiners, attending physicians,
hospitals, investigators, and the producer) the insurer decides whether or not to accept
the risk, modify the coverage offered, or decline the risk. With premium, the application
is considered to be an offer to buy. If attached to the policy at issue, it becomes part of
the Entire Contract.
Assignee - Answer-The person to whom policy rights are assigned in whole or in part by
the policyholder, who is
known as the Assignor. On Life insurance there are 2 types of assignment: Absolute
and Collateral.
Assignment - Answer-Transfer of rights in a policy to another party by the policyholder.
For example, if you bought
a life insurance policy on a minor child, you are the owner and the child is the insured.
When the child reaches age 21, you could assign all rights of ownership in the policy to
the child. This is an absolute assignment.
Attained Age - Answer-The present or current age of the insured. Upon conversion,
premiums are based on the current age of the insured.
Authorized Company - Answer-An insurer permitted to sell insurance within a state.
Must obtain a Certificate of Authority from the Commissioner or Director of Insurance of
every state they sell in.
Automatic Premium Loan - Answer-A rider in a Life policy authorizing the insurance
company to use the cash value to pay premiums not paid by the end of the grace
period. May be present in Whole Life or Endowment policies only, never Term. This
rider is free, but must be selected by the policy owner.
, Aviation Clause - Answer-Limits or excludes coverage when the insured is participating
in specified types of air travel. Coverage is usually confined to regularly scheduled
flights of commercial airlines. Often applies to student pilots.
Beneficiary - Answer-A person who may become eligible to receive, or is receiving,
benefits under an insurance plan. The beneficiary is selected by the policy owner and
may be changed at any time, unless "irrevocable".
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.
Business Insurance - Answer-Life or Health insurance written to cover business
situations such as key person, sole
proprietor, partnership, corporations, etc.
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.
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.
Certificate - Answer-A statement evidencing that a policy has been written and stating
the coverage in general. On
Group insurance, the employer receives the master policy and the employees receive
Certificates of Insurance.
Claim - Answer-A demand for payment under the insurance policy.
Classification - Answer-The grouping of persons for the purpose of determining an
underwriting or rating group into
which a particular risk must be placed. For example, on Whole Life, the "standard" rate
for the average person at age 30 might be $10 per $1,000 of face amount. If the insured
is "sub-standard", the rate will be higher. A Preferred risk receives a discount from the
standard rate.
Collateral Assignment - Answer-Assignment of part of the proceeds of an insurance
policy to a bank as collateral to settle the loan balance that may exist at the insured's
death.
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