2-14 Insurance License Exam / set /A+ GRADED
401K Plan - CORRECT ANSWER - A qualified retirement plan in which the employee can set aside a
portion of their income with pre-tax dollards
Absolute Assigment vs. Collateral Asssigment - CORRECT ANSWER - Absolute: A permanent and
irrevocable trans...
2-14 Insurance License Exam / set /A+ GRADED
401K Plan - CORRECT ANSWER - A qualified retirement plan in which the employee can set aside a
portion of their income with pre-tax dollards
Absolute Assigment vs. Collateral Asssigment - CORRECT ANSWER - Absolute: A permanent and
irrevocable transfer of rights and/or benefits by the policyowner.
Collateral: A temporary and/or revocable transfer of benefits by the policyowner.
Accelerated Death Benefit - CORRECT ANSWER - Policy provision that allows full or partial payment of
the policy's death benefit before the insured's death if he/she is terminally ill.
Accidental Death Benefit - CORRECT ANSWER - An extra cost rider that requires the insurance company
to pay an additional benefit in the event that the insured dies within 90 days of an accident as a direct
result of the accident.
Accumulate at Interest - CORRECT ANSWER - The Dividend Option where the policyowner leaves the
dividens with the insurer to invest and earn interest
Adhesion - CORRECT ANSWER - Since the insurer created all the documents of the contract, any
ambiguities in the contract will be settled in favor of the insured. Since the insurer wrote the contract
they are stuck with it.
Adverse Selection - CORRECT ANSWER - The tendency for less favorable risks to seek or continue
insurance to a greater extent than more favorable risks
Agency Agreement or Agency Contract - CORRECT ANSWER - A legal document containing the terms of
the agreement between the agent and the insurance company. It clearly defines what an agent can and
cannot do, and how he/she will be compensated.
,Agent Authorities - CORRECT ANSWER - Expressed: Power or authority specifically granted in writin to an
agent by the insurance company in their Agency Agreement.
Apparent: Power or authority that the public reasonably assumes an agent has based upon his/her
actions.
Implied: Power or authority that is not expressely granted by the company but that an agent can assume
or that are implied he/she has in order to transact insurance business.
Agent/ Producer - CORRECT ANSWER - Anyone who sell or aids in the selling of insurance. Legally
represents the company
Agent's Report - CORRECT ANSWER - A written report from the agent submitted to the insurer along
with the application disclosing what the agent knows, observed, or learned about the proposed
insured's risks.
Aleatory - CORRECT ANSWER - Unequal exchange of value. One party may obtain a far greater value
than the other under the contract.
Annual Renewable Term - CORRECT ANSWER - A Term Life Insurance contract which gives the
policyower the option to revew the policy each year without showing proof of insuranbility. Premiums
increase at each renewal.
Annuitant - CORRECT ANSWER - The person that buys an annuity; may or may not be an annuity's
policyowner.
Annuity - CORRECT ANSWER - A contract/policy that guarantees to pay income for a specified period of
time or for the life of the annuitant. Designed to prevent people from the outliving their savings.
Appointment - CORRECT ANSWER - Authorization of an agent/producer by an insurer to represent the
company
,Blackout Period - CORRECT ANSWER - The period of time between the youngest child turning 16 and the
widow(er) reaching retirement age during which no Social Security Survivor Benefits are paid to the
surviving spouse.
Buy-Sell Agreement - CORRECT ANSWER - Business use of Life Insurance where partners in a business
buy life insurance on each other. They agree that when one of them dies the survivors have the right to
purchase the deceased partner's share of the business. The death benefit from the insurance is used to
finance the purchase.
Cash Nonforfeiture Option - CORRECT ANSWER - Policyowern receives a lump-sum payment of the
current cash value of the policy upon surrender of the policy. The policy cannot be reinstated.
Cash Settlement Option - CORRECT ANSWER - Upon maturity of an insurance policy the beneficary
receives a lump-sum payment of the entire policy proceeds due.
Cash Value - CORRECT ANSWER - The part of an insurance policy that is the equity amount legally
available to the policyowner. The cash value accumulates throughout the duration of the policy. Also
known as living benefit or policy savings.
Commissioner - CORRECT ANSWER - Public official in charge of the state's department of insurance.
Charged with regulating the insurance industry in his/her state by enforcing the insurance laws.
Conditional - CORRECT ANSWER - Certain conditions must be met in order for policy to pay-out
Condiitional Receipt - CORRECT ANSWER - An interim insuring agreement under which the insurance
company agrees to start coverage on the later of either the date of application or the date of the
medical exam IF the proposed insured is found to be insurable on that date.
Consideration - CORRECT ANSWER - A necessary element of a contract; something of value exchanged
for the transfer of risk. Insured's consideration is payment of premiums and truthful statements on the
application. Insurer's consideration is promises contained in the contract.
, Contingent Beneficiary - CORRECT ANSWER - An alternate benefiary designated to receive the policy
proceeds in the event that the primary beneficiary dies before the insured.
Contributory Plan vs. Noncontributory Plan - CORRECT ANSWER - Contributory: Group insurance plan
under which the employees contribute to the payment of premiums.
Noncontributory: A group insurance plan in which the employer pays all the premiums for the policy.
Convertible Term - CORRECT ANSWER - Term insurance that specifically permits "conversion" of the
policy into permanent protection without proof of insurability
Decreasing Term - CORRECT ANSWER - Term life insurance in which the face amount of the policy
decreases over time in scheduled steps. Most often used to cover a debt obligation (mortgage)
Dividends - CORRECT ANSWER - Distribution paid out by insurance companies. Stock insurers pay
dividends (portion of profit) to stockholders and they are taxable. Mutual insurers pay dividens (return
of undeeded premiums) to policyowens an they are not taxable. Dividends are never guaranteed.
Equity Indexed Annuity - CORRECT ANSWER - The annuity that has a guaranteed minimum interest rate
and allows the annuitant to invest money in a index (i.e.: S&P 500). The investments grow as the index
grows.
Estoppel - CORRECT ANSWER - Legally preventing someone from asserting or reasserting a known right
that they have previously waived.
Extended Term Insurance - CORRECT ANSWER - Nonforfeiture option where cash value is used to make
a single premium payment on a Term Insurance Policy of the same face amount as the original policy.
Original policy can be reinstated. Not available on rated policies.
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