Primerica Illinois Exam Prep - Life Insurance Vocabulary

Comprehensive vocabulary flashcards covering the Primerica Illinois Exam Prep for life insurance, including policy types, provisions, legal concepts, and state regulations.

Insurance

The transfer of risk of loss from an individual to an insurer.

Insurable Interest

The requirement that a policyowner must face the possibility of losing money or something of value in the event of loss; it must exist between the policyowner and the insured at the time of application.

Contract

An agreement between two or more parties enforceable by law.

Consideration

The binding force in a contract; it refers to the value each party gives, such as the premium paid by the insured and the promise to pay benefits by the insurer.

Contract of Adhesion

A contract prepared by the insurer and accepted or rejected by the insured on a “take-it-or-leave-it” basis with no negotiation.

Aleatory

An insurance contract involving an exchange of unequal amounts or values.

Unilateral

A contract in which only one party (the insurer) is legally bound to perform its obligations.

Warranty

An absolutely true statement.

Representations

Statements believed to be true to the best of one’s knowledge, such as answers on an insurance application, but not guaranteed to be true.

Buyer’s Guide

A document providing generic information about life insurance policies and instructions on how to compare costs.

Policy Summary

A written statement describing the specific features and elements of the policy being issued.

Fair Credit Reporting Act

A federal law establishing procedures for consumer-reporting agencies to ensure records are confidential, relevant, and accurate.

HIPAA (Health Insurance Portability and Accountability Act)

Federal law providing protected health information protection and giving patients the right to view medical records and access logs for the previous $6$ years.

Preferred Risk

An underwriting classification for individuals who are a better than average risk, qualifying them for lower premiums.

Standard Risk

An underwriting classification for individuals who represent an average risk.

Substandard Risk

An underwriting classification for individuals who are a poorer than average risk, resulting in higher or rated premiums.

Mode

The frequency with which a premium is paid ($Annual$, $Semi-Annual$, $Quarterly$, or $Monthly$).

Mortality

The rate of death within a specific group, used as a primary factor in premium determination.

Term Life Insurance

Temporary, pure protection that provides the greatest amount of coverage for the lowest premium and has no cash value.

Annually Renewable Term (ART)

The purest form of term life insurance where the death benefit remains level and the policy renews each year without proof of insurability, but premiums increase yearly based on attained age.

Decrease Term

A term policy where the death benefit decreases over the duration of the term, commonly used to insure mortgages.

Traditional Whole Life

Permanent insurance providing coverage to age $100$ with level premiums, a guaranteed level death benefit, and cash value accumulation.

Ordinary Whole Life

Also called Straight Life, this is a basic whole life policy where level premiums are paid until death or age $100$.

Limited Pay Whole Life

A policy where premiums are paid-up before age $100$ (e.g., $20-pay\text{ life}$), but coverage continues until age $100$.

Universal Life

Also known as flexible premium adjustable life; it features a flexible premium, a cash account, and an insurance component that is annually renewable term.

Variable Life

A level, fixed premium policy with a guaranteed minimum death benefit where premiums are invested in a separate account; dually regulated by the SEC and FINRA.

Joint Life

A single policy covering $2$ or more lives that pays the death benefit when the first insured dies.

Survivorship Life

A single policy covering $2$ or more lives that pays the death benefit when the last insured dies.

Annuity

A contract designed to provide income for a number of years or for life by liquidating an estate or a large sum of money.

Accumulation Period

The pay-in phase of an annuity where interest is earned on a tax-deferred basis.

Annuitization Period

Also known as the liquidation or pay-out period, this is when annuity payments are made to the annuitant.

Entire Contract Provision

A provision stating that the policy, the copy of the application, and any riders or amendments constitute the entire agreement.

Insuring Clause

The basic agreement between the insurer and the insured located on the face page, stating the insurer’s promise to pay benefits.

Grace Period

A period of $30-31\text{ days}$ following the premium due date during which the policy remains in force despite non-payment.

Reinstatement

The process of restoring a lapsed policy within a specified timeframe (usually $3\text{ years}$) by paying back premiums and providing evidence of insurability.

Incontestability Clause

A provision preventing the insurer from denying a claim due to misstatements after the policy has been in force for $2\text{ years}$.

Absolute Assignment

The permanent and total transfer of all policy ownership rights to another party.

Collateral Assignment

A partial and temporary transfer of policy rights, usually to secure a loan.

Per Stirpes

A beneficiary designation by bloodline where benefits of a deceased beneficiary are distributed to their heirs.

Per Capita

A beneficiary designation where benefits are distributed evenly among the living beneficiaries.

Irrevocable Beneficiary

A beneficiary designation that cannot be changed without the written consent of that beneficiary.

Common Disaster Clause

A provision that assumes the primary beneficiary died first if the insured and primary beneficiary die in the same accident and it cannot be determined who died first.

Waiver of Premium Rider

A rider that waives the insurance premium if the insured becomes totally disabled, following a $6-month$ waiting period.

Payor Benefit Rider

A rider for juvenile insurance that waives premiums until the minor reaches age $21$ if the payor dies or becomes disabled.

Accidental Death and Dismemberment (AD&D)

A rider that pays a multiple of the face amount (double or triple indemnity) for accidental death or a percentage for loss of limbs or sight.

Key Person Insurance

Life insurance purchased by a business on a key employee to guard against financial loss; the business is the applicant, owner, and beneficiary.

Buy-Sell Agreement

A legal contract funded by life insurance that determines how a business interest will be purchased if an owner becomes disabled or dies.

Life Settlement

The sale of a life insurance policy to a third party for compensation, requiring an absolute assignment of all policy rights.

Modified Endowment Contract (MEC)

An overfunded life insurance policy that fails the $7-pay\text{ test}$ and loses standard tax benefits.

Director of Insurance

The official appointed by the Governor of Illinois to enforce insurance laws and protect the public.

Premium Fund Trust Account (PFTA)

A financial account required for licensees who hold premiums for $15\text{ days}$ or more before remitting them to the insurer.

Rebating

An illegal inducement offered to an insured that is not specified in the insurance policy, classified as a Class B misdemeanor in Illinois.

Defamation

The act of making false or malicious statements intended to injure a person or entity in the insurance business.

Illinois Life & Health Insurance Guaranty Association

A nonprofit legal entity created to protect insureds and beneficiaries against insolvent or impaired insurers.