Life and Health Insurance Licensing Exam Prep Flashcards

Comprehensive set of 500 fill-in-the-blank practice flashcards covering basic principles, policy types, riders, provisions, underwriting, annuities, retirement plans, Social Security, and health insurance for the Life and Health Licensing Exam.

Insurance is the transfer of __________ through a legal contract from policyholder to insurer.

risk

Premium __________ spreads risk across many policyholders.

pooling

__________ means restoring the insured to their pre-loss financial position.

Indemnification

Life insurance policies are __________ contracts, which pay a predetermined amount.

valued

Most property and casualty insurance policies use __________ contracts.

indemnity

Stock insurance companies are owned by __________.

shareholders

Stock insurance companies issue __________ policies.

nonparticipating

Profits from a stock insurance company go to __________.

stockholders

Mutual insurance companies are owned by __________.

policyholders

Mutual insurance companies issue __________ policies.

participating

Policyholders of mutual insurance companies receive __________ from excess earnings.

dividends

Mutual company policyholders elect the company's board of __________.

directors

Fraternal benefit societies are __________ organizations with a lodge system and ritualistic work.

non-profit

__________ insurers are groups of members who insure each other.

Reciprocal

Risk retention groups (RRGs) are created under federal law to provide __________ insurance.

liability

__________ insurers are owned by a parent company specifically to insure the parent's risks.

Captive

The __________ department of an insurer calculates rates, reserves, and dividends.

Actuarial

The __________ department reviews applications and assigns risk classifications.

Underwriting

Insurance agents work for the insurer, while insurance __________ represent the buyer.

brokers

In the __________ agency system, agents work exclusively for one single insurance company.

career

A personal producing general agency (PPGA) primarily focuses on insurance __________.

sales

Insurance __________ are not licensed to sell insurance and can only refer prospective clients.

solicitors

The Supreme Court ruling in Paul v. Virginia (1868) established __________ regulation of insurance.

state

The __________ Act of 1945 returned the regulation of insurance back to the states.

McCarran-Ferguson

The Gramm-Leach-Bliley Act of 1999 established __________ requirements for financial institutions.

privacy

The Fair Credit Reporting Act was enacted in the year __________.

1970

The acronym NAIC stands for the National Association of Insurance __________.

Commissioners

Risk pooling combines a large number of __________ exposure units.

homogeneous

Losses in risk pooling must be accidental and __________.

unintentional

__________ selection is the tendency for higher-risk individuals to seek insurance coverage.

Adverse

The law of large numbers requires exposure units to be independent, similar, and available in a __________ quantity.

large

The principle of indemnity prevents an insured from making a __________ from insurance.

profit

A __________ is the specific event that causes a financial loss.

peril

A __________ is a condition that increases the likelihood or severity of a loss.

hazard

A __________ hazard involves tangible or observable physical conditions.

physical

A __________ hazard involves dishonesty or intentional acts like insurance fraud.

moral

A __________ hazard involves a careless attitude due to having insurance protection.

morale

__________ losses are the immediate and direct physical damage caused by a peril.

Direct

__________ losses are consequential financial losses resulting from direct losses.

Indirect

Pure risks involve only the possibility of loss or __________.

no loss

Speculative risks involve the possibility of loss or __________.

gain

Insurance companies only provide coverage for __________ risks.

pure

Moving a financial risk from one party to another is known as risk __________.

transfer

Eliminating a risk-causing activity completely is called risk __________.

avoidance

Installing smoke detectors to decrease loss likelihood is an example of risk __________.

reduction

Retaining risk through deductibles or self-insurance is called risk __________.

retention

The acronym STARR stands for Sharing, Transfer, Avoidance, Reduction, and __________.

Retention

An occurrence can be gradual, whereas an accident is sudden and __________.

specific

NAIFA is a professional association representing insurance __________.

agents

A.M. Best is an example of a rating service that evaluates an insurer's financial __________.

strength

The mnemonic CLOC stands for Competent Parties, Legal Purpose, Offer and Acceptance, and __________.

Consideration

An insurance contract missing any of the essential CLOC elements is __________ from the beginning.

void

In an insurance contract, the applicant's offer consists of the application plus the __________ payment.

premium

In an insurance contract, consideration from the applicant includes premium payments and __________ statements.

truthful

In an insurance contract, consideration from the insurer is the promise to pay __________.

claims

An __________ contract is one where an unequal exchange of value can occur based on an uncertain event.

aleatory

Insurance contracts are contracts of __________, meaning they are written by the insurer on a take-it-or-leave-it basis.

adhesion

In a contract of adhesion, any ambiguities in the contract wording are interpreted in favor of the __________.

insured

A __________ contract is one where only one party (the insurer) makes legally enforceable promises.

unilateral

Life insurance policies allow assignment, making them an exception to the strict rule of __________ contracts.

personal

A __________ contract is one where benefits depend on specific conditions being met by the insured.

conditional

Life insurance contracts are __________ contracts because they pay a predetermined amount at issue.

valued

Insurable interest in life and health insurance is required only at the time of __________.

application

Insurable interest automatically exists between spouses and in parent-__________ relationships.

child

Property and casualty insurance requires insurable interest to exist at both the time of application and time of __________.

loss

STOLI stands for Stranger-Originated __________ Insurance and is illegal.

Life

Authority specifically written in an agent's contract is called __________ authority.

express

Authority necessary to perform an agent's job that is not explicitly written down is __________ authority.

implied

Authority created by the company's actions that leads the public to reasonably believe it exists is __________ authority.

apparent

Insurance agents represent the __________, while brokers represent the client.

insurer

A __________ contract was never legally in force because it was missing an essential element.

void

A __________ contract is valid initially but may be terminated or rejected by one party.

voidable

A __________ is the voluntary and intentional giving up of a known legal right by an insurer.

waiver

__________ prevents a party from re-asserting a right that was previously waived when another relied on it.

Estoppel

Statements in an insurance application made by the applicant are considered __________, not warranties.

representations

A __________ is a statement guaranteed to be true in every respect and becomes part of the contract.

warranty

Concealment is the failure to disclose __________ facts.

material

__________ is the insurer's legal right to recover paid claims from a responsible third party.

Subrogation

Errors and Omissions (E&O) insurance covers unintentional administrative errors but excludes __________ acts.

criminal

Life insurance policies create an __________ estate upon the death of the insured.

immediate

Term life insurance provides temporary protection and has no cash value or __________.

equity

Decreasing term life insurance features a benefit amount that decreases gradually over the __________ period.

protection

Mortgage redemption insurance is a common type of __________ term life insurance policy.

decreasing

The maximum benefit payable under a credit life insurance policy is the value of the __________.

loan

Level term life insurance provides a level amount of protection for a __________ period.

specified

The option to renew allows a term policy to be renewed without evidence of __________.

insurability

Annually renewable term (ART) provides coverage for one year and increases premiums upon renewal based on the insured's __________ age.

attained

The option to convert allows exchanging term life insurance for permanent insurance without proving __________.

insurability

Interim term life insurance premiums for temporary coverage are based on the original application __________ age.

original

Term life insurance provides the most substantial amount of protection for the lowest initial __________.

cost

Whole life insurance is designed to mature when the cash value equals the face value at age __________.

100

Cash value growth in permanent life insurance policies accumulates on a tax-__________ basis.

deferred

Ordinary whole life, also called straight life, requires premium payments until the insured dies or reaches age __________.

100

A single-premium whole life policy creates an immediate cash value and nonforfeiture __________.

value

Modified whole life insurance features lower premiums during an introductory period of typically __________ years before increasing.

5

Graded premium whole life insurance has premiums that increase __________ for an initial period before remaining fixed.

annually

Economatic life is another name for __________ whole life insurance.

enhanced

Equity-indexed whole life policies guarantee a minimum interest rate and death benefit, and are not considered __________.

securities

Adjustable life insurance allows the policy owner to change the face amount, premium, and protection __________.

period

A Modified Endowment Contract (MEC) is a life insurance policy that fails the IRS __________-pay test.

seven