Life Insurance Concepts and Terms

These flashcards cover key concepts and terms from the lecture on life insurance, providing definitions and explanations to aid in understanding and retention.

What is Adverse Selection in insurance?

The tendency of individuals with a higher probability of loss to purchase insurance more often than those presenting a lower risk.

What does the Death Benefit refer to in a life insurance policy?

The amount paid upon the death of the insured.

What is Cash Value in the context of permanent life insurance?

The equity amount accumulated in a permanent life insurance policy.

How is Estate defined in insurance terms?

A person’s net worth.

What are Illustrations in life insurance?

Presentations or depictions of nonguaranteed elements of a life insurance policy.

What does Life Insurance cover?

Coverage on human lives.

What is Liquidation in a financial context?

Selling assets in order to raise capital.

What is meant by Lump Sum payment in insurance?

Payment of the entire benefit in one sum.

Define a Minor in legal terms.

A person under legal age.

What does Solvency refer to in insurance companies?

The ability to meet financial obligations, ensuring enough assets to pay claims.

What is Insurable Interest in a life insurance policy?

The policyowner must face the possibility of losing money or something of value in the event of loss.

When must insurable interest exist for life insurance?

It must exist between the policyowner and the insured at the time of application.

Who is not required to have insurable interest?

Beneficiaries.

What is the purpose of Survivor Protection in life insurance?

To provide funds necessary for survivors to maintain their lifestyle in the event of the insured’s death.

How does Estate Creation work with life insurance?

Purchase of life insurance creates an immediate estate, starting from the moment the first premium is paid.

What is Cash Accumulation in life insurance?

Using life insurance to accumulate specific amounts of money for specific needs with guarantees that money will be available when needed.

What does liquidity in life insurance policies allow the policyowner to do?

Borrow against the policy's cash values for immediate needs.

How does life insurance assist in Estate Conservation?

It can be used to pay inheritance taxes and federal estate taxes, preventing the need for beneficiaries to sell off assets.