Primerica Illinois Life Insurance Exam Prep Flashcards

Comprehensive vocabulary flashcards covering the Illinois Life Insurance Exam Prep material, including legal principles, policy types, provisions, and state-specific statutes.

Insurance

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

Insurable Interest

A condition where the policyowner faces the possibility of losing money or something of value in the event of a loss; must exist between the policyowner and the insured at the time of application.

Consideration

The binding force in a contract where each party gives something of value; the insured pays premiums and makes representations, while the insurer promises to pay in the event of loss.

Contract of Adhesion

A 'take-it-or-leave-it' contract prepared by the insurer and accepted or rejected by the insured without negotiation; any ambiguities are settled in favor of the insured.

Aleatory

A contract feature involving an exchange of unequal amounts; for example, the premium paid is small compared to the potential amount paid in the event of loss.

Unilateral Contract

A contract where only one party (the insurer) is legally bound to do anything, specifically to pay losses covered by a policy in force.

Conditional Contract

A contract requiring certain conditions to be met, such as paying premiums and providing proof of loss, before the contract is executed.

Warranty

An absolutely true statement.

Representations

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

Buyer’s Guide

A document providing basic, generic information about life insurance policies, explaining how to choose amounts and types and how to compare costs.

Fair Credit Reporting Act

A federal law establishing procedures for consumer-reporting agencies to ensure records are confidential, relevant, and protect consumers against inaccurate information.

Consumer Reports

Information about a consumer’s credit, character, or habits collected by a reporting agency from employment and public sources.

Investigative Consumer Reports

Reports where information is obtained through investigations and interviews with associates; consumers must be advised in writing within 3 days of the request.

HIPAA (Health Insurance Portability and Accountability Act)

A federal law protecting individually identifiable health information, referred to as protected health information.

Mortality

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

Term Life Insurance

Temporary, pure protection that lasts for a specific period of time and has no cash value.

Annually Renewable Term (ART)

The purest form of term life insurance where the death benefit remains level but premiums increase yearly based on attained age; it renews without proof of insurability.

Traditional Whole Life

Permanent insurance providing coverage to age 100 with level premiums, a guaranteed death benefit, and cash value designed to equal the face amount at age 100.

Ordinary Whole Life (Straight Life)

A basic whole life policy with level premiums paid until death or age 100, whichever occurs first.

Universal Life

Also known as flexible premium adjustable life; an interest-sensitive policy with an insurance component (annually renewable term) and a cash account.

Variable (Whole) Life

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

Joint Life

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

Survivorship Life

A single policy covering two or more lives that pays the death benefit when the last insured dies; often used to offset estate tax liability.

Annuity

A contract designed to provide income for a number of years or for life, protecting individuals against outliving their money.

Accumulation Period

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

Entire Contract

A provision stating the contract consists of the policy, a copy of the application, and any riders or amendments.

Grace Period

A period of 30 or 31 days following the due date to pay premium before the policy lapses.

Incontestability

A provision preventing an insurer from denying a claim due to misstatements on the application after the policy has been in force for 2 years.

Absolute Assignment

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

Collateral Assignment

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

Free Look

A period (typically 10 days for new policies) where the policyowner can review the policy and return it for a full refund.

Per Capita

A beneficiary designation meaning 'by the head,' where benefits are evenly distributed among living beneficiaries.

Per Stirpes

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

Guaranteed Insurability Rider

A rider allowing the purchase of additional insurance at specified future dates without evidence of insurability.

Nonforfeiture Options

Guarantees built into whole life policies (Reduced Paid-up, Extended Term, Cash) to prevent cash value from being forfeited if the policy lapses.

Modified Endowment Contract (MEC)

An overfunded life insurance policy that fails the 7-pay test and loses many standard tax benefits.

Key Person Insurance

Life insurance used by a business to guard against financial loss due to the death of a key employee with specialized skills.

Buy-Sell Funding

An agreement determining how a business will be transferred if an owner dies or becomes disabled, usually funded with life insurance.

Viatical Settlements

Arrangements where someone with a life-threatening condition sells their life insurance policy to a third party for a percentage of the face value.

Fiduciary Capacity

The legal and ethical obligation of a licensee to handle funds for insurance policies without misappropriation or improper withholding.

Premium Fund Trust Account (PFTA)

An account that must be established by licensees who hold premiums for 15 days or more before remitting them to the insurer.

Controlled Business

Insurance written on the interests of the licensee, their spouse, or their employer; it cannot exceed $50\%$ of a producer's total business.

Rebating

An illegal inducement offered to the insured in the sale of insurance products not specified in the policy.

Defamation

An oral or written statement intended to injure a person in the insurance business or maliciously criticize the financial condition of a company.

Illinois Life & Health Insurance Guaranty Association

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