Indiana Life & Health Insurance Exam
Participating Insurance Policy - Answer-may pay dividends to the policyowner
Material Misrepresentation - Answer-misstatement to a question asked in the application process;
death benefit claim will likely be denied
Law of Large Numbers - Answer-the larger a group becomes, the easier it is to predict losses; used to
predict certain types of losses and set appropriate premiums
Substandard Risk - Answer-results in higher premium
Standard Risk - Answer-results in standard premium
Preferred Risk - Answer-results in lower premium
Expense Loading - Answer-combined with premiums to spread the operating costs of a business to
all insureds
Net Premium - Answer-premiums without expense loading
Concealment - Answer-occurs when a person withholds a material fact that is crucial to making a
decision; in insurance, this involves withholding information that would be crucial to underwriting
decisions
Warranty - Answer-a statement guaranteed to be true
Representation - Answer-a statement true to the best of an applicant's knowledge
3 Basic Types of Term Life Insurance - Answer-level, increasing, and decreasing
Level Term - Answer-death benefit doesn't change throughout the life of the policy
, Annually Renewable Term (ART) - Answer-premium increases annually according to attained age;
policy may be guaranteed to be renewable each without proof of insurability
Re-entry Option - Answer-the insured, upon the end of a term policy with guaranteed renewable
option, may qualify for a discounted premium rate with proof of insurability
Decreasing Term - Answer-death benefit decreases each year over duration of the policy term;
typically used when the amount of needed protection is time sensitive, or decreases over time
Increasing Term - Answer-death benefit increases each year over duration of the policy term (usually
by specific amount or percentage of original amount); often used by insurance companies to fund
certain riders that provide a refund of premiums of a gradual increase in total coverage, such as the
cost of living or return of premium riders
Convertible Term - Answer-provides the policy owner with the right to convert the policy to a
permanent insurance policy without evidence of insurability; premium will be based on the insured's
attained age at the time of conversion
Continuous Premium (Straight Life or Ordinary Life) - Answer-basic whole life policy; will typically
have the lowest annual premium
Limited Payment - Answer-premiums for coverage paid-up before age 100; higher premium and cash
value builds up faster; 20-pay life, life paid-up at 65 (LP-65);
Single Premium Whole Life (SPWL) - Answer-provides level death benefit to the insured's age 100 for
a one-time, lump-sum payment; policy completely paid-up after one premium and generates
immediate cash
Modified Life - Answer-lower premium in first few policy years (3 to 5 years) and higher level
premium for remainder of insured's life
Graded-premium Whole Life - Answer-premiums start low, gradually increase each year (for about 5
to 10 years), and remain level thereafter
Participating Insurance Policy - Answer-may pay dividends to the policyowner
Material Misrepresentation - Answer-misstatement to a question asked in the application process;
death benefit claim will likely be denied
Law of Large Numbers - Answer-the larger a group becomes, the easier it is to predict losses; used to
predict certain types of losses and set appropriate premiums
Substandard Risk - Answer-results in higher premium
Standard Risk - Answer-results in standard premium
Preferred Risk - Answer-results in lower premium
Expense Loading - Answer-combined with premiums to spread the operating costs of a business to
all insureds
Net Premium - Answer-premiums without expense loading
Concealment - Answer-occurs when a person withholds a material fact that is crucial to making a
decision; in insurance, this involves withholding information that would be crucial to underwriting
decisions
Warranty - Answer-a statement guaranteed to be true
Representation - Answer-a statement true to the best of an applicant's knowledge
3 Basic Types of Term Life Insurance - Answer-level, increasing, and decreasing
Level Term - Answer-death benefit doesn't change throughout the life of the policy
, Annually Renewable Term (ART) - Answer-premium increases annually according to attained age;
policy may be guaranteed to be renewable each without proof of insurability
Re-entry Option - Answer-the insured, upon the end of a term policy with guaranteed renewable
option, may qualify for a discounted premium rate with proof of insurability
Decreasing Term - Answer-death benefit decreases each year over duration of the policy term;
typically used when the amount of needed protection is time sensitive, or decreases over time
Increasing Term - Answer-death benefit increases each year over duration of the policy term (usually
by specific amount or percentage of original amount); often used by insurance companies to fund
certain riders that provide a refund of premiums of a gradual increase in total coverage, such as the
cost of living or return of premium riders
Convertible Term - Answer-provides the policy owner with the right to convert the policy to a
permanent insurance policy without evidence of insurability; premium will be based on the insured's
attained age at the time of conversion
Continuous Premium (Straight Life or Ordinary Life) - Answer-basic whole life policy; will typically
have the lowest annual premium
Limited Payment - Answer-premiums for coverage paid-up before age 100; higher premium and cash
value builds up faster; 20-pay life, life paid-up at 65 (LP-65);
Single Premium Whole Life (SPWL) - Answer-provides level death benefit to the insured's age 100 for
a one-time, lump-sum payment; policy completely paid-up after one premium and generates
immediate cash
Modified Life - Answer-lower premium in first few policy years (3 to 5 years) and higher level
premium for remainder of insured's life
Graded-premium Whole Life - Answer-premiums start low, gradually increase each year (for about 5
to 10 years), and remain level thereafter
