Arkansas Life Insurance Exam Questions & Answers (SCORED A)

Adverse Selection - ANSWER Insuring of risks that are more prone to losses than the average risk. Death Benefit - ANSWER The amount paid upon the death of the insured in a life insurance policy. Insurance Policy - ANSWER A contract between a policyowner/insured and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events. Insured - ANSWER Person covered by the insurance policy; may or may not be the policyowner Insurer (Principle) - ANSWER The company who issues an insurance policy. Lapse - ANSWER Policy termination due to nonpayment of premium. Life Insurance - ANSWER Coverage on human lives. Policyowner - ANSWER The person entitled to exercise the rights and privileges in the policy. Premium - ANSWER The money paid to the insurance company for the insurance policy. Insurance transfers what? - ANSWER The risk of loss from and individual to and insurance company. Elements of a Legal Contract - ANSWER 1. Agreement (offer and acceptance) 2. Consideration 3. Competent Parties 4. Legal Purpose Offer and Acceptance - ANSWER Offer happens when application is submitted. Acceptance takes place when an insurer's underwriter approves the application and issues a policy. Consideration - ANSWER Binding force. Something of value that each party gives to the other. Competent Parties - ANSWER Both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs/alcohol. Aleatory Contract - ANSWER There is an exchange of unequal amounts/values. The premium paid by the insured is small in relation to the amount that will be paid by the insurer in the event of loss. Unilateral Contract - ANSWER The insured makes no legally binding promises. Insurer is legally bound to pay losses covered by a policy in force. Conditional Contract - ANSWER Certain conditions must be met by the policyowner and the company in order the the contract to be executed, and before each party fulfills its obligations. (Pay premium and provide proof of loss for an insurer to cover claim.)