L&H FLASHCARDS FOR EXAM QUESTIONS AND ANSWERS
Adverse selection - CORRECT ANSWER✅✅✅Insuring of risks that are more prone to losses than the
average risk.
Agent/Producer - CORRECT ANSWER✅✅✅A legal representative of an insurance company; the
classification of producer usually includes agents and brokers; agents are the agents of the insurer.
Applicant or proposed insured - CORRECT ANSWER✅✅✅A person applying for insurance.
Beneficiary - CORRECT ANSWER✅✅✅A person who receives the benefits of an insurance policy.
Death benefit - CORRECT ANSWER✅✅✅The amount paid upon the death of the insured in a life
insurance policy.
Fraud - CORRECT ANSWER✅✅✅Intentional misrepresentation or deceit with the intent to induce a
person to part with something of value.
Insurance policy - CORRECT ANSWER✅✅✅A contract between a policyowner (and/or insured) and
an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific
events.
Insured - CORRECT ANSWER✅✅✅Person covered by the insurance policy; may or may not be the
policyowner.
Insurer (principal) - CORRECT ANSWER✅✅✅The company who issues an insurance policy.
Lapse - CORRECT ANSWER✅✅✅Policy termination due to nonpayment of premium.
Life insurance - CORRECT ANSWER✅✅✅Coverage on human lives.
,Policyowner - CORRECT ANSWER✅✅✅The person entitled to exercise the rights and privileges in
the policy.
Premium - CORRECT ANSWER✅✅✅The money paid to the insurance company for the insurance
policy.
Contract - CORRECT ANSWER✅✅✅An agreement between two or more parties enforceable by law.
Agreement (offer and acceptance) - CORRECT ANSWER✅✅✅The mutual understanding and consent
between parties to enter into a contract.
Consideration - CORRECT ANSWER✅✅✅The binding force of any contract; something of value that
each party gives to each other.
Legality - CORRECT ANSWER✅✅✅The purpose of the contract must be legal and not against public
policy; must have insurable interest and consent.
Contract of adhesion - CORRECT ANSWER✅✅✅Prepared by one of the parties (insurer) and
accepted or rejected by the other party (insured); insurance contracts are take it or leave it basis.
Aleatory Contract - CORRECT ANSWER✅✅✅An insurance contract characterized by an uneven
exchange of values.
Unilateral contract - CORRECT ANSWER✅✅✅Only one of the parties to the contract is legally bound
to do anything; one-sided promises.
Conditional Contract - CORRECT ANSWER✅✅✅Requires conditions that must be met by the policy
owner and the company in order for the contract to be executed.
Proof of Loss - CORRECT ANSWER✅✅✅The evidence that the insured must provide in order for the
insurer to cover the claim.
, Warranty - CORRECT ANSWER✅✅✅An absolutely true statement upon which the validity of the
insurance policy depends.
Representations - CORRECT ANSWER✅✅✅Statements that are believed to be true to the best of
one's knowledge, but not guaranteed to be true.
Nonmedical Application - CORRECT ANSWER✅✅✅An application where the agent and proposed
complete the medical information if the amount of insurance is small.
Medical Examination - CORRECT ANSWER✅✅✅A requirement by the insurer for larger amounts of
insurance to assess the applicant's health.
Agent/Life Insurance Producer - CORRECT ANSWER✅✅✅The company's field underwriter.
Agent's Report - CORRECT ANSWER✅✅✅A report that provides personal observations concerning
the proposed insured.
Premium Receipt - CORRECT ANSWER✅✅✅A receipt issued by an agent whenever premiums are
collected.
Conditional Receipt - CORRECT ANSWER✅✅✅A receipt that indicates the applicant may be covered
as early as the date of the application or the date of the medical exam, whichever occurs last.
Replacement - CORRECT ANSWER✅✅✅The practice of terminating an existing policy or letting it
lapse, and obtaining a new one.
Underwriting - CORRECT ANSWER✅✅✅The risk selection process aimed at protecting the insurer
against adverse selection.
Insurable Interest - CORRECT ANSWER✅✅✅The possibility of losing something of value, which must
exist at the time of the application.
Adverse selection - CORRECT ANSWER✅✅✅Insuring of risks that are more prone to losses than the
average risk.
Agent/Producer - CORRECT ANSWER✅✅✅A legal representative of an insurance company; the
classification of producer usually includes agents and brokers; agents are the agents of the insurer.
Applicant or proposed insured - CORRECT ANSWER✅✅✅A person applying for insurance.
Beneficiary - CORRECT ANSWER✅✅✅A person who receives the benefits of an insurance policy.
Death benefit - CORRECT ANSWER✅✅✅The amount paid upon the death of the insured in a life
insurance policy.
Fraud - CORRECT ANSWER✅✅✅Intentional misrepresentation or deceit with the intent to induce a
person to part with something of value.
Insurance policy - CORRECT ANSWER✅✅✅A contract between a policyowner (and/or insured) and
an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific
events.
Insured - CORRECT ANSWER✅✅✅Person covered by the insurance policy; may or may not be the
policyowner.
Insurer (principal) - CORRECT ANSWER✅✅✅The company who issues an insurance policy.
Lapse - CORRECT ANSWER✅✅✅Policy termination due to nonpayment of premium.
Life insurance - CORRECT ANSWER✅✅✅Coverage on human lives.
,Policyowner - CORRECT ANSWER✅✅✅The person entitled to exercise the rights and privileges in
the policy.
Premium - CORRECT ANSWER✅✅✅The money paid to the insurance company for the insurance
policy.
Contract - CORRECT ANSWER✅✅✅An agreement between two or more parties enforceable by law.
Agreement (offer and acceptance) - CORRECT ANSWER✅✅✅The mutual understanding and consent
between parties to enter into a contract.
Consideration - CORRECT ANSWER✅✅✅The binding force of any contract; something of value that
each party gives to each other.
Legality - CORRECT ANSWER✅✅✅The purpose of the contract must be legal and not against public
policy; must have insurable interest and consent.
Contract of adhesion - CORRECT ANSWER✅✅✅Prepared by one of the parties (insurer) and
accepted or rejected by the other party (insured); insurance contracts are take it or leave it basis.
Aleatory Contract - CORRECT ANSWER✅✅✅An insurance contract characterized by an uneven
exchange of values.
Unilateral contract - CORRECT ANSWER✅✅✅Only one of the parties to the contract is legally bound
to do anything; one-sided promises.
Conditional Contract - CORRECT ANSWER✅✅✅Requires conditions that must be met by the policy
owner and the company in order for the contract to be executed.
Proof of Loss - CORRECT ANSWER✅✅✅The evidence that the insured must provide in order for the
insurer to cover the claim.
, Warranty - CORRECT ANSWER✅✅✅An absolutely true statement upon which the validity of the
insurance policy depends.
Representations - CORRECT ANSWER✅✅✅Statements that are believed to be true to the best of
one's knowledge, but not guaranteed to be true.
Nonmedical Application - CORRECT ANSWER✅✅✅An application where the agent and proposed
complete the medical information if the amount of insurance is small.
Medical Examination - CORRECT ANSWER✅✅✅A requirement by the insurer for larger amounts of
insurance to assess the applicant's health.
Agent/Life Insurance Producer - CORRECT ANSWER✅✅✅The company's field underwriter.
Agent's Report - CORRECT ANSWER✅✅✅A report that provides personal observations concerning
the proposed insured.
Premium Receipt - CORRECT ANSWER✅✅✅A receipt issued by an agent whenever premiums are
collected.
Conditional Receipt - CORRECT ANSWER✅✅✅A receipt that indicates the applicant may be covered
as early as the date of the application or the date of the medical exam, whichever occurs last.
Replacement - CORRECT ANSWER✅✅✅The practice of terminating an existing policy or letting it
lapse, and obtaining a new one.
Underwriting - CORRECT ANSWER✅✅✅The risk selection process aimed at protecting the insurer
against adverse selection.
Insurable Interest - CORRECT ANSWER✅✅✅The possibility of losing something of value, which must
exist at the time of the application.
