LIFE & HEALTH INSURANCE
GLOSSARY TERMS EXAM
QUESTIONS & UPDATED CORRECT
ANSWERS
Accelerated Benefits - CORRECT ANSWER Riders attached to life insurance policies
which allow death benefits to be used to cover nursing or convalescent home expenses.
Accidental Death Benefits - CORRECT ANSWER A policy rider that states that the
cause of death will be analyzed to determine if it complies with the policy description of
accidental death.
Accidental Death Insurance - CORRECT ANSWER An insurance policy that provides
payment if the insured's death is the result of an accident.
Accumulation Period - CORRECT ANSWER The time before an annuitant's retirement
during which the annuitant is making payments or investments in an annuity.
Acquired Immunodeficiency Syndrome (AIDS) - - CORRECT ANSWER An infectious
and incurable disease caused by the human immunodeficiency virus (HIV).
Actual Cash Value (ACV) - CORRECT ANSWER The required amount to pay damages
or for property loss. This amount is calculated based on the property's current
replacement value minus depreciation.
Actuary - CORRECT ANSWER A person trained in the technical aspects of insurance
and related fields, particularly in the mathematics of insurance; a person who, on behalf
of the company, determines the mathematical probability of loss.
Adhesion - CORRECT ANSWER A contract offered on a "take-it-or leave-it" basis by
an insurer, in which the insured's only option is to either accept or reject the contract.
Any ambiguities in the contract will be settled in favor of the insured.
Adjustable Life - CORRECT ANSWER Life insurance which permits changes in the
face amount, premium amount, period of protection, and the duration of the premium
payment period.
Adjuster - CORRECT ANSWER A representative of an insurance company who
investigates and acts on the behalf of the company to obtain agreements for the amount
of the insurance claim.
,Administrator - CORRECT ANSWER An individual appointed by a court as a fiduciary
to settle the financial affairs and estate of a deceased person.
Admitted (Authorized) Insurer - CORRECT ANSWER An insurance company
authorized and licensed to transact business in a particular state.
Adult Day Care - CORRECT ANSWER A program for impaired adults that attempts to
meet their health, social, and functional needs in a setting away from their homes.
Adverse Selection - The tendency of risks with higher probability of loss to purchase
and maintain insurance more often than the risks who present lower probability.
Agency - CORRECT ANSWER An insurance sales office or company.
Agent - CORRECT ANSWER An individual who is licensed to sell, negotiate, or effect
insurance contracts on behalf of the insurer.
Agent's Authority - CORRECT ANSWER Special powers granted to an agent by his or
her agency contract.
Aleatory - A contract in which participating parties exchange unequal amounts.
Insurance contracts are aleatory in that the amount the insured will pay in premiums is
unequal to the amount the insurer will pay in the event of a loss.
Alien Insurer - CORRECT ANSWER An insurance company that is incorporated
outside the United States.
Alzheimer's Disease - A disease that causes the victim to become dysfunctional due to
degeneration of brain cells and severe memory loss.
Ancillary - Additional, miscellaneous services provided by a hospital, such as x-rays,
anesthesia, and lab work, but not hospital room and board expenses.
Annual Statement - CORRECT ANSWER A detailed financial report that an insurance
company must submit every year to the insurance department of state(s) in which it
conducts business.
Annuity - CORRECT ANSWER A contract that provides income for a specified period
of years, or for life.
Apparent Authority - CORRECT ANSWER The appearance or the assumption of
authority based on the actions, words, or deeds of the principal or because of
circumstances the principal created.
Applicant - CORRECT ANSWER A person making application for, or offering
him/herself or another to be insured under an insurance contract.
, Application - CORRECT ANSWER A document that provides information for
underwriting purposes. After the policy is issued, any unanswered questions are
considered waived by the insurer.
Assignment - CORRECT ANSWER The transfer of ownership rights of a life insurance
policy from one person to another.
Attained Age - CORRECT ANSWER The age of the insured at a determined date.
Attending Physician's Statement (APS) - CORRECT ANSWER A statement usually
obtained from the applicant's doctor.
Authorized (Admitted) Insurer - An insurance company authorized and licensed to
transact business in a particular state.
Avoidance - CORRECT ANSWER A method of dealing with risk by deliberately
keeping away from it (e.g. if a person wanted to avoid the risk of being killed in an
airplane crash, he/she might choose never to fly in a plane).
Back-End Load - CORRECT ANSWER a fee charged at the time of a sale, transfer or
withdrawal from an annuity or a life insurance policy.
Basic Illustration - CORRECT ANSWER A ledger or proposal used in the sale of a life
insurance policy that shows both guaranteed and nonguaranteed elements.
Beneficiary - CORRECT ANSWER The person who receives the proceeds from the
policy when the insured dies.
Binder (Binding Receipt) - CORRECT ANSWER A temporary contract that puts an
insurance policy into force before the premium has been paid.
Birthday Rule - CORRECT ANSWER The method of determining primary coverage for
a dependent child, under which the plan of the parent whose birthday occurs first in the
calendar year is designated as primary.
Broker - CORRECT ANSWER An individual who represents an insured in the process
of purchasing and negotiating a contract of insurance.
Buy-Sell Agreement - CORRECT ANSWER A legal contract that determines what will
be done with a business in the event that an owner dies or becomes disabled.
Buyer's Guide - CORRECT ANSWER A booklet that describes insurance policies and
concepts, and provides general information to help an applicant make an informed
decision.
Cash Value - CORRECT ANSWER The amount to which a policyowner is entitled if the
policy is surrendered before maturity.
GLOSSARY TERMS EXAM
QUESTIONS & UPDATED CORRECT
ANSWERS
Accelerated Benefits - CORRECT ANSWER Riders attached to life insurance policies
which allow death benefits to be used to cover nursing or convalescent home expenses.
Accidental Death Benefits - CORRECT ANSWER A policy rider that states that the
cause of death will be analyzed to determine if it complies with the policy description of
accidental death.
Accidental Death Insurance - CORRECT ANSWER An insurance policy that provides
payment if the insured's death is the result of an accident.
Accumulation Period - CORRECT ANSWER The time before an annuitant's retirement
during which the annuitant is making payments or investments in an annuity.
Acquired Immunodeficiency Syndrome (AIDS) - - CORRECT ANSWER An infectious
and incurable disease caused by the human immunodeficiency virus (HIV).
Actual Cash Value (ACV) - CORRECT ANSWER The required amount to pay damages
or for property loss. This amount is calculated based on the property's current
replacement value minus depreciation.
Actuary - CORRECT ANSWER A person trained in the technical aspects of insurance
and related fields, particularly in the mathematics of insurance; a person who, on behalf
of the company, determines the mathematical probability of loss.
Adhesion - CORRECT ANSWER A contract offered on a "take-it-or leave-it" basis by
an insurer, in which the insured's only option is to either accept or reject the contract.
Any ambiguities in the contract will be settled in favor of the insured.
Adjustable Life - CORRECT ANSWER Life insurance which permits changes in the
face amount, premium amount, period of protection, and the duration of the premium
payment period.
Adjuster - CORRECT ANSWER A representative of an insurance company who
investigates and acts on the behalf of the company to obtain agreements for the amount
of the insurance claim.
,Administrator - CORRECT ANSWER An individual appointed by a court as a fiduciary
to settle the financial affairs and estate of a deceased person.
Admitted (Authorized) Insurer - CORRECT ANSWER An insurance company
authorized and licensed to transact business in a particular state.
Adult Day Care - CORRECT ANSWER A program for impaired adults that attempts to
meet their health, social, and functional needs in a setting away from their homes.
Adverse Selection - The tendency of risks with higher probability of loss to purchase
and maintain insurance more often than the risks who present lower probability.
Agency - CORRECT ANSWER An insurance sales office or company.
Agent - CORRECT ANSWER An individual who is licensed to sell, negotiate, or effect
insurance contracts on behalf of the insurer.
Agent's Authority - CORRECT ANSWER Special powers granted to an agent by his or
her agency contract.
Aleatory - A contract in which participating parties exchange unequal amounts.
Insurance contracts are aleatory in that the amount the insured will pay in premiums is
unequal to the amount the insurer will pay in the event of a loss.
Alien Insurer - CORRECT ANSWER An insurance company that is incorporated
outside the United States.
Alzheimer's Disease - A disease that causes the victim to become dysfunctional due to
degeneration of brain cells and severe memory loss.
Ancillary - Additional, miscellaneous services provided by a hospital, such as x-rays,
anesthesia, and lab work, but not hospital room and board expenses.
Annual Statement - CORRECT ANSWER A detailed financial report that an insurance
company must submit every year to the insurance department of state(s) in which it
conducts business.
Annuity - CORRECT ANSWER A contract that provides income for a specified period
of years, or for life.
Apparent Authority - CORRECT ANSWER The appearance or the assumption of
authority based on the actions, words, or deeds of the principal or because of
circumstances the principal created.
Applicant - CORRECT ANSWER A person making application for, or offering
him/herself or another to be insured under an insurance contract.
, Application - CORRECT ANSWER A document that provides information for
underwriting purposes. After the policy is issued, any unanswered questions are
considered waived by the insurer.
Assignment - CORRECT ANSWER The transfer of ownership rights of a life insurance
policy from one person to another.
Attained Age - CORRECT ANSWER The age of the insured at a determined date.
Attending Physician's Statement (APS) - CORRECT ANSWER A statement usually
obtained from the applicant's doctor.
Authorized (Admitted) Insurer - An insurance company authorized and licensed to
transact business in a particular state.
Avoidance - CORRECT ANSWER A method of dealing with risk by deliberately
keeping away from it (e.g. if a person wanted to avoid the risk of being killed in an
airplane crash, he/she might choose never to fly in a plane).
Back-End Load - CORRECT ANSWER a fee charged at the time of a sale, transfer or
withdrawal from an annuity or a life insurance policy.
Basic Illustration - CORRECT ANSWER A ledger or proposal used in the sale of a life
insurance policy that shows both guaranteed and nonguaranteed elements.
Beneficiary - CORRECT ANSWER The person who receives the proceeds from the
policy when the insured dies.
Binder (Binding Receipt) - CORRECT ANSWER A temporary contract that puts an
insurance policy into force before the premium has been paid.
Birthday Rule - CORRECT ANSWER The method of determining primary coverage for
a dependent child, under which the plan of the parent whose birthday occurs first in the
calendar year is designated as primary.
Broker - CORRECT ANSWER An individual who represents an insured in the process
of purchasing and negotiating a contract of insurance.
Buy-Sell Agreement - CORRECT ANSWER A legal contract that determines what will
be done with a business in the event that an owner dies or becomes disabled.
Buyer's Guide - CORRECT ANSWER A booklet that describes insurance policies and
concepts, and provides general information to help an applicant make an informed
decision.
Cash Value - CORRECT ANSWER The amount to which a policyowner is entitled if the
policy is surrendered before maturity.
