Core life and health insurance policy terms and state licensing exam vocabulary.
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- What is life insurance?
- A contract where an insurance company pays a designated beneficiary a sum of money upon the death of the insured person.
- What is health insurance?
- Coverage that pays for medical expenses, including hospitalization, doctor visits, preventive care, and prescription drugs.
- Define beneficiary in insurance.
- The person or entity designated to receive the death benefit or other policy proceeds.
- What is the difference between the policy owner and the insured?
- The policy owner is the person who owns and controls the policy; the insured is the person whose life is covered.
- Define premium.
- The regular payment made by the policyholder to keep an insurance policy in force.
- What is underwriting?
- The process of evaluating an applicant's risk to determine whether to issue a policy and at what rate.
- What is risk classification in underwriting?
- The assignment of an applicant to a risk category (Standard, Preferred, or Substandard) based on health and lifestyle factors.
- What does APS stand for?
- Attending Physician Statement, a detailed report from an applicant's doctor used during underwriting.
- Define the contestability period.
- A period, usually two years from policy issue, during which an insurer can deny a claim due to material misstatement on the application.
- What is a grace period?
- A specified time period, usually 30 days, during which a premium can be paid after the due date without the policy lapsing.
- What is policy reinstatement?
- The process of restoring a lapsed policy to active status by paying overdue premiums and any applicable interest.
- Define surrender value.
- The amount of money a policyholder receives if they voluntarily terminate a policy before maturity.
- What is cash value?
- The portion of permanent life insurance premiums that accumulates as a savings component and can be borrowed against or withdrawn.
- Define term life insurance.
- Life insurance coverage for a specified period, typically 10, 20, or 30 years, with no cash value component.
- What is whole life insurance?
- A permanent life insurance policy that provides lifetime coverage with guaranteed premiums, guaranteed death benefit, and accumulating cash value.