#1
Which of the following is a basic principle of life insurance?
Risk pooling
ExplanationPooling of risks among policyholders to spread the financial impact of losses.
#2
Which type of life insurance provides coverage for a specified term and does not accumulate cash value?
Term life insurance
ExplanationLife insurance that provides coverage for a specific period without investment benefits.
#3
In life insurance, what is the purpose of the 'grace period'?
To allow for late premium payments without policy lapse
ExplanationA period during which late payments can be made without penalty.
#4
Which of the following is a characteristic of whole life insurance?
Builds cash value over time
ExplanationAccumulates cash value and provides coverage until death.
#5
What does 'in-force' mean in the context of life insurance?
The policy is active and premiums are being paid
ExplanationThe policy is active, and premiums are being regularly paid.
#6
What does the term 'underwriting' refer to in life insurance?
Assessing risk and determining eligibility
ExplanationEvaluation of risk factors to decide on insurability and premium rates.
#7
What is a 'rider' in the context of life insurance?
An additional benefit added to a policy
ExplanationAdditional coverage options or modifications to a life insurance policy.
#8
In life insurance, what does 'mortality risk' refer to?
The risk of premature death of the insured
ExplanationThe likelihood of the insured individual dying before the policy matures.
#9
Which of the following is NOT a factor typically considered when determining life insurance premiums?
Marital status of the insured
ExplanationMarital status usually doesn't directly impact life insurance premiums.
#10
What does the term 'cash surrender value' represent in life insurance?
The amount of cash value available for withdrawal or surrender
ExplanationThe sum of money accessible to the policyholder upon policy surrender.
#11
What is the main purpose of the cash value component in permanent life insurance policies?
To accumulate savings over time
ExplanationBuilding up cash reserves that policyholders can access during their lifetime.
#12
What is the purpose of a 'contestability period' in a life insurance policy?
To contest the cause of death of the insured
ExplanationA period during which the insurer can investigate and contest claims.
#13
What is the purpose of the 'incontestability clause' in a life insurance policy?
To prevent the insurer from contesting the policy after a certain period
ExplanationPrevents the insurer from challenging the validity of the policy after a specific time period.
#14
In life insurance, what is the 'exclusion' clause used for?
To exclude coverage for specific risks or conditions
ExplanationStipulates what risks or conditions are not covered by the policy.
#15
What is the primary purpose of the 'incontestability clause' in a life insurance policy?
To prevent the insurer from contesting the policy after a certain period
ExplanationPrevents the insurer from challenging the validity of the policy after a specific time period.