Insurance Exam Practice Flashcards

Which type of life insurance policy builds cash value and keeps the premium level for the life of the insured?

Answer: Whole life

Whole life insurance provides permanent coverage with a fixed premium and a guaranteed cash value accumulation component.

Under the concept of subrogation, an insurer that pays a claim then has the right to:

Answer: Recover payment from a negligent third party

Subrogation allows the insurer to step into the insured's shoes and sue the responsible third party to recover the amount paid.

A property insurance policy that pays the cost to repair or replace damaged property without deducting for depreciation is using which valuation method?

Answer: Replacement cost

Replacement cost coverage pays the full cost to replace damaged property with new property of like kind and quality, without subtracting depreciation.

An insured deliberately misrepresents a material fact on an insurance application. This is known as:

Answer: Fraud

Fraud is an intentional misrepresentation of a material fact made with the intent to deceive the insurer.

The 'free look' period in a life insurance policy typically allows the policyowner to:

Answer: Return the policy for a full refund within a set number of days

The free look period (typically 10–30 days) lets the policyowner review and return the policy for a full premium refund if not satisfied.

Which Medicare supplement plan is standardized so that insurers must offer identical benefits under the same plan letter?

Answer: Medigap plans

Medigap (Medicare Supplement) plans are federally standardized by plan letter (A–N), so Plan G from one insurer must offer the same benefits as Plan G from another.

Under a disability income policy, the 'elimination period' functions similarly to:

Answer: A deductible expressed in time

The elimination period is a waiting period at the start of a disability during which no benefits are paid, acting like a time-based deductible.