Free AL Life & Health Exam Flashcards

Pure risk offers loss or no loss and is generally insurable. Speculative risk can produce loss, no change, or gain, so ordinary insurance does not cover it.

Transfer shifts specified financial consequences to another party, as an insurance contract does. Retention leaves the person or business responsible for paying the loss.

An admitted insurer holds state authority to transact insurance and is subject to that state's solvency and market rules. A nonadmitted insurer lacks that authority for ordinary admitted-market business.

The insurer drafts the standard contract and the applicant accepts or rejects it. A genuine ambiguity is therefore generally construed against the insurer that wrote the language.

The parties exchange values that may be unequal because performance depends on an uncertain event. A small premium can support a much larger covered benefit, or no claim may occur.

It arises from the insurer's words, conduct, or circumstances that reasonably cause a third party to believe the producer has authority. The appearance must be traceable to the principal, not merely the producer's claim.

It is material when the truth would have affected the insurer's decision to issue, rate, limit, or decline the coverage. Materiality concerns the underwriting decision, not whether the misstated fact caused the later loss.

The producer observes the applicant, asks complete questions, records answers accurately, and reports relevant facts to the insurer. Final risk classification and issue decisions remain with the insurer's underwriter.

Coverage depends on the receipt's stated requirements, commonly payment and satisfaction of insurability conditions as of a defined date. It is not an unconditional promise that coverage began when money was collected.

People expecting greater-than-average loss are more likely to seek or keep coverage. Classification, evidence of insurability, and accurate pricing help prevent a pool from attracting disproportionate risk.

Term life fits a temporary protection need with no cash-value objective. Whole life fits permanent protection when level premiums and guaranteed cash value are important.

Joint life pays at the first insured's death. Survivorship life pays only after the last insured dies, making it useful for needs that arise after both deaths.

Universal life separates policy charges, credited interest, and flexible premium or death-benefit choices. Whole life generally uses fixed premiums and guarantees specified values under the contract.

The policyowner bears the investment risk for values placed in separate-account options. The producer must not present variable returns or cash values as guaranteed.

Interest is credited under a policy formula linked to an external index, often with caps, participation rates, or floors. The policyowner does not directly own the index's securities or receive its dividends.

The policyowner controls contractual rights, subject to policy terms and any irrevocable beneficiary's rights. The insured is the life measured, and the beneficiary receives proceeds when due.

An irrevocable beneficiary has a vested interest that generally requires consent before the owner changes the beneficiary or exercises rights that impair that interest. A revocable beneficiary has no comparable consent right.

Incontestability limits how long the insurer may challenge application statements. The suicide provision separately limits the death benefit for suicide during its stated early-policy period.

A grace period keeps coverage in force briefly after a premium is due. Reinstatement restores a policy after lapse and commonly requires overdue amounts, interest, and evidence of insurability.

Collateral assignment transfers only enough policy rights to secure a debt, so remaining proceeds stay with the beneficiary. Absolute assignment transfers the owner's full contractual rights to the assignee.

Extended term uses cash value to buy term coverage at the original face amount for a limited period. Reduced paid-up insurance instead buys a smaller permanent death benefit with no further premiums.

A settlement option determines how death proceeds are paid. A dividend option determines how a participating policy's nonguaranteed dividend is used or received while the policy is in force.

Loan principal and interest reduce available cash value and the net death benefit. If the growing balance exhausts value, the policy can lapse and may create tax consequences.

After its conditions and elimination period are met, it waives covered policy premiums while disability continues. It preserves the insurance contract; it does not pay the insured a monthly income benefit.

It lets the insured buy stated additional coverage at specified times or events without new medical evidence. The new premium can still reflect the insured's attained age.

During accumulation, value builds and the owner retains contract choices. Annuitization converts value into an income stream under a selected payout option, usually making that payout choice irrevocable.

The group policyowner, commonly an employer, receives the master policy. Each insured member receives a certificate summarizing coverage rather than owning the master contract.

It determines eligibility for specified Social Security benefits based on covered work credits. It does not by itself set the benefit amount, which depends on the applicable earnings and benefit formula.

Indemnity coverage generally reimburses covered expenses with broad provider choice. Managed care uses networks, negotiated payment arrangements, and utilization controls to coordinate cost and access.

The deductible is the amount the insured pays before the plan begins sharing covered expenses. Coinsurance is the percentage split applied after the deductible, subject to the plan's terms.

An HMO usually emphasizes coordinated in-network care and may require a primary-care referral. A PPO usually permits direct specialist access and some out-of-network benefits at greater member cost.

An HDHP is the qualifying health insurance plan. An HSA is the individually owned, tax-advantaged account that an eligible person can use for qualified medical expenses.

It determines which plan pays first when a person has overlapping health coverage and prevents total payments from exceeding the allowable covered expense. It does not automatically split every claim equally.

A benefit maximum caps what the plan pays for specified coverage. An out-of-pocket maximum caps specified member cost sharing for covered services; premiums and excluded expenses generally do not count toward it.

It is the waiting period after disability begins before benefits become payable. A longer elimination period usually lowers premium because the insured retains more short-term income risk.

Own-occupation can pay when the insured cannot perform the substantial duties of the insured's occupation. Any-occupation requires inability to perform work meeting the policy's broader standard of suitability.

It identifies the policy and attached application or endorsements as the complete agreement. The insurer cannot rely on an unattached document to add undisclosed terms after issue.

Notice alerts the insurer that a loss occurred. Proof of loss supplies the documentation needed to evaluate it; satisfying one duty does not automatically satisfy the other.

The employer or other eligible group policyholder owns the master contract. Covered members receive certificates and benefits but generally do not control the master policy's terms.

Continuation temporarily keeps the person under the group plan, usually at the person's cost. Conversion replaces group coverage with an individual policy under the applicable contract or law.

Part D provides outpatient prescription-drug coverage through approved private plans. Part A is mainly hospital insurance, Part B is medical insurance, and Part C is the Medicare Advantage alternative for receiving Parts A and B benefits.

It pays only for the named disease or defined event under its limited terms. An illness outside that trigger can produce no benefit even when the insured has substantial medical expense.

It addresses covered custodial or skilled-care needs when a person meets the policy's benefit triggers, such as impaired activities of daily living or cognitive impairment. It is not ordinary acute-care medical insurance.

The commissioner administers and enforces Alabama insurance law, including insurer authorization, producer licensing, examinations, investigations, and discipline. The commissioner regulates the market; the producer does not grant exceptions.

A license establishes the producer's state authority for a line of insurance. An appointment is an insurer's separate authorization for that producer to represent it; one does not substitute for the other.

Most resident producers complete 24 approved hours during each biennial license period, including 3 ethics hours. A producer should verify any limited-license or other exception rather than assume the general rule applies.

Identify the proposed replacement, provide required notices, and submit accurate replacement information so both insurers and the applicant can evaluate lost benefits, new contestability, costs, and surrender effects.

The producer must use the consumer's financial situation, objectives, needs, and alternatives to support the recommendation, disclose material conflicts, and avoid placing the producer's financial interest ahead of the consumer's.

Its narrow trigger or benefit schedule can leave large expenses uncovered. Clear disclosure prevents the buyer from mistaking specified-disease, accident-only, or other limited coverage for comprehensive medical insurance.

The applicant must understand whether existing coverage will end, whether the new policy duplicates benefits, and how new terms affect protection. Required replacement disclosures support an informed change rather than an unnecessary switch.