AFK AFK Insurance Fundamentals 1

Question 1

What type of life insurance provides a death benefit for a specified period and has no cash value component?

Accepted Answer

Term life insurance

Answer

Term life insurance provides a pure death benefit for a defined period (e.g., 10, 20, or 30 years) with no savings or cash value accumulation.

Question 2

What distinguishes whole life insurance from term life insurance?

Accepted Answer

Whole life provides lifetime coverage with a cash value component

Answer

Whole life insurance provides permanent coverage for the insured's lifetime and accumulates a guaranteed cash value that grows tax-deferred.

Question 3

What is the primary purpose of disability income insurance?

Accepted Answer

To replace a portion of income when the insured cannot work due to illness or injury

Answer

Disability income insurance replaces a percentage of the insured's earned income (typically 60–70%) if they become unable to work due to a covered disability.

Question 4

In life insurance, what is the 'incontestability clause'?

Accepted Answer

A clause that prevents the insurer from denying a claim based on misrepresentation after a specified period (usually 2 years)

Answer

The incontestability clause prevents an insurer from voiding a policy or denying a claim due to misrepresentation after the policy has been in force for the contestability period, typically two years.

Question 5

Which type of annuity guarantees a fixed interest rate for a specified period and is not tied to market performance?

Accepted Answer

Fixed annuity

Answer

A fixed annuity credits interest at a guaranteed rate set by the insurer, providing predictable growth independent of market conditions.

AFK - Assessment of Fundamental Knowledge Practice Test

AFK - Assessment of Fundamental Knowledge Practice Test

AFK AFK Insurance Fundamentals 1