AFK Insurance Fundamentals Flashcards

What does the 'free look period' in a life insurance policy allow the policyholder to do?

Answer: Cancel the policy within a specified period (typically 10–30 days) for a full premium refund

The free look period gives new policyholders a window—typically 10 to 30 days—to review and cancel a policy for a full refund if they are not satisfied.

Which life insurance policy feature allows the policyholder to skip premium payments using accumulated cash value?

Answer: Automatic premium loan provision

The automatic premium loan provision uses the policy's cash value to pay overdue premiums as a loan, preventing the policy from lapsing.

What is the primary difference between an 'own-occupation' and an 'any-occupation' disability definition in disability income insurance?

Answer: Own-occupation pays if the insured cannot perform their specific occupation; any-occupation requires inability to perform any job for which the insured is reasonably suited

Own-occupation pays benefits if the insured cannot perform the duties of their specific occupation, while any-occupation pays only if the insured cannot perform any job for which they are reasonably qualified.

Universal life insurance differs from whole life insurance primarily because it offers:

Answer: Flexible premiums and an adjustable death benefit within policy limits

Universal life insurance allows policyholders to adjust premium payments and death benefit amounts within certain limits, providing flexibility not available in whole life policies.

What is a 'beneficiary designation' in a life insurance policy, and why is it important in estate planning?

Answer: The named individual(s) who receive the death benefit, typically passing outside of probate

A beneficiary designation names who receives the death benefit, and because these assets pass directly to the named beneficiary, they bypass the probate process, ensuring faster and private transfer of assets.

What is the 'elimination period' in a disability income insurance policy?

Answer: The waiting period between the onset of disability and when benefits begin to be paid

The elimination period is the waiting period—typically 30, 60, 90, or 180 days—after a disability occurs before disability income benefits begin.