AFK Insurance Fundamentals Flashcards

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

Answer: Term life insurance

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.

What distinguishes whole life insurance from term life insurance?

Answer: Whole life provides lifetime coverage with a cash value component

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

What is the primary purpose of disability income insurance?

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

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.

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

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

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.

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

Answer: Fixed annuity

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

Long-term care insurance typically covers which of the following services?

Answer: Assistance with activities of daily living (ADLs) in a nursing home, assisted living, or at home

Long-term care insurance covers the cost of assistance with ADLs (such as bathing, dressing, eating) in various settings including nursing homes, assisted living facilities, and home care.