Definitions - Life insurance basic (Chapter 2)

Question 1

Adverse selection

Answer 1

tendency of individuals with higher probability of loss to purchase insurance more often than those who present a lower risk

Question 2

Beneficiary

Answer 2

a person who receives the benefits of an insurance policy

Question 3

Death benefit

Answer 3

the amount paid upon the death of the insured in a life insurance policy

Question 4

Cash value

Answer 4

equity amount accumulated in permanent life insurance

Question 5

Estate

Answer 5

a person’s net worth

Illustrations — presentation or depiction of nonguaranteed elements of a life insurance policy

Question 6

Life insurance

Answer 6

— coverage on human lives

Question 7

Liquidation

Answer 7

selling assets in order to raise capital

Question 8

Lump-sum

Answer 8

payment of the entire benefit in one sum

Question 9

Minor

Answer 9

a person under legal age

Question 10

Solvency

Answer 10

ability to meet financial obligations (e.g. an insurance company maintains enough assets to pay claims)