SLII Agent Exam cheat sheet

Insurable interest requires a financial or legally recognized relationship such that the insured benefits from the subject's survival and suffers loss from its damage; it must exist at policy inception (life) or at inception and at time of loss (property).

Indemnity principle: property insurance restores the insured to pre-loss financial position, never profit; life insurance and personal accident benefits are valued policies and are not subject to strict indemnity.

Utmost good faith (uberrimae fidei) obliges both parties to disclose material facts; material facts are those a prudent underwriter would consider in assessing or pricing the risk.

Utmost good faith is a duty of fair presentation: the proposer must disclose material facts, avoid misrepresentation, and not withhold facts a reasonable insurer would want to know; non-disclosure can render a policy voidable.

Proximate cause is the dominant, effective cause of loss, not the last event; where an insured peril and an excluded peril operate, the efficient cause determines whether the claim is payable.

Subrogation allows the insurer, after paying a claim, to stand in the insured's shoes and recover from the third party at fault; it cannot exceed the amount paid and does not apply to life policies.

Contribution applies when two or more policies cover the same risk and same interest, allowing each insurer to share the loss; it requires common subject matter, common peril, and common insured interest.

Risk pooling spreads individual losses across many policyholders; the law of large numbers reduces uncertainty as the number of independent, homogeneous exposure units increases.

Moral hazard concerns dishonest intent (e.g., arson for profit); morale hazard concerns carelessness or indifference (e.g., leaving a door unlocked); both affect underwriting and premium.

Term life pays a death benefit only if death occurs during the term; it builds no cash value and is typically the lowest-cost form of pure protection.

Whole life is permanent coverage with level premiums, guaranteed cash value, and non-forfeiture options (cash surrender, reduced paid-up, extended term); policy loans accrue interest and reduce the death benefit if unpaid.

Universal life separates the mortality charge from the cash value; the cost of insurance rises with age, and a policy may lapse if cash value is insufficient to cover charges (unless a no-lapse guarantee applies).

Underwriting uses medical, financial, and lifestyle information; a conditional receipt provides interim coverage that may be limited to the standard terms if the applicant is insurable at standard rates.

Suicide clause typically excludes payment of the face amount for death by suicide within a stated period (commonly two years), after which the full benefit is payable.

Incontestability clause: after the contestability period (typically two years from issue), the insurer cannot deny a claim for material misrepresentation, except for fraud or non-payment of premium.

Grace period (commonly 30 or 31 days) allows premium payment after the due date while keeping coverage in force; if death occurs, the overdue premium is deducted from the benefit.

Beneficiary rules: primary beneficiaries share per capita unless percentages are specified; contingent beneficiaries receive proceeds only if no primary beneficiary survives; per stirpes divides a deceased beneficiary's share among their descendants.

Free-look period (commonly 10-30 days) allows the policyholder to return the policy for a full refund of premium; reinstatement after lapse typically requires evidence of insurability and payment of overdue premiums.

Property insurance valuation methods: actual cash value = replacement cost minus depreciation; replacement cost pays new-for-old without depreciation; agreed value fixes the sum insured at inception.

Co-insurance (average) clause: if the sum insured is below the required percentage of the property's value, the claim is reduced proportionally: Claim = Loss x (Sum Insured / (Co-insurance % x Value at risk)).

Deductible (excess) is deducted from each loss before payment; a franchise means no payment if the loss is below the threshold, but the full amount is paid if the loss exceeds it.

Liability insurance covers legal liability for bodily injury or property damage to third parties, plus defense costs; it does not cover the insured's own property or contractual penalties.

Motor insurance: third-party liability is typically compulsory; comprehensive/collision coverage adds damage to the insured vehicle; no-claims discounts reward claim-free years.

Marine and cargo insurance: general average requires all cargo interests to share a sacrifice made to save the venture; particular average is borne by the individual cargo owner.

Business interruption insurance covers lost gross profit and increased cost of working following an insured property loss; the indemnity period is the time needed to restore normal trading.

Health and accident policies often use waiting periods, pre-existing condition exclusions, and sub-limits; claims are settled on a reimbursement or fixed-benefit basis.

Reinsurance: facultative is arranged case by case; treaty is automatic for a class of business; proportional (quota share, surplus) shares premiums and losses, while non-proportional (excess of loss) responds above a retention.

An insurance contract requires offer, acceptance, consideration, legal capacity, and lawful object; the consideration is the premium and the promise to pay claims.

A contract of adhesion is drafted by the insurer; ambiguity is construed against the drafter (contra proferentem), and exclusions are interpreted narrowly.

Warranties are strict promises in the contract; a breach can discharge the insurer, whereas representations are statements made before the contract that need only be substantially true.

Regulators license insurers and intermediaries, approve policy forms and rates where required, monitor solvency (capital adequacy), and handle market-conduct supervision.

Anti-money-laundering obligations include customer due diligence, identifying beneficial owners, enhanced due diligence for politically exposed persons, and suspicious activity reporting.

Data protection principles: collect only necessary data, use it for stated purposes, keep it secure, retain it no longer than required, and honor access and correction rights.

Ethical duties of agents: act in the client's best interest, disclose commissions and conflicts, avoid misrepresentation and churning, and maintain confidentiality.

Utmost good faith and fair dealing apply to both parties; unfair claim practices include unreasonable delay, failure to investigate, and offering less than the policy requires.

Sanctions and anti-fraud rules require insurers to screen customers and report suspected fraud; misrepresentation can void the policy and may constitute a criminal offense.

Needs-based selling: identify the client's goals, risk exposures, and budget before recommending a product; the recommendation should match the identified need, not the agent's target.

Fact-finding covers personal details, financial situation, existing coverage, health, and objectives; the resulting needs analysis documents gaps and informs the recommendation.

The sales process: prospecting, approach, fact-finding, presentation, handling objections, closing, and follow-up/service; each stage has specific objectives.

Objection handling: acknowledge the concern, clarify the underlying issue, respond with relevant facts, and confirm the client's understanding before proceeding.

Marketing compliance: advertising must be accurate, balanced, not misleading, and must include required disclosures; testimonials and illustrations must be representative and not exaggerated.

Customer segmentation and targeting should comply with fair treatment rules; vulnerable customers require extra care in communication and suitability assessment.

Customer service standards: prompt response, clear communication, accurate documentation, and a defined complaints procedure with escalation and resolution timelines.

Retention and relationship management: regular policy reviews, proactive renewal reminders, and claims support reduce lapse rates and build trust.

Cross-selling and upselling must be based on suitability; recommending unnecessary coverage or replacement of an existing policy without clear benefit is unsuitable (churning).