SLII Agent Exam flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Insurable interest

A financial or legally recognized relationship to the subject matter such that the insured benefits from its survival and suffers loss from its damage; required for a valid insurance contract.

Proximate cause

The dominant and effective cause of a loss, as opposed to the last event in the chain; it determines whether the loss falls within the insured perils.

Subrogation

The insurer's right, after paying a claim, to pursue recovery from the third party responsible for the loss, limited to the amount paid and not available for life policies.

Contribution

The principle that when two or more policies cover the same interest and peril, each insurer shares the loss proportionally, preventing double recovery by the insured.

Utmost good faith

The mutual duty of insurer and insured to disclose material facts and avoid misrepresentation; breach can make the contract voidable by the insurer.

Moral hazard

The risk arising from dishonest intent, such as deliberately causing a loss to claim insurance; it influences underwriting and may lead to exclusions.

Law of large numbers

Statistical principle that as the number of independent, homogeneous exposure units increases, actual loss experience converges toward expected loss, improving premium accuracy.

Term life insurance

Coverage that pays a death benefit only if the insured dies within a specified period; it has no cash value and is generally the lowest-cost protection.

Whole life insurance

Permanent coverage with level premiums, guaranteed cash value, and non-forfeiture options such as cash surrender, reduced paid-up, or extended term.

Universal life

Permanent policy separating mortality charges from cash value; the cost of insurance rises with age and the policy may lapse if cash value cannot cover charges.

Incontestability clause

Provision stating that after a stated period, typically two years from issue, the insurer cannot deny a claim based on misrepresentation, except for fraud or non-payment.

Grace period

A period, commonly 30 or 31 days, after a premium due date during which coverage remains in force; any overdue premium is deducted from the benefit.

Suicide clause

An exclusion limiting payment of the face amount if the insured dies by suicide within a stated period, commonly two years, after which the full benefit is payable.

Per stirpes

A beneficiary distribution method in which a deceased beneficiary's share passes to their descendants, rather than being divided equally among surviving named beneficiaries.

Conditional receipt

A receipt given with the initial premium that provides interim coverage, often limited to standard terms if the applicant proves insurable at standard rates.

Free-look period

A period, commonly 10 to 30 days after delivery, during which the policyholder may return the policy for a full refund of premium.

Actual cash value

A property valuation method equal to replacement cost minus depreciation, reflecting the property's value at the time of loss.

Co-insurance clause

A clause requiring coverage of a stated percentage of property value; if underinsured, claims are reduced proportionally by the ratio of sum insured to required amount.

Franchise deductible

A threshold under which no payment is made, but once the loss exceeds the threshold the full loss is paid, unlike a standard deductible.

General average

A marine principle requiring all cargo interests to share proportionally in a sacrifice or expense incurred to save the vessel and cargo from a common peril.

Business interruption cover

Insurance covering lost gross profit and increased cost of working following an insured property loss, for the indemnity period needed to restore normal trading.

Facultative reinsurance

Reinsurance arranged case by case for an individual risk, giving the reinsurer the right to accept or decline each submission.

Treaty reinsurance

An agreement under which the reinsurer automatically accepts all risks within a defined class and limit, sharing premiums and losses under agreed terms.

Contract of adhesion

An insurance contract drafted by the insurer and accepted or rejected by the insured; ambiguities are construed against the drafter.

Warranty in insurance

A strict promise in the contract that, if breached, may discharge the insurer from liability, unlike a representation that need only be substantially true.

Contra proferentem

Interpretation rule that ambiguous policy wording is construed against the party who drafted it, typically the insurer.

Customer due diligence

Anti-money-laundering process of identifying customers and beneficial owners, verifying information, and assessing risk before establishing a business relationship.

Politically exposed person

An individual entrusted with prominent public functions, or a close associate or family member, who requires enhanced due diligence under anti-money-laundering rules.

Churning

Unsuitable replacement of an existing policy with a new one that provides little or no benefit to the client, often driven by agent commission.

Needs-based selling

A sales approach that identifies the client's goals, exposures, and budget through fact-finding before recommending a product that matches the identified need.

Objection handling

A sales technique of acknowledging the client's concern, clarifying the underlying issue, responding with relevant facts, and confirming understanding before proceeding.

Vulnerable customer

A client whose circumstances, such as age, illness, or financial difficulty, reduce their ability to understand or make informed decisions, requiring extra care.