Life Insurance Practice
What the exam tests
Life Insurance Practice tests product types, underwriting, policy provisions, nominations, claims, and the mathematics of premiums and reserves at agent level.
Core rules
- Risk classification: insurers group lives by age, sex, health, occupation, and habits; smokers usually pay more.
- Product families: term, whole life, endowment, universal life, and annuities. Term has no cash value; whole life combines death cover with cash value; endowment pays at maturity or death.
- Key provisions: free-look/cooling-off, grace period, reinstatement, incontestability, suicide clause, non-forfeiture, policy loan, assignment, and nomination.
- Nomination: a nominee receives policy money under the policy terms; ownership and beneficiary rights depend on the jurisdiction and policy wording.
- Claims: death certificate, proof of identity, and claim forms; insurers check non-disclosure and exclusions.
Worked example
A 45-year-old non-smoker buys a 20-year term policy with a sum assured of $200,000 and pays the first premium. He dies by suicide 14 months later. The policy's suicide clause excludes the death benefit in the first 12 months but refunds premiums. Because death occurred after the clause period, the insurer pays the sum assured, subject to any incontestability period. If he had died in month 10, the insurer would refund premiums only. The reasoning turns on the clause wording and timing, not on the cause being self-inflicted generally.
Traps
- Treating a nominee as automatically the absolute owner.
- Assuming incontestability bars all fraud claims from day one.
- Forgetting that a lapsed policy may need reinstatement evidence.