The Top Terms for The Califorina Life Insurance Exam

If you are preparing for the California life and health insurance exams here are the terms and Concepts you must know prior to sitting for your exam

The California Life and Health Insurance Exam will need to know certain basic concepts relating to the non forfeiture provisions of life and health policies in order to pass the California Life and Health Insurance Exams


NON-FORFEITURE provisions protect insured individuals from having to forfeit (lose) the cash value of a policy for nonpayment of premiums when the policy has been in force and paid for a certain period of time. The non-forfeiture provision is selected at the time of the application. If no option is selected at the time of the application, the default option is extended term.

Note: Non-forfeiture options are only available on cash value insurance policies. Term insurance has no cash value, thus no non-forfeiture provision.

Cash Surrender Value

CASH SURRENDER VALUE is a portion of the excess premiums paid above the mortality costs of a policy. The contract must state that the insurer will pay cash surrender value rather than paid up forfeiture benefits:

If there is nonpayment after the policy has been in effect for a period of time (usually three years).

On the written request of the policy owner.

Payment of a cash surrender value will terminate the policy.

Extended Term Insurance

If the insured has not selected another non-forfeiture provision and has no outstanding policy loans, the death benefit stays the same. The cash value of the policy is used to purchase single premium term insurance to extend coverage as long as possible. When the term insurance runs out, the policy is terminated.

Reduced Paid-up Insurance

This option reduces the amount of paid-up insurance from the original amount to an amount equal to what the existing cash value of the policy can purchase. This reduced face amount will be in force for the insured’s life or to maturity at age 100. With this option, no further payments are needed to keep the policy in effect.

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