South Carolina Life Insurance Practice Exam

In insurance, a "corrido" or gap is primarily related to which concept?

1. Claim processing time

2. Coverage limits

3. Cash value and death benefit alignment

4. Re-insurance rules

The correct answer is: Cash value and death benefit alignment

The term "corrido" or gap in the context of insurance primarily relates to the alignment of cash value and death benefit. This concept is essential in life insurance policies where the cash value accumulates over time and can be accessed by the policyholder. However, the death benefit is the amount paid out upon the death of the insured. In some types of life insurance, particularly permanent life insurance, there may be instances where the cash value and death benefit do not align correctly. This misalignment can create a gap—meaning that the cash value could either decrease the death benefit or may not provide adequate coverage at the time of the insured's passing. Understanding how cash value accumulation impacts the death benefit is crucial for policyholders to ensure they have sufficient coverage and to avoid any surprises when a claim is made. Considering the other options: claim processing time refers to how long it takes for a claim to be evaluated and paid, which is unrelated to the intrinsic values of the policy; coverage limits pertain to the maximum amount an insurer will pay for a covered loss and do not focus on the relationship between cash value and death benefit; and re-insurance rules involve agreements between insurance companies to share risks, rather than the direct interaction of cash value and death benefit within