California Life Insurance Exam:
Key Terms, Policies, and
Annuities Exam Questions and
Answers 100% PASS
Insurance—ANSWER-A contract whereby one party (insurer/ agent) agrees to indemnify
another party (insured/ client) against a loss by a specified future contingency or peril in
return for payment of a premium.
Risk—ANSWER-Uncertainty of a loss.
Pure risk—ANSWER-Insurable because it involves a chance of loss only.
Speculative risk—ANSWER-Not insurable because it involves a chance of loss or gain, i.e.
Gambling.
Hazards—ANSWER-Events or conditions that increase the chance of a loss.
Physical hazard—ANSWER-A physical condition: medical history, blindness, deafness.
Moral hazard—ANSWER-A lie.
Morale hazard—ANSWER-Doing really unsafe things.
Peril—ANSWER-The cause of a loss: fire, accident, flood.
, Law of Large Numbers—ANSWER-Predicts the number of deaths that should occur within a
similar group of people; the larger the number, the more accurate the prediction.
Captive/ Career agent—ANSWER-Works for one company and sells only their products.
Independent agent—ANSWER-Works for self and sells products for many companies.
Domestic agent—ANSWER-Incorporated in the state they are doing business (i.e. California).
Foreign agent—ANSWER-Incorporated in another state (i.e. Oregon or Arizona) but doing
business in California.
Alien agent—ANSWER-Incorporated in a country outside the United States (i.e. Canada or
England) but doing business in California.
Fiduciary—ANSWER-A person in position of financial trust. For example, an agent that
collects premiums must remit them promptly to the insurance company.
Appointment—ANSWER-Authorization of an agent/ producer by an insurer to represent the
company.
Authorized/ Admitted—ANSWER-All companies (domestic, foreign, alien) must have a
license to conduct business in a state regardless of where their company is incorporated; An
authorized company has a Certificate of Authority to conduct business in a state.
Certificate of Authority—ANSWER-A license granted by the state's insurance authority which
allows an insurer the right to conduct business in that state.
Expressed—ANSWER-Powers specifically stated and written in the contracts.
Implied—ANSWER-Not specifically stated in the contract but is assumed authority that is
needed to conduct insurance businesses.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
Key Terms, Policies, and
Annuities Exam Questions and
Answers 100% PASS
Insurance—ANSWER-A contract whereby one party (insurer/ agent) agrees to indemnify
another party (insured/ client) against a loss by a specified future contingency or peril in
return for payment of a premium.
Risk—ANSWER-Uncertainty of a loss.
Pure risk—ANSWER-Insurable because it involves a chance of loss only.
Speculative risk—ANSWER-Not insurable because it involves a chance of loss or gain, i.e.
Gambling.
Hazards—ANSWER-Events or conditions that increase the chance of a loss.
Physical hazard—ANSWER-A physical condition: medical history, blindness, deafness.
Moral hazard—ANSWER-A lie.
Morale hazard—ANSWER-Doing really unsafe things.
Peril—ANSWER-The cause of a loss: fire, accident, flood.
, Law of Large Numbers—ANSWER-Predicts the number of deaths that should occur within a
similar group of people; the larger the number, the more accurate the prediction.
Captive/ Career agent—ANSWER-Works for one company and sells only their products.
Independent agent—ANSWER-Works for self and sells products for many companies.
Domestic agent—ANSWER-Incorporated in the state they are doing business (i.e. California).
Foreign agent—ANSWER-Incorporated in another state (i.e. Oregon or Arizona) but doing
business in California.
Alien agent—ANSWER-Incorporated in a country outside the United States (i.e. Canada or
England) but doing business in California.
Fiduciary—ANSWER-A person in position of financial trust. For example, an agent that
collects premiums must remit them promptly to the insurance company.
Appointment—ANSWER-Authorization of an agent/ producer by an insurer to represent the
company.
Authorized/ Admitted—ANSWER-All companies (domestic, foreign, alien) must have a
license to conduct business in a state regardless of where their company is incorporated; An
authorized company has a Certificate of Authority to conduct business in a state.
Certificate of Authority—ANSWER-A license granted by the state's insurance authority which
allows an insurer the right to conduct business in that state.
Expressed—ANSWER-Powers specifically stated and written in the contracts.
Implied—ANSWER-Not specifically stated in the contract but is assumed authority that is
needed to conduct insurance businesses.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
