CA PSI SITE - LIFE, ACCIDENT
AND HEALTH AGENT
EXAMINATION (LIFE AGENT)
WITH CORRECT ANSWERS
GRADED A+
Aleatory Contract - ANSWER --The exchange of value is unequal.
Insured's premium payment is less than the potential benefit to be received in the event of a
loss.
Indemnity Contract - ANSWER --An agreement to pay on behalf of another party under
specified circumstances
Unilateral Contract - ANSWER --Only one party is legally bound to the contractual
obligations after the premium is paid to the insurer
Only the insurer makes a promise of future performance, and only the insurer can be charged
with breach of contract
Admitted Insurance Company vs. Non-Admitted Insurance Company - ANSWER --An
admitted insurance company is authorized to transact insurance in California because it has a
Certificate of Authority granted by the California Department of Insurance (CDI)
,A non-admitted insurance company is not authorized to transact insurance in California because
of failing to comply with California requirements or did not seek admission
Pure Risk vs. Speculative Risk - ANSWER --Pure risks are insurable but Speculative risks are
not
Pure Risks - A possibility of loss, no loss, or gain
Pure Risk - A possibility of loss or no loss; there is no possibility for gain
Contract of Adhesion - ANSWER --One party writes the contract without inout from the
other party on a "take-it-or-leave-it" basis
4 elements of a valid contract - ANSWER --1) Competent Parties
2) Legal Purpose
3) Agreement (offer and acceptance)
4) Consideration
Preferred Risks vs Standard Risks - ANSWER --Standard Risks are individuals who have the
same health, habits, sex/gender, and occupational characteristics as those reflected in the
mortality table
Preferred Risks are individuals who meet certain requirements and qualify for lower premiums
because of ideal health, height and weight. Individuals in this category have a longer than
average life expectancy
,Human Life Value Approach vs. Needs Analysis Approach - ANSWER --Human Life Value
approach is a measure of the projected future earnings and services of a person at risk in the
event of a premature death.
In the event of total disability and after the initial waiting period (such as 6 months), premiums
are waived and the insured is paid a monthly income.
The monthly disability income benefit is typically limited to a percentage of the face value.
The benefit paid from the rider does not reduce the death benefits paid out upon death.
Accidental Death Benefit rider - ANSWER --Life Insurance Rider affecting the death benefit
amount
May be called multiple indemnity rider
In the event of a claim, the policy normally pays double or triple the face amount only if the
insured's death was a result of an accident.
The benefit is payable only if death occurs before a specific age and within 90 days of the
accident
Separate Account (Variable) vs General Account (Life Insurance) - ANSWER --The separate
account is invested in debt or equity securities as offered by the insurance company.
o Both the cash value in the separate account and the death benefit will fluctuate based on
market conditions and performance of the subaccounts.
o There is no guaranteed minimum return on the cash value in the separate account and the
policy may lose both cash value and death benefit if there are market losses.
o The death benefit is recalculated annually.
, The general account provides a fixed rate of interest and the cash value in the general account
provides for a guaranteed minimum death benefit.
Viatical Settlement - ANSWER --An agreement between a policyowner and a third-party
buyer to purchase the life policy covering a person who is diagnosed as terminally ill with less
than 24 months remaining life expectancy.
Principle of Indemnity - ANSWER --To indemnify means to restore a person, in whole or in
part, to the same physical or financial condition which existed prior to a loss, but without profit
or gain.
In life and health insurance, it may not be possible to truly indemnify a person for all losses.
o Instead, indemnity takes the form of cash (a death or disability income benefit) or payments
to physicians or hospitals for care and services provided to an insured who is injured or ill.
Joint Life - ANSWER --Joint Life (First to Die) is a whole life policy that is written to cover 2
or more lives.
• The death benefit is paid upon the first insured to die and the policy terminates.
Joint Survivorship - ANSWER --Joint Survivorship (Last to Die) is a whole life policy written
to cover 2 or more lives, and the death benefit is not paid until the last insured dies.
The objective is to provide the proper amount of coverage as determined by the value of the
individual to his/her dependents using the following factors:
- The individual's age and gender
- The individual's occupation, annual wage, and planned retirement age
- Inflation
AND HEALTH AGENT
EXAMINATION (LIFE AGENT)
WITH CORRECT ANSWERS
GRADED A+
Aleatory Contract - ANSWER --The exchange of value is unequal.
Insured's premium payment is less than the potential benefit to be received in the event of a
loss.
Indemnity Contract - ANSWER --An agreement to pay on behalf of another party under
specified circumstances
Unilateral Contract - ANSWER --Only one party is legally bound to the contractual
obligations after the premium is paid to the insurer
Only the insurer makes a promise of future performance, and only the insurer can be charged
with breach of contract
Admitted Insurance Company vs. Non-Admitted Insurance Company - ANSWER --An
admitted insurance company is authorized to transact insurance in California because it has a
Certificate of Authority granted by the California Department of Insurance (CDI)
,A non-admitted insurance company is not authorized to transact insurance in California because
of failing to comply with California requirements or did not seek admission
Pure Risk vs. Speculative Risk - ANSWER --Pure risks are insurable but Speculative risks are
not
Pure Risks - A possibility of loss, no loss, or gain
Pure Risk - A possibility of loss or no loss; there is no possibility for gain
Contract of Adhesion - ANSWER --One party writes the contract without inout from the
other party on a "take-it-or-leave-it" basis
4 elements of a valid contract - ANSWER --1) Competent Parties
2) Legal Purpose
3) Agreement (offer and acceptance)
4) Consideration
Preferred Risks vs Standard Risks - ANSWER --Standard Risks are individuals who have the
same health, habits, sex/gender, and occupational characteristics as those reflected in the
mortality table
Preferred Risks are individuals who meet certain requirements and qualify for lower premiums
because of ideal health, height and weight. Individuals in this category have a longer than
average life expectancy
,Human Life Value Approach vs. Needs Analysis Approach - ANSWER --Human Life Value
approach is a measure of the projected future earnings and services of a person at risk in the
event of a premature death.
In the event of total disability and after the initial waiting period (such as 6 months), premiums
are waived and the insured is paid a monthly income.
The monthly disability income benefit is typically limited to a percentage of the face value.
The benefit paid from the rider does not reduce the death benefits paid out upon death.
Accidental Death Benefit rider - ANSWER --Life Insurance Rider affecting the death benefit
amount
May be called multiple indemnity rider
In the event of a claim, the policy normally pays double or triple the face amount only if the
insured's death was a result of an accident.
The benefit is payable only if death occurs before a specific age and within 90 days of the
accident
Separate Account (Variable) vs General Account (Life Insurance) - ANSWER --The separate
account is invested in debt or equity securities as offered by the insurance company.
o Both the cash value in the separate account and the death benefit will fluctuate based on
market conditions and performance of the subaccounts.
o There is no guaranteed minimum return on the cash value in the separate account and the
policy may lose both cash value and death benefit if there are market losses.
o The death benefit is recalculated annually.
, The general account provides a fixed rate of interest and the cash value in the general account
provides for a guaranteed minimum death benefit.
Viatical Settlement - ANSWER --An agreement between a policyowner and a third-party
buyer to purchase the life policy covering a person who is diagnosed as terminally ill with less
than 24 months remaining life expectancy.
Principle of Indemnity - ANSWER --To indemnify means to restore a person, in whole or in
part, to the same physical or financial condition which existed prior to a loss, but without profit
or gain.
In life and health insurance, it may not be possible to truly indemnify a person for all losses.
o Instead, indemnity takes the form of cash (a death or disability income benefit) or payments
to physicians or hospitals for care and services provided to an insured who is injured or ill.
Joint Life - ANSWER --Joint Life (First to Die) is a whole life policy that is written to cover 2
or more lives.
• The death benefit is paid upon the first insured to die and the policy terminates.
Joint Survivorship - ANSWER --Joint Survivorship (Last to Die) is a whole life policy written
to cover 2 or more lives, and the death benefit is not paid until the last insured dies.
The objective is to provide the proper amount of coverage as determined by the value of the
individual to his/her dependents using the following factors:
- The individual's age and gender
- The individual's occupation, annual wage, and planned retirement age
- Inflation
