CA PSI SITE STUDY GUIDE 2026 ACCURATE
QUESTION SET AND CORRECT ANSWERS
◉ 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
◉ 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
◉ 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.
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
Needs Analysis Approach determines a need for coverage upon the
premature death of an individual.
It always assumes the death of the individual to be immediate and
factors the following steps into arriving at the proper amount of
coverage needed:
, - Calculate all financial needs caused by immediate death, including
debts, medical bills, and final expenses
- Provide lifetime income to the spouse
- Pay off mortgage or other debts
- Provide funds for children's education
- Subtracts any assets available to fund financial needs after death
(such as retirement plan, other insurance, liquid investments,
separate savings)
◉ Waiver of Premium.
Answer: Life Insurance Disability Rider
If the insured becomes totally disabled, the insurer will waive
premiums for the duration of the disability or the end of the policy,
whichever occurs first.
To qualify for the waiver, the insured must be disabled for a waiting
period of 3-6 months.
The policyowner must continue to pay premiums during the waiting
period, but once eligible, the waiver is retroactive to the start of the
disability and the premiums will be refunded.
During the disability, the insured will credit the premiums to the
policy and all benefits, such as cash value accumulation and
dividend payments, will continue.
QUESTION SET AND CORRECT ANSWERS
◉ 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
◉ 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
◉ 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.
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
Needs Analysis Approach determines a need for coverage upon the
premature death of an individual.
It always assumes the death of the individual to be immediate and
factors the following steps into arriving at the proper amount of
coverage needed:
, - Calculate all financial needs caused by immediate death, including
debts, medical bills, and final expenses
- Provide lifetime income to the spouse
- Pay off mortgage or other debts
- Provide funds for children's education
- Subtracts any assets available to fund financial needs after death
(such as retirement plan, other insurance, liquid investments,
separate savings)
◉ Waiver of Premium.
Answer: Life Insurance Disability Rider
If the insured becomes totally disabled, the insurer will waive
premiums for the duration of the disability or the end of the policy,
whichever occurs first.
To qualify for the waiver, the insured must be disabled for a waiting
period of 3-6 months.
The policyowner must continue to pay premiums during the waiting
period, but once eligible, the waiver is retroactive to the start of the
disability and the premiums will be refunded.
During the disability, the insured will credit the premiums to the
policy and all benefits, such as cash value accumulation and
dividend payments, will continue.
