CA PSI Site - Life, Accident and Health
Agent Examination (Life Agent)
Admitted Insurance Company vs. Non-Admitted Insurance Company
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
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
One party writes the contract without inout from the other party on a "take-it-or-leave-
it" basis
Aleatory Contract
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
An agreement to pay on behalf of another party under specified circumstances
Unilateral Contract
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
1) Competent Parties
2) Legal Purpose
3) Agreement (offer and acceptance)
4) Consideration
Preferred Risks vs Standard Risks
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
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
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.
Disability Income Rider
Life Insurance Disability Rider
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
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)
The separate account is invested in debt or equity securities as offered by the
insurance company.
Agent Examination (Life Agent)
Admitted Insurance Company vs. Non-Admitted Insurance Company
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
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
One party writes the contract without inout from the other party on a "take-it-or-leave-
it" basis
Aleatory Contract
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
An agreement to pay on behalf of another party under specified circumstances
Unilateral Contract
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
1) Competent Parties
2) Legal Purpose
3) Agreement (offer and acceptance)
4) Consideration
Preferred Risks vs Standard Risks
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
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
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.
Disability Income Rider
Life Insurance Disability Rider
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
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)
The separate account is invested in debt or equity securities as offered by the
insurance company.
