CA PSI Site - Life, Accident and Health Agent Examination (Life Agent)
ACCURATE 100%
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
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)
ACCURATE 100%
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
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)
