California Life and Health Insurance Agent Exam Study Guide ()

CA PSI Site - Life, Accident and Health Agent Examination
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2024 - 2025 Life Agent
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1. Admitted Insurance Company vs. Non-Admitted Insurance Company:
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Anadmitted insurance company is authorized to transact insurance in California
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because it has a Certificate of Authority granted by the California Department
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ofInsurance (CDI)
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A non-admitted insurance company is not authorized to transact insurance in
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California because of failing to comply with California requirements or did not
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seekadmission
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2. Pure Risk vs. Speculative Risk: Pure risks are insurable but Speculative risksare
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not
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Pure Risks - A possibility of loss, no loss, or gain
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Pure Risk - A possibility of loss or no loss; there is no possibility for gain
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3. Contract of Adhesion: One party writes the contract without inout from
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theother party on a "take-it-or-leave-it" basis
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,4. Aleatory Contract: The exchange of value is unequal.
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Insured's premium payment is less than the potential benefit to be received in
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theevent of a loss.
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5. Indemnity Contract: An agreement to pay on behalf of another party
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underspecified circumstances
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6. Unilateral Contract: Only one party is legally bound to the contractual obliga-
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tions after the premium is paid to the insurer
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Only the insurer makes a promise of future performance, and only the insurer canbe
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charged with breach of contract
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7. 4 elements of a valid contract: 1) Competent Parties
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2) Legal Purpose v




3) Agreement (offer and acceptance) v v v




4) Consideration


8. Preferred Risks vs Standard Risks: Standard Risks are individuals who
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havethe same health, habits, sex/gender, and occupational characteristics as
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those reflected in the mortality table
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PreferredRisksareindividualswhomeetcertainrequirementsandqualifyforlower
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,premiums because of ideal health, height and weight.Individuals in this
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categoryhave a longer than average life expectancy
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9. Human Life Value Approach vs. Needs Analysis Approach: Human Life
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Value approach is a measure of the projected future earnings and services of
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aperson at risk in the event of a premature death.
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The objective is to provide the proper amount of coverage as determined by
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thevalue of the individual to his/her dependents using the following factors:
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- The individual's age and gender
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- The individual's occupation, annual wage, and planned retirement age
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- Inflation



Needs Analysis Approach determines a need for coverage upon the
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prematuredeath of an individual.
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It always assumes the death of the individual to be immediate and factors
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thefollowing steps into arriving at the proper amount of coverage needed:
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- Calculateallfinancialneedscaused byimmediatedeath,includingdebts,medicalbills,
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and final expenses
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- Provide lifetime income to the spouse v v v v v




- Pay off mortgage or other debts
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- Provide funds for children's educationv v v v




- Subtracts any assets available to fund financial needs after death (such
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asretirement plan, other insurance, liquid investments, separate savings)
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, 10. Waiver of Premium: Life Insurance Disability Rider
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If the insured becomes totally disabled, the insurer will waive premiums for
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theduration of the disability or the end of the policy, whichever occurs first.
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To qualify for the waiver, the insured must be disabled for a waiting period of 3-
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6months.
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The policyowner must continue to pay premiums during the waiting period, but
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onceeligible,the waiverisretroactivetothestartofthe disabilityandthe premiumswill
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be refunded.
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During the disability, the insured will credit the premiums to the policy and all
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benefits, such as cash value accumulation and dividend payments, will continue.
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