1 | Page
CA PSI Site - Life, Accident and Health
Agent Examination (Life Agent) Questions
and Correct Answers
Admitted Insurance Company vs. Non-Admitted Insurance
Company Ans: — 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 Ans: — 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 Ans: — One party writes the contract
without inout from the other party on a "take-it-or-leave-it" basis
Aleatory Contract Ans: — 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 Ans: — An agreement to pay on behalf of
another party under specified circumstances
Unilateral Contract Ans: — Only one party is legally bound to the
contractual obligations after the premium is paid to the insurer
© 2025 All rights reserved
, 2 | Page
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 Ans: — 1) Competent Parties
2) Legal Purpose
3) Agreement (offer and acceptance)
4) Consideration
Preferred Risks vs Standard Risks Ans: — 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 Ans: —
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
© 2025 All rights reserved
, 3 | Page
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 Ans: — 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.
© 2025 All rights reserved
, 4 | Page
Disability Income Rider Ans: — 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 Ans: — 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)
Ans: — 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.
© 2025 All rights reserved
CA PSI Site - Life, Accident and Health
Agent Examination (Life Agent) Questions
and Correct Answers
Admitted Insurance Company vs. Non-Admitted Insurance
Company Ans: — 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 Ans: — 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 Ans: — One party writes the contract
without inout from the other party on a "take-it-or-leave-it" basis
Aleatory Contract Ans: — 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 Ans: — An agreement to pay on behalf of
another party under specified circumstances
Unilateral Contract Ans: — Only one party is legally bound to the
contractual obligations after the premium is paid to the insurer
© 2025 All rights reserved
, 2 | Page
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 Ans: — 1) Competent Parties
2) Legal Purpose
3) Agreement (offer and acceptance)
4) Consideration
Preferred Risks vs Standard Risks Ans: — 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 Ans: —
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
© 2025 All rights reserved
, 3 | Page
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 Ans: — 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.
© 2025 All rights reserved
, 4 | Page
Disability Income Rider Ans: — 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 Ans: — 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)
Ans: — 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.
© 2025 All rights reserved
