CA PSI Site - Life, Accident and Health Agent Examination (Life Agent)| Questions and Answers, 100% Correct| Latest 2023/2024

CA PSI Site - Life, Accident and Health Agent Examination (Life Agent)| Questions and Answers, 100% Correct| Latest 2023/2024 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-orleave-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. 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. o The death benefit is recalculated annually. The general account provides a fixed rate of interest and the cash value in the general account provides for a guaranteed minimum death benefit. Viatical Settlement