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CA PSI SITE - LIFE, ACCIDENT AND HEALTH
AGENT EXAMINATION 2025/2026 (LIFE AGENT)
ACTUAL EXAM QUESTIONS WITH SOLUTIONS
Admitted Insurance Company vs. Non-Admitted Insurance Company-correct-
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-correct-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
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Contract of Adhesion-correct-answer-One party writes the contract without inout
from the other party on a "take-it-or-leave-it" basis
Aleatory Contract-correct-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-correct-answer-An agreement to pay on behalf of another
party under specified circumstances
Unilateral Contract-correct-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-correct-answer-1) Competent Parties
2) Legal Purpose
3) Agreement (offer and acceptance)
4) Consideration
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Preferred Risks vs Standard Risks-correct-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-correct-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.
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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-correct-answer-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.
CA PSI SITE - LIFE, ACCIDENT AND HEALTH
AGENT EXAMINATION 2025/2026 (LIFE AGENT)
ACTUAL EXAM QUESTIONS WITH SOLUTIONS
Admitted Insurance Company vs. Non-Admitted Insurance Company-correct-
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-correct-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
,2|Page
Contract of Adhesion-correct-answer-One party writes the contract without inout
from the other party on a "take-it-or-leave-it" basis
Aleatory Contract-correct-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-correct-answer-An agreement to pay on behalf of another
party under specified circumstances
Unilateral Contract-correct-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-correct-answer-1) Competent Parties
2) Legal Purpose
3) Agreement (offer and acceptance)
4) Consideration
,3|Page
Preferred Risks vs Standard Risks-correct-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-correct-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.
, 4|Page
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-correct-answer-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.
