PSI Life Insurance practice

Key terms and concepts from the California PSI Life Insurance Exam covering risk types, policy clauses, riders, and insurance models.

What is pure risk?

A situation involving only the possibility of loss.

What is speculative risk?

A risk involving the possibility of gain or loss.

What is indemnity?

Restoring an insured to the approximate financial position before a loss.

Q: Which word means mandatory in the California Insurance Code?

Shall

Which word means permissive?

May

What clause makes the policy and application the entire contract?

Entire Contract Clause

Which clause protects against innocent misrepresentations after two years?

Incontestability Clause

What does the grace period allow?

Late premium payment without lapse

Which rider lets you buy more insurance without proving insurability?

Guaranteed Insurability Rider

Which rider pays benefits before death if terminally ill?

Accelerated Benefit Rider

Which policy has no cash value?

Term Life

Which life policy builds cash value?

Whole Life

What assignment transfers all ownership?

Absolute Assignment

What assignment is used as loan collateral?

Collateral Assignment

Which settlement option pays only interest?

Interest Only

Which beneficiary cannot be changed without permission?

irrevocable Beneficiary

What is insurable interest designed to prevent?

Wagering on someone's life.

Mutual insurance companies are owned by?

Policyowners

Stock insurance companies are owned by?

Stockholders

Who receives dividends in a mutual company?

Policyowners

What is a deductible?

Amount paid before insurance pays.

What is coinsurance?

Shared percentage of medical expenses.

What is first-dollar coverage?

No deductible.

Major Medical covers?

Medical and hospitalization expenses.

Work-related injuries are covered by?

Workers' Compensation

Which policy pays a fixed amount per day hospitalized?

Hospital Indemnity

What is a drug formulary?

List of covered prescription drugs.

What is a PPO?

Preferred Provider Organization

Fee-for-service means?

Provider paid for each service

Dread Disease insurance covers?

Specific illnesses.

What is the elimination period?

Waiting period before benefits begin.

Own Occupation means?

Cannot perform your regular job.

Partial Disability means?

Can work but income decreases.

Presumptive Disability examples?

Blindness, deafness, loss of limbs

Typical LTD benefit percentage?

60%

Business Overhead Expense insurance pays?

Business expenses while owner is disabled.

Waiver of Premium begins after?

Disability waiting period.

Disability benefits are intended to?

Replace lost income.

Medicare Part A?

Hospital Insurance

Medicare Part B?

Medical Insurance

Medicare Part C?

Medicare Advantage

Medicare Part D

Prescription Drugs.

Medicare Part B pays what percentage?

80%

Medigap is sold by?

Private insurance companies.

Medigap fills gaps in?

Medicare Parts A & B

Three levels of LTC?

Skilled, Intermediate, Custodial

Respite Care?

Temporary relief for caregivers

Assisted Living?

Some nursing care, not full-time.

LTC benefit trigger?

Cognitive impairment or inability to perform ADLs

Qualified LTC policies must be?

Guaranteed Renewable.

According to the California Insurance Code, what is an insurance broker?

A person compensated for transacting insurance on behalf of another person with an insurer. The broker represents the client, not the insurance company.

What is required after a life agent sells a policy without being appointed by the insurer?

The insurer must submit a Notice of Appointment to the California Insurance Commissioner.

What license is required to charge a fee to review an insured's existing life insurance policy?

Life and Disability Insurance Analyst.

What is an insurer called after it has met the qualifications to transact business in California?

Admitted insurer (admitted carrier)

What must a comprehensive long-term care insurance policy cover?

Both institutional (nursing facility) care and home care.

When handling premiums for an insured, an agent is acting in what capacity?

Fiduciary — The agent holds premium funds in trust and must handle them honestly and properly.

How is an agent's first-year commission calculated for a replacement long-term care policy?

Based on the difference between the new policy's annual premium and the original policy's annual premium.

When intentional concealment is involved, what remedy is the injured party entitled to?

Rescission of the contract.

Which of the following is NOT a federal offense committed by an insurance agent?

Misrepresentation on an insurance application.

How many Activities of Daily Living (ADLs) must an insured be unable to perform to qualify as chronically ill under a Long-Term Care policy?

At least 2 of the 6 ADLs (or have a severe cognitive impairment).

What does Medicare Part B cover?

Physician expenses (Medical Insurance), including outpatient services and preventive care.

What is MRMIP?

A California state program that provided health coverage to residents unable to obtain insurance due to pre-existing conditions.

Which of the following is NOT considered insurance solicitation?

Publishing a magazine where one of the advertisers is an insurer.

Which rate regulation system requires an insurer to obtain approval before using new rates?

Prior approval.

What is Medicare Part B also known as?

Medical Insurance (covers physician and outpatient medical services).

During the first 30 months of Medicare eligibility due to ESRD, who pays first if the insured has employer group health coverage?

The employer group health plan is primary; Medicare is secondary.

What does it mean when a provider accepts Medicare Assignment?

The provider accepts the Medicare-approved amount as payment in full.

When can an individual enroll in a Medicare Part C (Medicare Advantage) plan?

When they become eligible for Medicare (and during other authorized enrollment periods).

How is Medicare Part B funded?

General tax revenue and beneficiary (user) premiums.

Who is Medicaid designed to provide health care coverage for?

Low-income individuals and families. (California's Medicaid program is called Medi-Cal.)

Who is Medicaid intended for?

Low-income (poverty-stricken) individuals and families.