Life Insurance Basics & Risk Concepts

Correct

The answer is A: Conditional

An insurance contract is conditional because the insurer's promise to pay benefits is conditioned upon the occurrence of a covered event and the policyowner fulfilling certain duties, such as paying premiums and providing proof of loss. A contract of adhesion means one party drafts the contract and the other must accept or reject it as is. Unilateral means only one party makes legally enforceable promises. Aleatory means an unequal exchange of value, dependent on an uncertain event.

Reviewed in our October 2026 California fact-check.

Correct

The answer is A: Representation

A representation is a statement the applicant makes at or before issuance and believes to be true; it is false when the facts fail to correspond with it (§358). In California life and disability insurance, statements made by the insured are representations and not warranties, absent fraud (§10113). Concealment is neglecting to communicate a fact the party knows and ought to communicate (§330), but here the applicant made an affirmative statement that turned out to be false. Materiality describes how much a fact would influence the insurer (§334); it is a quality of a fact, not a type of statement.

Reviewed in our October 2026 California fact-check.

Correct

The answer is C: The rate is the cost per unit of insurance, while the premium is the total the policyowner pays.

The rate is the price of insurance per unit of exposure (for example, per $1,000 of coverage). The premium is the total amount the policyowner pays, found by multiplying the rate by the number of units purchased. The other statements reverse the two terms, confuse them with insurer and agent earnings, or wrongly treat them as the same thing.

Reviewed in our October 2026 California fact-check.

Correct

The answer is B: Implied authority

Implied authority is not expressly granted in the agency contract but is assumed to be necessary to carry out the agent's express duties, such as collecting the initial premium when taking an application. Express authority is what the agency contract spells out. Apparent authority is created when the insurer gives third parties the impression that the agent has authority the agent doesn't actually have. Fiduciary duty is a responsibility the agent owes, not a type of authority.

Reviewed in our October 2026 California fact-check.