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Alabama Life & Health Insurance Exam Questions and Answers A+ Guaranteed

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Alabama Life & Health Insurance Exam Questions and Answers A+ Guaranteed 1. In group insurance, the evidence of a contract between the insurer and the employer or association is: - ANSWER The policy 2. The policy itself is the evidence that a contract exists, whether it is an individual, association or group policy. In group insurance the policy is referred to as the master policy. Individual insureds do not receive a copy of the policy, since there is no agreement between the insureds and the insurer. 3. A non-school employer can set up a TSA plan for their employees under which of the following IRC section? - ANSWER 503 (c)(3) 4. The mathematical probability table used by insurance companies to determine loss due to sickness or injury is the: - ANSWER Morbidity Table 5. Which of the following is required to sign the application for insurance? - ANSWER Producer and applicant 6. A policy that pays surgical expense benefits does not schedule the approved benefit payable for every type of surgery. Instead, surgeries not listed are paid on the basis of a comparison to one or more types of commonly-performed major surgeries that are scheduled. Under this arrangement, the unscheduled surgeries are paid on the basis of: - ANSWER Their relative value 7. Which of the following statements is FALSE regarding Medigap policies? - ANSWER A Medigap policy provides the same coverage as a Medicare policy 8. All of the following statements about noncancellable policies are true, except: - ANSWER The insurer may choose not to renew the policy, but only on the policy renewal or anniversary date 9. Guaranteed Renewable means: - ANSWER Renewable with adjustable premiums, by classification only 10. The grace period for an individual health insurance policy being paid on a quarterly basis is: - ANSWER 31 days 11. One of your clients just reinstated his health insurance plan. When is coverage effective for sickness and accident? - ANSWER 10 days for sickness, and immediately for accidental injuries 12. The Coordination of Benefits Provision is designed to: - ANSWER Give insureds as much coverage as possible while eliminating overinsurance 13. Experience rating utilizes _______ in determining the rate the insurer will charge for group coverage in each year of coverage. - ANSWER Actual loss experience of the group 14. The following statement is true concerning the income received from an individually owned disability income policy: - ANSWER Premiums paid with after tax dollars, Income benefit not taxable 15. An insured with an individual LTC policy is deducting the premiums he is paying for the plan on his income taxes. Once he begins to receive benefits from this plan, what will be the tax consequences on this income? - ANSWER Not taxable 16. The maximum liability of the Life and Disability Insurance Guaranty Association for cash values, for any one life is: - ANSWER $100,000 17. Which of the following would be considered a speculative risk? - ANSWER The possibility the painting you bought might be a long-lost masterpiece A speculative risk is one in which there is a chance for either loss or gain. Example: Gambling, Casino's, Lottery, etc. All of the other choices describe pure risk, where there is no chance of gain, only a chance of loss exists. 18. Which is the proper term for a company owned by its policy owners? - ANSWER A mutual insurance company 19. A producer who is acting as an agent is representing: - ANSWER Always the insurer 20. All of the following are elements of a contract, except: - ANSWER Authority All enforceable contracts must include these characteristics: offer and acceptance (agreement), considerations, competent parties, and legal purpose. Authority is not considered one of the elements of a legal contract. 21. Each of the following would be an element in the definition of fraud, except: - ANSWER An individual warrants a fact stated on the application A warranted fact is one guaranteed to be true. Although no statement on an application is regarded as warranty, no fraud is involved if a statement is guaranteed to be true. 22. Examples of Fraud - ANSWER Intentional material misrepresentation with the intent of causing injury to another party Withholding of known material facts A false statement on the application that is material to the acceptance of the risk 23. A company that is licensed to sell insurance in a particular state is: - ANSWER An authorized Company 24. In order to be valid, a contract must be between individuals considered legally able to enter into an agreement. This principle is known as: - ANSWER Competent parties 25. An insurance contract is an aleatory contract. This means: - ANSWER Equal value is not given by both parties to the contract Aleatory: contract of unequal values exchanged 26. The ____________ market is a private source of coverage of last resort for individuals or businesses that have been rejected by voluntary market insurers. - ANSWER Residual 27. To address adverse selection what can an insurer legally do? - ANSWER Establish and enforce sound underwriting practices

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Alabama Life & Health Insurance Exam
Questions and Answers A+ Guaranteed
1. In group insurance, the evidence of a contract between the insurer and the
employer or association is: - ANSWER The policy

2. The policy itself is the evidence that a contract exists, whether it is an
individual, association or group policy. In group insurance the policy is
referred to as the master policy. Individual insureds do not receive a copy of
the policy, since there is no agreement between the insureds and the insurer.

3. A non-school employer can set up a TSA plan for their employees under
which of the following IRC section? - ANSWER 503 (c)(3)

4. The mathematical probability table used by insurance companies to
determine loss due to sickness or injury is the: - ANSWER Morbidity Table

5. Which of the following is required to sign the application for insurance? -
ANSWER Producer and applicant

6. A policy that pays surgical expense benefits does not schedule the approved
benefit payable for every type of surgery. Instead, surgeries not listed are
paid on the basis of a comparison to one or more types of commonly-
performed major surgeries that are scheduled. Under this arrangement, the
unscheduled surgeries are paid on the basis of: - ANSWER Their relative
value

7. Which of the following statements is FALSE regarding Medigap policies? -
ANSWER A Medigap policy provides the same coverage as a Medicare
policy

8. All of the following statements about noncancellable policies are true,
except: - ANSWER The insurer may choose not to renew the policy, but
only on the policy renewal or anniversary date

9. Guaranteed Renewable means: - ANSWER Renewable with adjustable
premiums, by classification only

1

,10.The grace period for an individual health insurance policy being paid on a
quarterly basis is: - ANSWER 31 days

11.One of your clients just reinstated his health insurance plan. When is
coverage effective for sickness and accident? - ANSWER 10 days for
sickness, and immediately for accidental injuries

12.The Coordination of Benefits Provision is designed to: - ANSWER Give
insureds as much coverage as possible while eliminating overinsurance

13.Experience rating utilizes _______ in determining the rate the insurer will
charge for group coverage in each year of coverage. - ANSWER Actual loss
experience of the group

14.The following statement is true concerning the income received from an
individually owned disability income policy: - ANSWER Premiums paid
with after tax dollars, Income benefit not taxable

15.An insured with an individual LTC policy is deducting the premiums he is
paying for the plan on his income taxes. Once he begins to receive benefits
from this plan, what will be the tax consequences on this income? -
ANSWER Not taxable

16.The maximum liability of the Life and Disability Insurance Guaranty
Association for cash values, for any one life is: - ANSWER $100,000
17.Which of the following would be considered a speculative risk? - ANSWER
The possibility the painting you bought might be a long-lost masterpiece

A speculative risk is one in which there is a chance for either loss or gain.
Example: Gambling, Casino's, Lottery, etc. All of the other choices describe
pure risk, where there is no chance of gain, only a chance of loss exists.

18.Which is the proper term for a company owned by its policy owners? -
ANSWER A mutual insurance company

19.A producer who is acting as an agent is representing: - ANSWER Always
the insurer

20.All of the following are elements of a contract, except: - ANSWER
Authority
2

, All enforceable contracts must include these characteristics: offer and
acceptance (agreement), considerations, competent parties, and legal
purpose. Authority is not considered one of the elements of a legal contract.

21.Each of the following would be an element in the definition of fraud, except:
- ANSWER An individual warrants a fact stated on the application

A warranted fact is one guaranteed to be true. Although no statement on an
application is regarded as warranty, no fraud is involved if a statement is
guaranteed to be true.

22.Examples of Fraud - ANSWER Intentional material misrepresentation with
the intent of causing injury to another party

Withholding of known material facts

A false statement on the application that is material to the acceptance of the
risk

23.A company that is licensed to sell insurance in a particular state is: -
ANSWER An authorized Company

24.In order to be valid, a contract must be between individuals considered
legally able to enter into an agreement. This principle is known as: -
ANSWER Competent parties

25.An insurance contract is an aleatory contract. This means: - ANSWER Equal
value is not given by both parties to the contract

Aleatory: contract of unequal values exchanged

26.The ____________ market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market
insurers. - ANSWER Residual

27.To address adverse selection what can an insurer legally do? - ANSWER
Establish and enforce sound underwriting practices



3

, 28.Underwriting helps to protect the insurer against adverse selection and
accepting risks that are more likely than average to suffer losses.

29.A contract that is drafted by an insurer and receives no input or alteration
from the insured, is considered a(n): - ANSWER Contract of Adhesion

30._________ refers to the jurisdiction where an insurer was formed or
incorporated. - ANSWER Domicile: Domicile refers to the jurisdiction
either state or country where an insurer was formed or incorporated.

31._____________ insurance allows for insurance coverage to be obtained
when not available from admitted carriers. - ANSWER Surplus Lines

Insurance can be obtained through surplus lines brokers (producers) from
non-admitted insurers.

32.To make insurance more affordable and protect the insurance company from
paying out too much in claims, insurers will: - ANSWER Reinsure the risk

Reinsurance is what makes insurance affordable. Reinsurance companies are
insurance companies that accept all or a portion of the financial risk of loss
from the insurance company.

33.The field underwriter is the _________ and is not a determiner of
insurability. - ANSWER Producer

34.The producer is in the field soliciting applications for insurance and in effect
is another pair of eyes and ears for the insurer in helping to issue policies to
insurable prospects.

35.Third-party ownership refers to: - ANSWER A situation where the
policyowner is someone other than the insured

36.Which statement best describes the term reserve? - ANSWER That amount
that, when increased by future premiums on outstanding policies, and
interest on those premiums will enable the company to meet future death
claims

37.The applicant, if other than the proposed insured, must have: - ANSWER An
insurable interest in the life of the insured
4

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