Alabama Life & Health Insurance Exam, Complete
Verified Solution 2023/2024| 100%
Which of the following would be considered a speculative risk?
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.
Which is the proper term for a company owned by its policy owners?
A mutual insurance company
A producer who is acting as an agent is representing:
Always the insurer
All of the following are elements of a contract, except:
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.
Each of the following would be an element in the definition of fraud, except:
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.
Examples of Fraud
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
A company that is licensed to sell insurance in a particular state is:
An authorized Company
In order to be valid, a contract must be between individuals considered legally
able to enter into an agreement. This principle is known as:
Competent parties
An insurance contract is an aleatory contract. This means:
Equal value is not given by both parties to the contract
Aleatory: contract of unequal values exchanged
The ____________ market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market insurers.
Residual
To address adverse selection what can an insurer legally do?
,Establish and enforce sound underwriting practices
Underwriting helps to protect the insurer against adverse selection and accepting risks
that are more likely than average to suffer losses.
A contract that is drafted by an insurer and receives no input or alteration from
the insured, is considered a(n):
Contract of Adhesion
_________ refers to the jurisdiction where an insurer was formed or incorporated.
Domicile: Domicile refers to the jurisdiction either state or country where an insurer was
formed or incorporated.
_____________ insurance allows for insurance coverage to be obtained when not
available from admitted carriers.
Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-admitted
insurers.
To make insurance more affordable and protect the insurance company from
paying out too much in claims, insurers will:
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.
The field underwriter is the _________ and is not a determiner of insurability.
Producer
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.
Third-party ownership refers to:
A situation where the policyowner is someone other than the insured
Which statement best describes the term reserve?
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
The applicant, if other than the proposed insured, must have:
An insurable interest in the life of the insured
Controlled business may be defined as insurance sold:
To the producer, the producer's family and friends, and the producer's business
associates
With regard to life insurance policies, loading refers to:
Assignment of the appropriate share of the company's operating expenses to each
policy
Which of the following statements about the average number of people who die
each year is true?
It is called the mortality rate
, Mortality Rate: which is the statistical probability of death in a large population of
insureds.
Which of the following is NOT a characteristic of life insurance as property?
It requires a fund portfolio manager
Characteristics:
It creates an immediate estate
It requires no physical maintenance
It may be paid for in installments
The most effective way to ensure that the applicant will accept the policy when it
is issued is:
To have the applicant pay the initial premium at the time of application
Allen purchases an estate builder (jumping juvenile) policy for his 5-year old son,
Donald. Suppose that when Donald reaches age 21 his father presents him with
the policy as a gift. Which of the following statements is NOT correct?
Donald must change the beneficiaries immediately
CORRECT:
The premium will continue to be based on his original age of 5
Donald has enjoyed protection against the problems of premature death
The face value of Donald's policy has increased by 5 times
Term insurance differs from permanent insurance in that term:
Builds no cash value, pays a death benefit only
An indeterminate premium policy offers:
A low initial premium with succeeding premiums based on the company's investment
return, mortality and expenses
With regard to the waiver of premium rider, after the disability a policyowner
normally:
Need not repay the premiums paid by the company during disability
In many jurisdictions, permanent policies are required to have some cash value
by the end of:
The Third Year
Loan values and retirement income are:
Called the living benefits of life insurance
With a modified premium whole life contract, premium payments:
Are lower in the early years of the contract
A variable life policy:
Death benefit varies to reflect the investment results of the underlying separate account,
but never falls below a guaranteed minimum
Verified Solution 2023/2024| 100%
Which of the following would be considered a speculative risk?
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.
Which is the proper term for a company owned by its policy owners?
A mutual insurance company
A producer who is acting as an agent is representing:
Always the insurer
All of the following are elements of a contract, except:
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.
Each of the following would be an element in the definition of fraud, except:
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.
Examples of Fraud
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
A company that is licensed to sell insurance in a particular state is:
An authorized Company
In order to be valid, a contract must be between individuals considered legally
able to enter into an agreement. This principle is known as:
Competent parties
An insurance contract is an aleatory contract. This means:
Equal value is not given by both parties to the contract
Aleatory: contract of unequal values exchanged
The ____________ market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market insurers.
Residual
To address adverse selection what can an insurer legally do?
,Establish and enforce sound underwriting practices
Underwriting helps to protect the insurer against adverse selection and accepting risks
that are more likely than average to suffer losses.
A contract that is drafted by an insurer and receives no input or alteration from
the insured, is considered a(n):
Contract of Adhesion
_________ refers to the jurisdiction where an insurer was formed or incorporated.
Domicile: Domicile refers to the jurisdiction either state or country where an insurer was
formed or incorporated.
_____________ insurance allows for insurance coverage to be obtained when not
available from admitted carriers.
Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-admitted
insurers.
To make insurance more affordable and protect the insurance company from
paying out too much in claims, insurers will:
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.
The field underwriter is the _________ and is not a determiner of insurability.
Producer
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.
Third-party ownership refers to:
A situation where the policyowner is someone other than the insured
Which statement best describes the term reserve?
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
The applicant, if other than the proposed insured, must have:
An insurable interest in the life of the insured
Controlled business may be defined as insurance sold:
To the producer, the producer's family and friends, and the producer's business
associates
With regard to life insurance policies, loading refers to:
Assignment of the appropriate share of the company's operating expenses to each
policy
Which of the following statements about the average number of people who die
each year is true?
It is called the mortality rate
, Mortality Rate: which is the statistical probability of death in a large population of
insureds.
Which of the following is NOT a characteristic of life insurance as property?
It requires a fund portfolio manager
Characteristics:
It creates an immediate estate
It requires no physical maintenance
It may be paid for in installments
The most effective way to ensure that the applicant will accept the policy when it
is issued is:
To have the applicant pay the initial premium at the time of application
Allen purchases an estate builder (jumping juvenile) policy for his 5-year old son,
Donald. Suppose that when Donald reaches age 21 his father presents him with
the policy as a gift. Which of the following statements is NOT correct?
Donald must change the beneficiaries immediately
CORRECT:
The premium will continue to be based on his original age of 5
Donald has enjoyed protection against the problems of premature death
The face value of Donald's policy has increased by 5 times
Term insurance differs from permanent insurance in that term:
Builds no cash value, pays a death benefit only
An indeterminate premium policy offers:
A low initial premium with succeeding premiums based on the company's investment
return, mortality and expenses
With regard to the waiver of premium rider, after the disability a policyowner
normally:
Need not repay the premiums paid by the company during disability
In many jurisdictions, permanent policies are required to have some cash value
by the end of:
The Third Year
Loan values and retirement income are:
Called the living benefits of life insurance
With a modified premium whole life contract, premium payments:
Are lower in the early years of the contract
A variable life policy:
Death benefit varies to reflect the investment results of the underlying separate account,
but never falls below a guaranteed minimum
