©SOPHIABENNETT@2024-2025 Saturday, August 24, 2024 8:52 AM
Alabama Life & Health Insurance Exam
Practice Questions and Answers
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.
Which is the proper term for a company owned by its policy owners? -
Answer✔️✔️-A mutual insurance company
A producer who is acting as an agent is representing: - Answer✔️✔️-Always
the insurer
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.
1
, ©SOPHIABENNETT@2024-2025 Saturday, August 24, 2024 8:52 AM
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.
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
A company that is licensed to sell insurance in a particular state is: -
Answer✔️✔️-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: -
Answer✔️✔️-Competent parties
An insurance contract is an aleatory contract. This means: - Answer✔️✔️-
Equal value is not given by both parties to the contract
2
, ©SOPHIABENNETT@2024-2025 Saturday, August 24, 2024 8:52 AM
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. - Answer✔️✔️-Residual
To address adverse selection what can an insurer legally do? - Answer✔️✔️-
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): - Answer✔️✔️-Contract of Adhesion
_________ 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.
_____________ 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.
3
, ©SOPHIABENNETT@2024-2025 Saturday, August 24, 2024 8:52 AM
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.
The field underwriter is the _________ and is not a determiner of
insurability. - Answer✔️✔️-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: - Answer✔️✔️-A situation where the
policyowner is someone other than the insured
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
The applicant, if other than the proposed insured, must have: - Answer✔️✔️-
An insurable interest in the life of the insured
4
Alabama Life & Health Insurance Exam
Practice Questions and Answers
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.
Which is the proper term for a company owned by its policy owners? -
Answer✔️✔️-A mutual insurance company
A producer who is acting as an agent is representing: - Answer✔️✔️-Always
the insurer
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.
1
, ©SOPHIABENNETT@2024-2025 Saturday, August 24, 2024 8:52 AM
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.
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
A company that is licensed to sell insurance in a particular state is: -
Answer✔️✔️-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: -
Answer✔️✔️-Competent parties
An insurance contract is an aleatory contract. This means: - Answer✔️✔️-
Equal value is not given by both parties to the contract
2
, ©SOPHIABENNETT@2024-2025 Saturday, August 24, 2024 8:52 AM
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. - Answer✔️✔️-Residual
To address adverse selection what can an insurer legally do? - Answer✔️✔️-
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): - Answer✔️✔️-Contract of Adhesion
_________ 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.
_____________ 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.
3
, ©SOPHIABENNETT@2024-2025 Saturday, August 24, 2024 8:52 AM
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.
The field underwriter is the _________ and is not a determiner of
insurability. - Answer✔️✔️-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: - Answer✔️✔️-A situation where the
policyowner is someone other than the insured
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
The applicant, if other than the proposed insured, must have: - Answer✔️✔️-
An insurable interest in the life of the insured
4
