ALABAMA INSURANCE TEST PAPER 2025/2026 QUESTIONS
WITH SOLUTIONS RATED A+
✔✔Career agents who represent only one company are referred to as: - ✔✔Exclusive
or captive producers
✔✔Of the following, which is NOT an element of insurability? - ✔✔Risk of loss is a
speculative risk
✔✔A hazard is defined as - ✔✔A condition that increases the chance that a loss will
occur
✔✔Specific insurance provides coverage for different classes of property under one
policy. - ✔✔False
✔✔When insurers are required to receive approval from the department of insurance for
a rate change before they can change it describes: - ✔✔Prior approval
✔✔Exposure can be defined as: - ✔✔A condition or situation that presents the
possibility of a loss
✔✔A written modification that either adds or deletes coverage in a policy is called: -
✔✔An endorsement
✔✔A contract in which only one party makes an enforceable promise is a(n): -
✔✔Unilateral contract
✔✔Which principle holds that both parties to an insurance contract have a responsibility
to be honest and truthful to the other? - ✔✔Utmost good faith
✔✔In completing an application for auto coverage, Joe told his agent that he had not
received any speeding tickets in the last 5 years. In truth, Joe received a ticket 2 years
ago. Joe is guilty of: - ✔✔Misrepresentation
✔✔An insurance binder can provide temporary insurance coverage while an application
is being underwritten. Which of the following statements is incorrect regarding binders?
- ✔✔A binder expires when the initial premium is paid
✔✔One week ago, Joe accidentally ran off the road and clipped 3 of Farmer John's
fence posts. Hidden by small print located in the middle of an obscure paragraph in
John's lengthy auto policy was one sentence that stated accidents occurring on dirt
roads would not be covered. Which of the following would probably be most helpful in
getting Joe's claim paid? - ✔✔Insurance policies are contracts of adhesion
, ✔✔Statements made by an applicant in an application for insurance are generally
considered to be: - ✔✔Representation
✔✔With an insurance contract, the uncertainty of events can lead to unequal financial
results for the two parties. This means that insurance is what kind of contract? -
✔✔Aleatory
✔✔Which of the following statements is incorrect regarding consideration in a property
and casualty contract? - ✔✔Statements the agent makes in the agent report are part of
the insurer's consideration
✔✔In a legal situation any wording that is ambiguous (confusing) in an insurance
contract will be interpreted as favorable to the policyholder, not the insurer. This
describes a(n) - ✔✔Contract of adhesion
✔✔Which dwelling form(s) pay losses to the dwelling on an actual cash value basis? -
✔✔Basic DP-1
✔✔If an insured increases the deductible on their homeowner insurance policy from
$250 to $500, this will help likely reduce: - ✔✔Their premium and the number of small
claims to the insurer
✔✔Joe has $50,000 of coverage under and HOW-5 policy. After a fire, it was
determined that the loss has an actual cash value of $10,000 and a replacement cost
value of $12,000. How much will the insurer pay for the loss if the full replacement cost
of the home was $10,000 at the time of the loss? Ignore any deductible that may apply.
- ✔✔$10,000
✔✔While joe is driving his daughter and her friend to school one morning, he
accidentally runs into Jan's car. What part of Joe's Personal Auto Policy would cover
Jan's injuries? - ✔✔Part A
✔✔Joe is driving his daughter and her friend to school one morning. Joe accidentally
runs into Jan's car. What part of Joe's personal auto policy would cover her bodily injury
to Joe and his passengers? - ✔✔Part B
✔✔All of the following are correct concerning Med Pay EXCEPT - ✔✔Med Pay covers
the other driver's bodily injury and property damage.
✔✔Joe is driving the family car with his wife, Jane, son Joe Jr. and their daughter,
Janie. He has Med Pay limits of $5,000. If Joe and his passengers were injured into an
WITH SOLUTIONS RATED A+
✔✔Career agents who represent only one company are referred to as: - ✔✔Exclusive
or captive producers
✔✔Of the following, which is NOT an element of insurability? - ✔✔Risk of loss is a
speculative risk
✔✔A hazard is defined as - ✔✔A condition that increases the chance that a loss will
occur
✔✔Specific insurance provides coverage for different classes of property under one
policy. - ✔✔False
✔✔When insurers are required to receive approval from the department of insurance for
a rate change before they can change it describes: - ✔✔Prior approval
✔✔Exposure can be defined as: - ✔✔A condition or situation that presents the
possibility of a loss
✔✔A written modification that either adds or deletes coverage in a policy is called: -
✔✔An endorsement
✔✔A contract in which only one party makes an enforceable promise is a(n): -
✔✔Unilateral contract
✔✔Which principle holds that both parties to an insurance contract have a responsibility
to be honest and truthful to the other? - ✔✔Utmost good faith
✔✔In completing an application for auto coverage, Joe told his agent that he had not
received any speeding tickets in the last 5 years. In truth, Joe received a ticket 2 years
ago. Joe is guilty of: - ✔✔Misrepresentation
✔✔An insurance binder can provide temporary insurance coverage while an application
is being underwritten. Which of the following statements is incorrect regarding binders?
- ✔✔A binder expires when the initial premium is paid
✔✔One week ago, Joe accidentally ran off the road and clipped 3 of Farmer John's
fence posts. Hidden by small print located in the middle of an obscure paragraph in
John's lengthy auto policy was one sentence that stated accidents occurring on dirt
roads would not be covered. Which of the following would probably be most helpful in
getting Joe's claim paid? - ✔✔Insurance policies are contracts of adhesion
, ✔✔Statements made by an applicant in an application for insurance are generally
considered to be: - ✔✔Representation
✔✔With an insurance contract, the uncertainty of events can lead to unequal financial
results for the two parties. This means that insurance is what kind of contract? -
✔✔Aleatory
✔✔Which of the following statements is incorrect regarding consideration in a property
and casualty contract? - ✔✔Statements the agent makes in the agent report are part of
the insurer's consideration
✔✔In a legal situation any wording that is ambiguous (confusing) in an insurance
contract will be interpreted as favorable to the policyholder, not the insurer. This
describes a(n) - ✔✔Contract of adhesion
✔✔Which dwelling form(s) pay losses to the dwelling on an actual cash value basis? -
✔✔Basic DP-1
✔✔If an insured increases the deductible on their homeowner insurance policy from
$250 to $500, this will help likely reduce: - ✔✔Their premium and the number of small
claims to the insurer
✔✔Joe has $50,000 of coverage under and HOW-5 policy. After a fire, it was
determined that the loss has an actual cash value of $10,000 and a replacement cost
value of $12,000. How much will the insurer pay for the loss if the full replacement cost
of the home was $10,000 at the time of the loss? Ignore any deductible that may apply.
- ✔✔$10,000
✔✔While joe is driving his daughter and her friend to school one morning, he
accidentally runs into Jan's car. What part of Joe's Personal Auto Policy would cover
Jan's injuries? - ✔✔Part A
✔✔Joe is driving his daughter and her friend to school one morning. Joe accidentally
runs into Jan's car. What part of Joe's personal auto policy would cover her bodily injury
to Joe and his passengers? - ✔✔Part B
✔✔All of the following are correct concerning Med Pay EXCEPT - ✔✔Med Pay covers
the other driver's bodily injury and property damage.
✔✔Joe is driving the family car with his wife, Jane, son Joe Jr. and their daughter,
Janie. He has Med Pay limits of $5,000. If Joe and his passengers were injured into an
