ALABAMA LIFE AND HEALTH INSUARANCE
EXAM COMPLETE AND ACCURATE.
Which of the following would be considered a speculative risk? Correct 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? Correct
Answer -A mutual insurance company
A producer who is acting as an agent is representing: Correct Answer -Always
the insurer
All of the following are elements of a contract, except: Correct 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.
Each of the following would be an element in the definition of fraud, except:
Correct 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 Correct 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: Correct
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: Correct Answer -
Competent parties
An insurance contract is an aleatory contract. This means: Correct Answer -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.
Correct Answer -Residual
To address adverse selection what can an insurer legally do? Correct 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): Correct Answer -Contract of Adhesion
_________ refers to the jurisdiction where an insurer was formed or incorporated.
Correct 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. Correct Answer -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: Correct 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.
Correct 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: Correct Answer -A situation where the
policyowner is someone other than the insured
Which statement best describes the term reserve? Correct 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: Correct Answer -An
insurable interest in the life of the insured
Controlled business may be defined as insurance sold: Correct Answer -To the
producer, the producer's family and friends, and the producer's business associates
With regard to life insurance policies, loading refers to: Correct Answer -
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? Correct Answer -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?
Correct Answer -It requires a fund portfolio manager
Characteristics:
EXAM COMPLETE AND ACCURATE.
Which of the following would be considered a speculative risk? Correct 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? Correct
Answer -A mutual insurance company
A producer who is acting as an agent is representing: Correct Answer -Always
the insurer
All of the following are elements of a contract, except: Correct 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.
Each of the following would be an element in the definition of fraud, except:
Correct 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 Correct 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: Correct
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: Correct Answer -
Competent parties
An insurance contract is an aleatory contract. This means: Correct Answer -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.
Correct Answer -Residual
To address adverse selection what can an insurer legally do? Correct 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): Correct Answer -Contract of Adhesion
_________ refers to the jurisdiction where an insurer was formed or incorporated.
Correct 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. Correct Answer -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: Correct 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.
Correct 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: Correct Answer -A situation where the
policyowner is someone other than the insured
Which statement best describes the term reserve? Correct 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: Correct Answer -An
insurable interest in the life of the insured
Controlled business may be defined as insurance sold: Correct Answer -To the
producer, the producer's family and friends, and the producer's business associates
With regard to life insurance policies, loading refers to: Correct Answer -
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? Correct Answer -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?
Correct Answer -It requires a fund portfolio manager
Characteristics:
