Alabama Life and Health Exam TEST STUDY
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Section 1: General Insurance Concepts (1-15)
1. What is the definition of risk?
A) The chance of a loss
B) The cause of a loss
C) The uncertainty of a loss occurring
D) The amount of a loss
2. What is the term for a situation that involves only the chance of
loss or no loss?
A) Speculative Risk
B) Pure Risk
C) Fundamental Risk
D) Particular Risk
3. What is the 'Law of Large Numbers' used for in insurance?
A) To predict individual losses
B) To predict group losses more accurately
C) To determine premium taxes
D) To set agent commission rates
4. What is the insurance term for the cause of a loss?
A) Hazard
B) Indemnity
C) Peril
D) Risk
,5. A condition that increases the likelihood or severity of a loss is
known as a:
A) Peril
B) Hazard
C) Risk
D) Morale Hazard
6. What is the fundamental purpose of insurance?
A) To eliminate risk
B) To transfer risk from the individual to the group
C) To create wealth
D) To guarantee no loss will occur
7. What is the term for the restoration of an insured to the same
financial condition they were in prior to a loss?
A) Reimbursement
B) Indemnity
C) Coinsurance
D) Deductible
8. What is a 'Warranty' in an insurance contract?
A) An incidental statement of fact
B) A statement that must be true to the finest detail for coverage to apply
C) A fraudulent misrepresentation
D) The agent's guarantee of coverage
9. What principle states that if a policy allows for greater financial
recovery than the value of the loss, the insured may not profit from
the loss?
A) Principle of Indemnity
B) Principle of Utmost Good Faith
, C) Principle of Waiver
D) Principle of Estoppel
10. An insurance contract is considered a(n) ______ contract
because one party's performance is contingent upon an uncertain
event.
A) Aleatory
B) Adhesive
C) Unilateral
D) Conditional
11. What is the term for the process of selecting, classifying, and
pricing applicants for insurance?
A) Marketing
B) Underwriting
C) Actuarial Science
D) Claims Processing
12. The requirement that an insured must prove a loss before the
insurer is required to pay is known as:
A) Consideration
B) Insurable Interest
C) Proof of Loss
D) Condition Precedent
13. What document is issued by the insurance company and contains
all the details of the contract?
A) Application
B) Binder
C) Policy
D) Rider
GUIDE 2025/2026 REAL QUESTIONS WITH
VERIFIED CORRECT ANSWERS || 100% PASS
GUARANTEED <LATEST VERSION>
Section 1: General Insurance Concepts (1-15)
1. What is the definition of risk?
A) The chance of a loss
B) The cause of a loss
C) The uncertainty of a loss occurring
D) The amount of a loss
2. What is the term for a situation that involves only the chance of
loss or no loss?
A) Speculative Risk
B) Pure Risk
C) Fundamental Risk
D) Particular Risk
3. What is the 'Law of Large Numbers' used for in insurance?
A) To predict individual losses
B) To predict group losses more accurately
C) To determine premium taxes
D) To set agent commission rates
4. What is the insurance term for the cause of a loss?
A) Hazard
B) Indemnity
C) Peril
D) Risk
,5. A condition that increases the likelihood or severity of a loss is
known as a:
A) Peril
B) Hazard
C) Risk
D) Morale Hazard
6. What is the fundamental purpose of insurance?
A) To eliminate risk
B) To transfer risk from the individual to the group
C) To create wealth
D) To guarantee no loss will occur
7. What is the term for the restoration of an insured to the same
financial condition they were in prior to a loss?
A) Reimbursement
B) Indemnity
C) Coinsurance
D) Deductible
8. What is a 'Warranty' in an insurance contract?
A) An incidental statement of fact
B) A statement that must be true to the finest detail for coverage to apply
C) A fraudulent misrepresentation
D) The agent's guarantee of coverage
9. What principle states that if a policy allows for greater financial
recovery than the value of the loss, the insured may not profit from
the loss?
A) Principle of Indemnity
B) Principle of Utmost Good Faith
, C) Principle of Waiver
D) Principle of Estoppel
10. An insurance contract is considered a(n) ______ contract
because one party's performance is contingent upon an uncertain
event.
A) Aleatory
B) Adhesive
C) Unilateral
D) Conditional
11. What is the term for the process of selecting, classifying, and
pricing applicants for insurance?
A) Marketing
B) Underwriting
C) Actuarial Science
D) Claims Processing
12. The requirement that an insured must prove a loss before the
insurer is required to pay is known as:
A) Consideration
B) Insurable Interest
C) Proof of Loss
D) Condition Precedent
13. What document is issued by the insurance company and contains
all the details of the contract?
A) Application
B) Binder
C) Policy
D) Rider
