Alabama Life & Health Insurance Exam Exam Questions and
Answers |Fall 2025/2026 Update | 100% Correct
Question 1
Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any
proceeds if Wilma dies before Fred, or if she dies after Fred, but before receiving all the policy proceeds. Fred elected the
interest settlement option for Wilma, with the right of withdrawal after 5 years. No settlement option was stipulated for
Pebbles. Fred dies on May 6th, 1991. When Fred dies, his insurance company will make settlement by paying:
Correct Answer
Interest in periodic payments to Wilma
Question 2
The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of
the following, except:
Correct Answer
Purchasing a new car once the claim has been settled and proceeds have been paid out according to the beneficiary
designations
Page 1 of 61
,Question 3
The Coordination of Benefits Provision is designed to:
Correct Answer
Give insureds as much coverage as possible while eliminating overinsurance
Question 4
Which of the following statements is NOT true concerning a coordination of benefits situation?
Correct Answer
Where children are involved, the primary group insurer is the insurer for the parent who is oldest by age at the time of
claim
When double coverage exists, the coordination of benefits provision simply steps in and stipulates which insurer pays
and when. The insured's plan is always primary, the spouses plan is secondary, the parent whose birthday comes first in
the calendar year is primary for the children, not who is oldest. The purpose of this provision is to provide the most
possible coverage without allowing any overinsurance from occurring.
Question 5
An insured should receive necessary claim forms within _____ days after notice of claim.
Correct Answer
15
Page 2 of 61
,Question 6
An insurer may reserve the right to defer the payment of a cash surrender value for up to _________ months after demand is
made and the policy is surrendered.
Correct Answer
6 months
Question 7
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
Question 8
On which of the following policies would any proceeds be taxable?
Correct Answer
Business overhead expense insurance
Generally, when premiums are deductible, the policy proceeds will be taxed. When premiums are not deductible,
proceeds are generally received tax free. When the business is also the beneficiary, typically the premiums are not tax
deductible to the business.
Page 3 of 61
, Question 9
Which of the following policies would allow the business to deduct premiums paid?
Correct Answer
Business overhead expense insurance
Premiums paid for disability policies, whether held on key employees or put in place to fund a buy-sell agreement, are
not deductible. A business overhead expense policy is sold and marketed as a business loss income policy and therefore
qualifies as a tax deductible business expense.
Question 10
As compared to individual disability income policies, group disability income policies are generally:
Correct Answer
Less costly and have more liberal provisions
Question 11
TSAs are tax-sheltered retirement programs for employees of all the following kinds of organizations, except:
Correct Answer
Corporations
Page 4 of 61
Answers |Fall 2025/2026 Update | 100% Correct
Question 1
Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any
proceeds if Wilma dies before Fred, or if she dies after Fred, but before receiving all the policy proceeds. Fred elected the
interest settlement option for Wilma, with the right of withdrawal after 5 years. No settlement option was stipulated for
Pebbles. Fred dies on May 6th, 1991. When Fred dies, his insurance company will make settlement by paying:
Correct Answer
Interest in periodic payments to Wilma
Question 2
The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of
the following, except:
Correct Answer
Purchasing a new car once the claim has been settled and proceeds have been paid out according to the beneficiary
designations
Page 1 of 61
,Question 3
The Coordination of Benefits Provision is designed to:
Correct Answer
Give insureds as much coverage as possible while eliminating overinsurance
Question 4
Which of the following statements is NOT true concerning a coordination of benefits situation?
Correct Answer
Where children are involved, the primary group insurer is the insurer for the parent who is oldest by age at the time of
claim
When double coverage exists, the coordination of benefits provision simply steps in and stipulates which insurer pays
and when. The insured's plan is always primary, the spouses plan is secondary, the parent whose birthday comes first in
the calendar year is primary for the children, not who is oldest. The purpose of this provision is to provide the most
possible coverage without allowing any overinsurance from occurring.
Question 5
An insured should receive necessary claim forms within _____ days after notice of claim.
Correct Answer
15
Page 2 of 61
,Question 6
An insurer may reserve the right to defer the payment of a cash surrender value for up to _________ months after demand is
made and the policy is surrendered.
Correct Answer
6 months
Question 7
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
Question 8
On which of the following policies would any proceeds be taxable?
Correct Answer
Business overhead expense insurance
Generally, when premiums are deductible, the policy proceeds will be taxed. When premiums are not deductible,
proceeds are generally received tax free. When the business is also the beneficiary, typically the premiums are not tax
deductible to the business.
Page 3 of 61
, Question 9
Which of the following policies would allow the business to deduct premiums paid?
Correct Answer
Business overhead expense insurance
Premiums paid for disability policies, whether held on key employees or put in place to fund a buy-sell agreement, are
not deductible. A business overhead expense policy is sold and marketed as a business loss income policy and therefore
qualifies as a tax deductible business expense.
Question 10
As compared to individual disability income policies, group disability income policies are generally:
Correct Answer
Less costly and have more liberal provisions
Question 11
TSAs are tax-sheltered retirement programs for employees of all the following kinds of organizations, except:
Correct Answer
Corporations
Page 4 of 61
