Alabama Life & Health Insurance Exam Practice
Newest 2025/2026 Complete Questions and
Correct Answers Already Graded A+|Brand New
Version
Which of the following would be considered a speculative risk? - CORRECT
ANSWER-The possibility the painting you bought might be a long-lost
masterpiece
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
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.
Newest 2025/2026 Complete Questions and
Correct Answers Already Graded A+|Brand New
Version
Which of the following would be considered a speculative risk? - CORRECT
ANSWER-The possibility the painting you bought might be a long-lost
masterpiece
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
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.
