Alabama Life & Health Insurance Exam
Questions and Answers A+ Guaranteed
1. In group insurance, the evidence of a contract between the insurer and the
employer or association is: - ANSWER The policy
2. The policy itself is the evidence that a contract exists, whether it is an
individual, association or group policy. In group insurance the policy is
referred to as the master policy. Individual insureds do not receive a copy of
the policy, since there is no agreement between the insureds and the insurer.
3. A non-school employer can set up a TSA plan for their employees under
which of the following IRC section? - ANSWER 503 (c)(3)
4. The mathematical probability table used by insurance companies to
determine loss due to sickness or injury is the: - ANSWER Morbidity Table
5. Which of the following is required to sign the application for insurance? -
ANSWER Producer and applicant
6. A policy that pays surgical expense benefits does not schedule the approved
benefit payable for every type of surgery. Instead, surgeries not listed are
paid on the basis of a comparison to one or more types of commonly-
performed major surgeries that are scheduled. Under this arrangement, the
unscheduled surgeries are paid on the basis of: - ANSWER Their relative
value
7. Which of the following statements is FALSE regarding Medigap policies? -
ANSWER A Medigap policy provides the same coverage as a Medicare
policy
8. All of the following statements about noncancellable policies are true,
except: - ANSWER The insurer may choose not to renew the policy, but
only on the policy renewal or anniversary date
9. Guaranteed Renewable means: - ANSWER Renewable with adjustable
premiums, by classification only
1
,10.The grace period for an individual health insurance policy being paid on a
quarterly basis is: - ANSWER 31 days
11.One of your clients just reinstated his health insurance plan. When is
coverage effective for sickness and accident? - ANSWER 10 days for
sickness, and immediately for accidental injuries
12.The Coordination of Benefits Provision is designed to: - ANSWER Give
insureds as much coverage as possible while eliminating overinsurance
13.Experience rating utilizes _______ in determining the rate the insurer will
charge for group coverage in each year of coverage. - ANSWER Actual loss
experience of the group
14.The following statement is true concerning the income received from an
individually owned disability income policy: - ANSWER Premiums paid
with after tax dollars, Income benefit not taxable
15.An insured with an individual LTC policy is deducting the premiums he is
paying for the plan on his income taxes. Once he begins to receive benefits
from this plan, what will be the tax consequences on this income? -
ANSWER Not taxable
16.The maximum liability of the Life and Disability Insurance Guaranty
Association for cash values, for any one life is: - ANSWER $100,000
17.Which of the following would be considered a speculative risk? - 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.
18.Which is the proper term for a company owned by its policy owners? -
ANSWER A mutual insurance company
19.A producer who is acting as an agent is representing: - ANSWER Always
the insurer
20.All of the following are elements of a contract, except: - ANSWER
Authority
2
, 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.
21.Each of the following would be an element in the definition of fraud, except:
- 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.
22.Examples of Fraud - 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
23.A company that is licensed to sell insurance in a particular state is: -
ANSWER An authorized Company
24.In order to be valid, a contract must be between individuals considered
legally able to enter into an agreement. This principle is known as: -
ANSWER Competent parties
25.An insurance contract is an aleatory contract. This means: - ANSWER Equal
value is not given by both parties to the contract
Aleatory: contract of unequal values exchanged
26.The ____________ market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market
insurers. - ANSWER Residual
27.To address adverse selection what can an insurer legally do? - ANSWER
Establish and enforce sound underwriting practices
3
, 28.Underwriting helps to protect the insurer against adverse selection and
accepting risks that are more likely than average to suffer losses.
29.A contract that is drafted by an insurer and receives no input or alteration
from the insured, is considered a(n): - ANSWER Contract of Adhesion
30._________ refers to the jurisdiction where an insurer was formed or
incorporated. - ANSWER Domicile: Domicile refers to the jurisdiction
either state or country where an insurer was formed or incorporated.
31._____________ insurance allows for insurance coverage to be obtained
when not available from admitted carriers. - ANSWER Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from
non-admitted insurers.
32.To make insurance more affordable and protect the insurance company from
paying out too much in claims, insurers will: - 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.
33.The field underwriter is the _________ and is not a determiner of
insurability. - ANSWER Producer
34.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.
35.Third-party ownership refers to: - ANSWER A situation where the
policyowner is someone other than the insured
36.Which statement best describes the term reserve? - 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
37.The applicant, if other than the proposed insured, must have: - ANSWER An
insurable interest in the life of the insured
4
Questions and Answers A+ Guaranteed
1. In group insurance, the evidence of a contract between the insurer and the
employer or association is: - ANSWER The policy
2. The policy itself is the evidence that a contract exists, whether it is an
individual, association or group policy. In group insurance the policy is
referred to as the master policy. Individual insureds do not receive a copy of
the policy, since there is no agreement between the insureds and the insurer.
3. A non-school employer can set up a TSA plan for their employees under
which of the following IRC section? - ANSWER 503 (c)(3)
4. The mathematical probability table used by insurance companies to
determine loss due to sickness or injury is the: - ANSWER Morbidity Table
5. Which of the following is required to sign the application for insurance? -
ANSWER Producer and applicant
6. A policy that pays surgical expense benefits does not schedule the approved
benefit payable for every type of surgery. Instead, surgeries not listed are
paid on the basis of a comparison to one or more types of commonly-
performed major surgeries that are scheduled. Under this arrangement, the
unscheduled surgeries are paid on the basis of: - ANSWER Their relative
value
7. Which of the following statements is FALSE regarding Medigap policies? -
ANSWER A Medigap policy provides the same coverage as a Medicare
policy
8. All of the following statements about noncancellable policies are true,
except: - ANSWER The insurer may choose not to renew the policy, but
only on the policy renewal or anniversary date
9. Guaranteed Renewable means: - ANSWER Renewable with adjustable
premiums, by classification only
1
,10.The grace period for an individual health insurance policy being paid on a
quarterly basis is: - ANSWER 31 days
11.One of your clients just reinstated his health insurance plan. When is
coverage effective for sickness and accident? - ANSWER 10 days for
sickness, and immediately for accidental injuries
12.The Coordination of Benefits Provision is designed to: - ANSWER Give
insureds as much coverage as possible while eliminating overinsurance
13.Experience rating utilizes _______ in determining the rate the insurer will
charge for group coverage in each year of coverage. - ANSWER Actual loss
experience of the group
14.The following statement is true concerning the income received from an
individually owned disability income policy: - ANSWER Premiums paid
with after tax dollars, Income benefit not taxable
15.An insured with an individual LTC policy is deducting the premiums he is
paying for the plan on his income taxes. Once he begins to receive benefits
from this plan, what will be the tax consequences on this income? -
ANSWER Not taxable
16.The maximum liability of the Life and Disability Insurance Guaranty
Association for cash values, for any one life is: - ANSWER $100,000
17.Which of the following would be considered a speculative risk? - 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.
18.Which is the proper term for a company owned by its policy owners? -
ANSWER A mutual insurance company
19.A producer who is acting as an agent is representing: - ANSWER Always
the insurer
20.All of the following are elements of a contract, except: - ANSWER
Authority
2
, 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.
21.Each of the following would be an element in the definition of fraud, except:
- 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.
22.Examples of Fraud - 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
23.A company that is licensed to sell insurance in a particular state is: -
ANSWER An authorized Company
24.In order to be valid, a contract must be between individuals considered
legally able to enter into an agreement. This principle is known as: -
ANSWER Competent parties
25.An insurance contract is an aleatory contract. This means: - ANSWER Equal
value is not given by both parties to the contract
Aleatory: contract of unequal values exchanged
26.The ____________ market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market
insurers. - ANSWER Residual
27.To address adverse selection what can an insurer legally do? - ANSWER
Establish and enforce sound underwriting practices
3
, 28.Underwriting helps to protect the insurer against adverse selection and
accepting risks that are more likely than average to suffer losses.
29.A contract that is drafted by an insurer and receives no input or alteration
from the insured, is considered a(n): - ANSWER Contract of Adhesion
30._________ refers to the jurisdiction where an insurer was formed or
incorporated. - ANSWER Domicile: Domicile refers to the jurisdiction
either state or country where an insurer was formed or incorporated.
31._____________ insurance allows for insurance coverage to be obtained
when not available from admitted carriers. - ANSWER Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from
non-admitted insurers.
32.To make insurance more affordable and protect the insurance company from
paying out too much in claims, insurers will: - 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.
33.The field underwriter is the _________ and is not a determiner of
insurability. - ANSWER Producer
34.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.
35.Third-party ownership refers to: - ANSWER A situation where the
policyowner is someone other than the insured
36.Which statement best describes the term reserve? - 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
37.The applicant, if other than the proposed insured, must have: - ANSWER An
insurable interest in the life of the insured
4
