Alabama P&C Licensing Practice Exam Questions
& Answers | Updated 2026
Replacement cost less depreciation defines...
a. ACV
b. market value
c. insurable value
d. agreed value - CORRECT ANSWER -a - ACV
A building owner purchases a property policy in the amount of $60k on his $100k building. The
contract contains an 80% co ins clause. If he suffers a covered loss of $10k he will receive a
settlement in the amount of __ disregarding the deductible.
a. 4.8k
b. 7.5k
c. 8k
d. 10k - CORRECT ANSWER -b - 7.5k
Insurance binders are__
a. valid for 30d
b. limited to personal lines risks
c. interim insuring agreements
d. required to be written - CORRECT ANSWER -c - interim insuring agreements
A consequential loss can also be called a(n)__
a. gambling loss
b. speculative loss
c. indirect loss
d. excluded loss - CORRECT ANSWER -c - indirect loss
,Which statements must represent the absolute truth?
a. representations
b. assertions
c. material
d. warranties - CORRECT ANSWER -d - warranties
Knowingly withholding material information on an application is__
a. waiver
b. concealment
c. misrepresentation
d. fraud - CORRECT ANSWER -b - concealment
Which type of insurance company is designed to pay dividends to policyowners?
a. stock
b. mutual
c. reinsurance
d. RRG - CORRECT ANSWER -b - mutual
A company domiciled in this state is best described as a __ company.
a. foreign
b. domestic
c. alien
d. local - CORRECT ANSWER -b - domestic
An insurance company's promise to pay a loss can be found in which policy section?
a. declarations
, b. insuring agreement
c. conditions
d. extensions - CORRECT ANSWER -b - insuring agreement
The rules which govern the actions of the company and the policyowner within an insurance
contract can be found in the policy ______.
a. declarations
b. insuring clause
c. conditions
d. exclusions - CORRECT ANSWER -c - condition
A short-term proof of insurance coverage provided to an insured until a policy can be delivered is
known as a(n)...
a. endorsement
b. proposal
c. application
d. binder - CORRECT ANSWER -d - binder
Which is NOT considered an insurable loss?
a. gambling losses
b. income losses due to a business' inability to remain open following a covered loss
c. fire losses following a lightning strike
d. medical costs following a woman's fall on a wet drugstore floor - CORRECT ANSWER -a -
gambling losses
Which of the following best defines risk?
a. result of loss
b. amount of loss
& Answers | Updated 2026
Replacement cost less depreciation defines...
a. ACV
b. market value
c. insurable value
d. agreed value - CORRECT ANSWER -a - ACV
A building owner purchases a property policy in the amount of $60k on his $100k building. The
contract contains an 80% co ins clause. If he suffers a covered loss of $10k he will receive a
settlement in the amount of __ disregarding the deductible.
a. 4.8k
b. 7.5k
c. 8k
d. 10k - CORRECT ANSWER -b - 7.5k
Insurance binders are__
a. valid for 30d
b. limited to personal lines risks
c. interim insuring agreements
d. required to be written - CORRECT ANSWER -c - interim insuring agreements
A consequential loss can also be called a(n)__
a. gambling loss
b. speculative loss
c. indirect loss
d. excluded loss - CORRECT ANSWER -c - indirect loss
,Which statements must represent the absolute truth?
a. representations
b. assertions
c. material
d. warranties - CORRECT ANSWER -d - warranties
Knowingly withholding material information on an application is__
a. waiver
b. concealment
c. misrepresentation
d. fraud - CORRECT ANSWER -b - concealment
Which type of insurance company is designed to pay dividends to policyowners?
a. stock
b. mutual
c. reinsurance
d. RRG - CORRECT ANSWER -b - mutual
A company domiciled in this state is best described as a __ company.
a. foreign
b. domestic
c. alien
d. local - CORRECT ANSWER -b - domestic
An insurance company's promise to pay a loss can be found in which policy section?
a. declarations
, b. insuring agreement
c. conditions
d. extensions - CORRECT ANSWER -b - insuring agreement
The rules which govern the actions of the company and the policyowner within an insurance
contract can be found in the policy ______.
a. declarations
b. insuring clause
c. conditions
d. exclusions - CORRECT ANSWER -c - condition
A short-term proof of insurance coverage provided to an insured until a policy can be delivered is
known as a(n)...
a. endorsement
b. proposal
c. application
d. binder - CORRECT ANSWER -d - binder
Which is NOT considered an insurable loss?
a. gambling losses
b. income losses due to a business' inability to remain open following a covered loss
c. fire losses following a lightning strike
d. medical costs following a woman's fall on a wet drugstore floor - CORRECT ANSWER -a -
gambling losses
Which of the following best defines risk?
a. result of loss
b. amount of loss
