ALABAMA LIFE AND HEALTH INSURANCE EXAM 2026 Edition | Verified Questions and Answers

1



ALABAMA LIFE AND HEALTH INSURANCE EXAM 2026
Edition | Verified Questions and Answers

SECTION 1: LIFE INSURANCE – GENERAL CONCEPTS
Question 1. The primary purpose of life insurance is to:
A. Provide a savings vehicle for retirement
B. Provide a death benefit to beneficiaries upon the insured's death
C. Cover medical expenses
D. Provide a tax shelter for investments
Answer: B
Rationale : Life insurance is fundamentally designed to provide financial
protection to named beneficiaries in the event of the insured's death. The death
benefit can replace lost income, pay debts, or fund future needs.


Question 2. The person who receives the death benefit from a life insurance
policy is called the:
A. Policyowner
B. Insured
C. Beneficiary
D. Underwriter
Answer: C
Rationale : The beneficiary is the person or entity designated to receive the
death benefit. The policyowner (A) owns and controls the policy. The insured (B)
is the person whose life is covered.


Question 3. In life insurance, the "insurable interest" requirement means that:
A. Anyone can buy insurance on anyone else
B. The policyowner must have a legitimate financial or emotional interest in the
continued life of the insured at the time of application



pg. 1

,2


C. Only family members can be beneficiaries
D. The insured must have a medical exam
Answer: B
Rationale : Insurable interest must exist at the time of policy inception to
prevent wagering contracts. It is presumed between spouses, parents and
children, and business partners. It does not need to exist at the time of claim.


Question 4. What is the primary purpose of underwriting in life insurance?
A. To sell as many policies as possible
B. To assess risk, classify applicants, and determine appropriate premium rates
C. To pay claims
D. To design new insurance products
Answer: B
Rationale : Underwriting evaluates the applicant's risk factors (age, health,
occupation, lifestyle) to classify them into a risk category (preferred, standard,
substandard) and set premiums commensurate with that risk.


Question 5. Which of the following is NOT a source of underwriting information
for a life insurance application?
A. Medical Information Bureau (MIB) report
B. Attending physician statement
C. Credit score from a consumer reporting agency
D. Application and medical questionnaire
Answer: C
Rationale : Underwriting typically uses the application, MIB, attending
physician statements, medical exams, and inspection reports. Credit scores are
not used for underwriting life insurance; they may be used for some financial
products but not traditional life underwriting.


Question 6. The Medical Information Bureau (MIB) primarily functions to:
A. Provide medical care to policyholders


pg. 2

,3


B. Alert member insurance companies to omissions or misrepresentations on
applications
C. Set premium rates for the industry
D. Regulate insurance companies
Answer: B
Rationale : The MIB is a non-profit trade association that maintains a database
of medical and avocational information reported by member insurers. It helps
detect fraud and omissions, but it does not make underwriting decisions.


Question 7. An applicant intentionally withholds information about a heart
condition on a life insurance application. If the insured dies during the
contestability period, the insurer may:
A. Pay the full death benefit
B. Rescind the policy and deny the claim based on material misrepresentation
C. Only pay a reduced benefit
D. Sue the beneficiary
Answer: B
Rationale : A material misrepresentation (a fact that would have affected the
underwriting decision) allows the insurer to rescind the policy within the
contestability period (typically 2 years). After the contestability period, the policy
is generally incontestable except for fraud.


Question 8. The "incontestability clause" in a life insurance policy states that:
A. The policy can never be contested
B. After the policy has been in force for 2 years (during the insured's lifetime),
the insurer cannot contest the policy except for non-payment of premiums or
fraud
C. Beneficiaries can contest the policy at any time
D. The insured can change the policy terms
Answer: B
Rationale : The incontestability clause protects policyowners by limiting the
time an insurer can challenge the validity of the policy. After the contestable

pg. 3

, 4


period (usually 2 years), the insurer cannot cancel or deny claims based on
misstatements in the application.


Question 9. The "grace period" in a life insurance policy typically allows:
A. A free-look period to return the policy
B. A specified number of days (usually 30 or 31) after the premium due date
during which the policy remains in force without penalty
C. The beneficiary to file a late claim
D. The insurer to delay payment
Answer: B
Rationale : The grace period protects the policyowner from unintentional
lapse by providing time (typically 30 or 31 days) to pay the premium after the due
date. Coverage remains in force during this period. If the insured dies, the unpaid
premium is deducted from the death benefit.


Question 10. The "suicide clause" in a life insurance policy typically states that:
A. Suicide is covered at any time
B. If the insured commits suicide within the first 1-2 years of the policy, the
death benefit is limited to a return of premiums paid
C. Suicide is never covered
D. The policy is voided
Answer: B
Rationale : Most policies have a suicide exclusion (typically 2 years, sometimes
1). If suicide occurs during this period, the insurer refunds the premiums paid
rather than paying the full death benefit. After the exclusion period, suicide is
generally covered.


SECTION 2: TYPES OF LIFE INSURANCE POLICIES
Question 11. Term life insurance provides coverage for:
A. The insured's entire lifetime
B. A specified period (term), such as 10, 20, or 30 years


pg. 4