Alabama Department of
MAXE H&L
Insurance
★ ★
AL
State of Alabama
EST. 1819
PROTECTING ALABAMA CONSUMERS
Alabama Life & Health Insurance Exam
CO M P L E T E ST U DY G U I D E | A L R E A DY G RA D E D A +
INSTITUTION Alabama Department of Insurance COURSE CODE L&H Exam
PROGRAM Life & Health Insurance Licensing ACADEMIC YEAR
EXAM TITLE Alabama Life & Health Insurance TOTAL QUESTIONS 106 Questions
Exam
COURSE TITLE Life & Health Insurance Pre- FORMAT Multiple Choice — Select the
Licensing Single Best Answer
EXAMINATION INSTRUCTIONS
▸ Select the single best answer for each question.
▸ Life insurance, health insurance, annuities, and Alabama-specific regulations are all testable content.
▸ Correct answers and detailed rationales appear below each question for review purposes.
▸ All content reflects current Alabama insurance licensing requirements.
, SECTION I — LIFE & HEALTH INSURANCE PRINCIPLES Questions 1 – 106
1. Self-insurers:
A. Retain risks and must have a large number of similar risks and enough capital to pay
claims
B. Transfer all risks to insurers
C. Avoid all risks
D. Pool risks with other companies
CORRECT ANSWER A — Retain risks and must have a large number of similar risks and enough
capital to pay claims
RATIONALE Self-insurers retain risks and must have a large number of similar risks and
enough capital to pay claims. Self-insurance requires sufficient financial resources
to cover potential losses without transferring risk to an insurer.
2. A self-funded plan is:
A. A plan in which an employer pays insurance benefits from a fund derived from the
employer's current revenues
B. A plan where employees pay all benefits
C. A plan where the insurer pays all benefits
D. A government-funded plan
CORRECT ANSWER A — A plan in which an employer pays insurance benefits from a fund
derived from the employer's current revenues
RATIONALE A self-funded plan is one in which an employer pays insurance benefits from a
fund derived from the employer's current revenues. The employer assumes the
financial risk for providing benefits to employees.
,3. Lloyd's of London is:
A. Not an insurance company
B. A stock insurance company
C. A mutual insurance company
D. A fraternal benefit society
CORRECT ANSWER A — Not an insurance company
RATIONALE Lloyd's of London is not an insurance company. It is a marketplace where
syndicates of underwriters accept risks. It provides facilities for insurance but
does not directly issue policies.
4. Distribution Systems are:
A. The ways insurance products are marketed and sold to the public
B. The ways insurers are regulated
C. The types of insurance policies
D. The claims processing systems
CORRECT ANSWER A — The ways insurance products are marketed and sold to the public
RATIONALE Distribution systems are the ways insurance products are marketed and sold to
the public. These include career agency systems, independent agency systems,
and direct writing.
, 5. Career Agency System:
A. All producers under the career agency system are captive agents and employees of the
insurer
B. Agents represent multiple insurers
C. Agents are independent contractors
D. Agents own their own agencies
CORRECT ANSWER A — All producers under the career agency system are captive agents and
employees of the insurer
RATIONALE All producers under the career agency system are captive agents and employees
of the insurer. They represent only one insurance company and are typically paid
a salary plus commissions.
6. Personal Producing General Agency System:
A. Agents work for an independent agency selling policies from several insurance companies
B. Agents are employees of one insurer
C. Agents work for the government
D. Agents are salaried employees
CORRECT ANSWER A — Agents work for an independent agency selling policies from several
insurance companies
RATIONALE In the Personal Producing General Agency System, agents work for an
independent agency selling policies from several insurance companies. They are
not captive to any single insurer.
MAXE H&L
Insurance
★ ★
AL
State of Alabama
EST. 1819
PROTECTING ALABAMA CONSUMERS
Alabama Life & Health Insurance Exam
CO M P L E T E ST U DY G U I D E | A L R E A DY G RA D E D A +
INSTITUTION Alabama Department of Insurance COURSE CODE L&H Exam
PROGRAM Life & Health Insurance Licensing ACADEMIC YEAR
EXAM TITLE Alabama Life & Health Insurance TOTAL QUESTIONS 106 Questions
Exam
COURSE TITLE Life & Health Insurance Pre- FORMAT Multiple Choice — Select the
Licensing Single Best Answer
EXAMINATION INSTRUCTIONS
▸ Select the single best answer for each question.
▸ Life insurance, health insurance, annuities, and Alabama-specific regulations are all testable content.
▸ Correct answers and detailed rationales appear below each question for review purposes.
▸ All content reflects current Alabama insurance licensing requirements.
, SECTION I — LIFE & HEALTH INSURANCE PRINCIPLES Questions 1 – 106
1. Self-insurers:
A. Retain risks and must have a large number of similar risks and enough capital to pay
claims
B. Transfer all risks to insurers
C. Avoid all risks
D. Pool risks with other companies
CORRECT ANSWER A — Retain risks and must have a large number of similar risks and enough
capital to pay claims
RATIONALE Self-insurers retain risks and must have a large number of similar risks and
enough capital to pay claims. Self-insurance requires sufficient financial resources
to cover potential losses without transferring risk to an insurer.
2. A self-funded plan is:
A. A plan in which an employer pays insurance benefits from a fund derived from the
employer's current revenues
B. A plan where employees pay all benefits
C. A plan where the insurer pays all benefits
D. A government-funded plan
CORRECT ANSWER A — A plan in which an employer pays insurance benefits from a fund
derived from the employer's current revenues
RATIONALE A self-funded plan is one in which an employer pays insurance benefits from a
fund derived from the employer's current revenues. The employer assumes the
financial risk for providing benefits to employees.
,3. Lloyd's of London is:
A. Not an insurance company
B. A stock insurance company
C. A mutual insurance company
D. A fraternal benefit society
CORRECT ANSWER A — Not an insurance company
RATIONALE Lloyd's of London is not an insurance company. It is a marketplace where
syndicates of underwriters accept risks. It provides facilities for insurance but
does not directly issue policies.
4. Distribution Systems are:
A. The ways insurance products are marketed and sold to the public
B. The ways insurers are regulated
C. The types of insurance policies
D. The claims processing systems
CORRECT ANSWER A — The ways insurance products are marketed and sold to the public
RATIONALE Distribution systems are the ways insurance products are marketed and sold to
the public. These include career agency systems, independent agency systems,
and direct writing.
, 5. Career Agency System:
A. All producers under the career agency system are captive agents and employees of the
insurer
B. Agents represent multiple insurers
C. Agents are independent contractors
D. Agents own their own agencies
CORRECT ANSWER A — All producers under the career agency system are captive agents and
employees of the insurer
RATIONALE All producers under the career agency system are captive agents and employees
of the insurer. They represent only one insurance company and are typically paid
a salary plus commissions.
6. Personal Producing General Agency System:
A. Agents work for an independent agency selling policies from several insurance companies
B. Agents are employees of one insurer
C. Agents work for the government
D. Agents are salaried employees
CORRECT ANSWER A — Agents work for an independent agency selling policies from several
insurance companies
RATIONALE In the Personal Producing General Agency System, agents work for an
independent agency selling policies from several insurance companies. They are
not captive to any single insurer.
