Alabama Life & Health Insurance Exam.pdf file:///C:/Users/Admin/Downloads/Alabama%20Life%20&%20Heal
Alabama Life & Health InsuranceExam
Questions and Answers
1. Which of the following would be considered a speculative risk ANS The possi-bility 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, wherethere is no chance of
gain, only a chance of loss exists.
2. Which is the proper term for a company owned by its policy owners ANS Amutual
insurance company
3. A producer who is acting as an agent is representing ANS Always the insurer
4. All of the following are elements of a contract, except ANS 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.
5. Each of the following would be an element in the definition of fraud, except:-
: 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
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,Alabama Life & Health Insurance Exam.pdf file:///C:/Users/Admin/Downloads/Alabama%20Life%20&%20Heal
regarded as warranty, no fraud is involved if a statement is guaranteedto be true.
6. Examples of Fraud: Intentional material misrepresentation with the intent ofcausing
injury to another party
Withholding of known material facts
A false statement on the application that is material to the acceptance of the risk
7. A company that is licensed to sell insurance in a particular state is ANS Anauthorized
Company
8. In order to be valid, a contract must be between individuals considered legally able to
enter into an agreement.This principle is known as ANS Competentparties
9. An insurance contract is an aleatory contract.This means ANS Equal value is notgiven by
both parties to the contract
Aleatory: contract of unequal values exchanged
10. The market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market insurers ANS
Residual
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,Alabama Life & Health Insurance Exam.pdf file:///C:/Users/Admin/Downloads/Alabama%20Life%20&%20Heal
11. To address adverse selection what can an insurer legally do ANS Establish andenforce
sound underwriting practices
Underwriting helps to protect the insurer against adverse selection and acceptingrisks that
are more likely than average to suffer losses.
12. A contract that is drafted by an insurer and receives no input or alterationfrom the
insured, is considered a(n) ANS Contract of Adhesion
13. refers to the jurisdiction where an insurer was formed or incor- porated
ANS Domicile: Domicile refers to the jurisdiction either state or country wherean insurer was
formed or incorporated.
14. insurance allows for insurance coverage to be obtainedwhen not
available from admitted carriers ANS Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-ad-mitted
insurers.
15. To make insurance more affordable and protect the insurance companyfrom paying
out too much in claims, insurers will ANS Reinsure the risk
Reinsurance is what makes insurance affordable. Reinsurance companies are in-surance
companies that accept all or a portion of the financial risk of loss from theinsurance
company.
16. The field underwriter is the and is not a determiner of insura-bility
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,Alabama Life & Health Insurance Exam.pdf file:///C:/Users/Admin/Downloads/Alabama%20Life%20&%20Heal
ANS Producer
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 insurableprospects.
17. Third-party ownership refers to ANS A situation where the policyowner is some- one
other than the insured
18. Which statement best describes the term reserve ANS That amount that, whenincreased
by future premiums on outstanding policies, and interest on those premi-ums will enable the
company to meet future death claims
19. The applicant, if other than the proposed insured, must have ANS An insurableinterest in
the life of the insured
20. Controlled business may be defined as insurance sold ANS To the producer, theproducer's
family and friends, and the producer's business associates
21. With regard to life insurance policies, loading refers to ANS Assignment of the
appropriate share of the company's operating expenses to each policy
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Alabama Life & Health InsuranceExam
Questions and Answers
1. Which of the following would be considered a speculative risk ANS The possi-bility 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, wherethere is no chance of
gain, only a chance of loss exists.
2. Which is the proper term for a company owned by its policy owners ANS Amutual
insurance company
3. A producer who is acting as an agent is representing ANS Always the insurer
4. All of the following are elements of a contract, except ANS 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.
5. Each of the following would be an element in the definition of fraud, except:-
: 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
1 of 37 9/10/2024, 9:28
,Alabama Life & Health Insurance Exam.pdf file:///C:/Users/Admin/Downloads/Alabama%20Life%20&%20Heal
regarded as warranty, no fraud is involved if a statement is guaranteedto be true.
6. Examples of Fraud: Intentional material misrepresentation with the intent ofcausing
injury to another party
Withholding of known material facts
A false statement on the application that is material to the acceptance of the risk
7. A company that is licensed to sell insurance in a particular state is ANS Anauthorized
Company
8. In order to be valid, a contract must be between individuals considered legally able to
enter into an agreement.This principle is known as ANS Competentparties
9. An insurance contract is an aleatory contract.This means ANS Equal value is notgiven by
both parties to the contract
Aleatory: contract of unequal values exchanged
10. The market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market insurers ANS
Residual
2 of 37 9/10/2024, 9:28
,Alabama Life & Health Insurance Exam.pdf file:///C:/Users/Admin/Downloads/Alabama%20Life%20&%20Heal
11. To address adverse selection what can an insurer legally do ANS Establish andenforce
sound underwriting practices
Underwriting helps to protect the insurer against adverse selection and acceptingrisks that
are more likely than average to suffer losses.
12. A contract that is drafted by an insurer and receives no input or alterationfrom the
insured, is considered a(n) ANS Contract of Adhesion
13. refers to the jurisdiction where an insurer was formed or incor- porated
ANS Domicile: Domicile refers to the jurisdiction either state or country wherean insurer was
formed or incorporated.
14. insurance allows for insurance coverage to be obtainedwhen not
available from admitted carriers ANS Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-ad-mitted
insurers.
15. To make insurance more affordable and protect the insurance companyfrom paying
out too much in claims, insurers will ANS Reinsure the risk
Reinsurance is what makes insurance affordable. Reinsurance companies are in-surance
companies that accept all or a portion of the financial risk of loss from theinsurance
company.
16. The field underwriter is the and is not a determiner of insura-bility
3 of 37 9/10/2024, 9:28
,Alabama Life & Health Insurance Exam.pdf file:///C:/Users/Admin/Downloads/Alabama%20Life%20&%20Heal
ANS Producer
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 insurableprospects.
17. Third-party ownership refers to ANS A situation where the policyowner is some- one
other than the insured
18. Which statement best describes the term reserve ANS That amount that, whenincreased
by future premiums on outstanding policies, and interest on those premi-ums will enable the
company to meet future death claims
19. The applicant, if other than the proposed insured, must have ANS An insurableinterest in
the life of the insured
20. Controlled business may be defined as insurance sold ANS To the producer, theproducer's
family and friends, and the producer's business associates
21. With regard to life insurance policies, loading refers to ANS Assignment of the
appropriate share of the company's operating expenses to each policy
4 of 37 9/10/2024, 9:28
