ALABAMA LIFE INSURANCE EXAM QUESTIONS WITH ANSWERS 2024

Which clause allows the insured to change an existing policy to any other policy of any type as long as the new policy has a higher premium, without any proof of insurability? - ANSWERS Privilege of change clause The extended term nonforfeiture option provides: - ANSWERS Paid-up term coverage equal to that of the original policy With a collateral assignment of a life policy to a creditor: - ANSWERS You assign a partial amount of the policy values to the creditor An accounting measure used to determine a contract owner's interest in the separate account of a variable annuity before payments begin is called: - ANSWERS An accumulation unit Group Insurance Market: A certificate of insurance is issued to whom? - ANSWERS Each individual covered by the group life insurance The principal difference between an entity purchase and a cross purchase buy-sell agreement is: - ANSWERS The identity of the policy owner (the main difference is who owns the policy) How long is the probationary period for group life insurance? - ANSWERS The probationary period is usually 90 days. What is the primary purpose of a section 303 redemption? - ANSWERS To provide liquidity to pay estate taxes and administration and funeral costs What is it called when an insurance company sells part of their risk to another insurance company? - ANSWERS Reinsurance (also, risk-sharing) The policy conditions represent the obligation of whom? - ANSWERS Both the insured and the insurer Does social insurance provide equal benefits to all citizens that contribute? - ANSWERS No. As income is re-distributed through the governmental system, insureds who put less into the system such as the poor, elderly, and those with dependents get proportionately greater benefits. In determining whether disability is permanent, most companies call for a waiting period of how long? - ANSWERS 3 to 6 months What can the cash value of a permanent life insurance policy be used for? - ANSWERS Cash values can be used as nonforfeiture option, policy loans, full or partial surrender's, but not for accidental death benefits. What are the essential elements of a contract? - ANSWERS Remember the acronym: CLOC: consideration, offer and acceptance, competent parties, and legal purpose What market is a private source of coverage of last resort for individuals or businesses that have been rejected by voluntary market insurers? - ANSWERS The residual marketplace Describe the term reserve - ANSWERS That amount that, when increased by future premiums on outstanding policies, and interest on this premiums will enable the company to meet future death claims How are premiums generally calculated by insurers? - ANSWERS Insurers generally calculate premiums on an annual basis, and then prorate according to the mode selected. The more frequent the premium, the more overall the cost. When a producer receives an application for life insurance that is completed and signed, but without premium payment, when does coverage start? - ANSWERS On the date the policy is delivered and premium collected At what age does the waiver of premium rider normally expire? - ANSWERS 60 In a whole life insurance policy when is the cash value at its greatest? - ANSWERS At the end of the policy term. In a whole life insurance policy when is the insurance protection at its greatest? - ANSWERS The insurance protection is greatest at the start of a policy. At the start, a whole life policy is all insurance protection. The policy begins to build cash value, the cash value eventually equals the death benefit when the policy endows. Therefore, the cash value is its greatest at the end of the policy term. An insured allows a permanent policy to lapse: Unless otherwise instructed, what will the insurance company do? - ANSWERS The insurance company will automatically institute the extended term option What type of annuity guarantees to pay total income at least equal to the purchase price of the contract? - ANSWERS A refund life annuity What does a split-dollar plan do? - ANSWERS A split-dollar plan divides the cost of additional insurance for an employee between that employee and the company. If death occurs while employed, the death benefit is shared between the employer and the employee's beneficiary