1
ALABAMA LIFE & HEALTH INSURANCE EXAM QUESTIONS WITH
COMPLETE SOLUTIONS GUARANTEED PASS
1. Which of the following would be considered a speculative risk -
ANSWER ->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, where there 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 - ANSWER ->A mutual insurance company
3. A producer who is acting as an agent is representing - ANSWER -
>Always the insurer
4. All of the following are elements of a contract, except - ANSWER -
>Authority
,2
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 regarded as warranty, no fraud is involved if a statement
is guaranteed to be true.
6. Examples of Fraud: Intentional material misrepresentation with the
intent of causing 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 - ANSWER ->An authorized
Company
,3
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 - ANSWER -
>Competent parties
9. An insurance contract is an aleatory contract. This
me- ANSWER ->- ANSWER ->Equal value is not given
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 - ANSWER -
>Residual
, 4
11. To address adverse selection what can an insurer
legally do - ANSWER ->Establish and enforce sound
underwriting practices
Underwriting helps to protect the insurer against adverse selection and
accepting risks that are more likely than average to suffer losses.
12. A contract that is drafted by an insurer and receives
no input or alteration from the insured, is
considered a(n) - ANSWER ->Contract of Adhesion
13. refers to the jurisdiction where an insurer was
formed or incor- porated - ANSWER ->Domicile:
Domicile refers to the jurisdiction either state or country
where an insurer was formed or incorporated.
14. insurance allows for insurance coverage to be
obtained
when not available from admitted carriers - ANSWER ->Surplus Lines
ALABAMA LIFE & HEALTH INSURANCE EXAM QUESTIONS WITH
COMPLETE SOLUTIONS GUARANTEED PASS
1. Which of the following would be considered a speculative risk -
ANSWER ->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, where there 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 - ANSWER ->A mutual insurance company
3. A producer who is acting as an agent is representing - ANSWER -
>Always the insurer
4. All of the following are elements of a contract, except - ANSWER -
>Authority
,2
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 regarded as warranty, no fraud is involved if a statement
is guaranteed to be true.
6. Examples of Fraud: Intentional material misrepresentation with the
intent of causing 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 - ANSWER ->An authorized
Company
,3
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 - ANSWER -
>Competent parties
9. An insurance contract is an aleatory contract. This
me- ANSWER ->- ANSWER ->Equal value is not given
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 - ANSWER -
>Residual
, 4
11. To address adverse selection what can an insurer
legally do - ANSWER ->Establish and enforce sound
underwriting practices
Underwriting helps to protect the insurer against adverse selection and
accepting risks that are more likely than average to suffer losses.
12. A contract that is drafted by an insurer and receives
no input or alteration from the insured, is
considered a(n) - ANSWER ->Contract of Adhesion
13. refers to the jurisdiction where an insurer was
formed or incor- porated - ANSWER ->Domicile:
Domicile refers to the jurisdiction either state or country
where an insurer was formed or incorporated.
14. insurance allows for insurance coverage to be
obtained
when not available from admitted carriers - ANSWER ->Surplus Lines
