ALABAMA Property and Casualty Insurance
Practice Exam Questions and correct Answers
(Verified Answers) 2026/2027 Updated
Comprehensive Review for Licensing and
Certification
1. Question:
Which of the following is considered a peril under a standard homeowners
insurance policy in Alabama?
A) Flood
B) Theft
C) Wear and Tear
D) Earthquake
Answer:
B) Theft
Explanation: Under a standard homeowners insurance policy, perils typically
covered include theft, fire, windstorm, and vandalism, among others. Flood and
earthquake typically require separate coverage endorsements.
2. Question:
What is the primary purpose of the Alabama Insurance Guaranty Association?
,A) To offer insurance discounts
B) To pay claims of policyholders when their insurance company becomes
insolvent
C) To provide low-cost health insurance
D) To regulate the rates of property and casualty insurance
Answer:
B) To pay claims of policyholders when their insurance company becomes
insolvent
Explanation: The Alabama Insurance Guaranty Association is designed to provide
protection to policyholders by covering claims if an insurance company becomes
insolvent. The association steps in to pay claims up to a certain limit.
3. Question:
Which of the following would NOT be covered under a standard Auto Insurance
Liability policy in Alabama?
A) Bodily injury to others
B) Damage to another person’s property
C) Injuries sustained by the insured while driving
D) Injuries caused by an uninsured motorist
Answer:
C) Injuries sustained by the insured while driving
Explanation: Standard auto insurance liability policies generally cover damages to
others, including bodily injury and property damage, as well as uninsured
motorist coverage. However, injuries sustained by the insured (driver) would
typically be covered under their own personal injury protection (PIP) or medical
payments coverage.
4. Question:
What is the minimum required liability coverage for automobile insurance in
Alabama?
, A) $25,000 for bodily injury per person, $50,000 for bodily injury per accident, and
$25,000 for property damage
B) $50,000 for bodily injury per person, $100,000 for bodily injury per accident,
and $50,000 for property damage
C) $15,000 for bodily injury per person, $30,000 for bodily injury per accident,
and $15,000 for property damage
D) $25,000 for bodily injury per person, $50,000 for bodily injury per accident,
and $100,000 for property damage
Answer:
C) $15,000 for bodily injury per person, $30,000 for bodily injury per accident, and
$15,000 for property damage
Explanation: In Alabama, the minimum required auto liability coverage is $15,000
for bodily injury per person, $30,000 for bodily injury per accident, and $15,000
for property damage.
5. Question:
What is the purpose of Umbrella Insurance?
A) To replace the standard homeowners insurance policy
B) To cover losses that exceed the limits of other insurance policies
C) To provide life insurance coverage
D) To provide coverage only for commercial property
Answer:
B) To cover losses that exceed the limits of other insurance policies
Explanation: Umbrella insurance is designed to provide additional coverage above
and beyond the limits of your primary insurance policies, such as auto or
homeowners insurance. It can help protect against large claims or lawsuits that
exceed the limits of your other policies.
6. Question:
Practice Exam Questions and correct Answers
(Verified Answers) 2026/2027 Updated
Comprehensive Review for Licensing and
Certification
1. Question:
Which of the following is considered a peril under a standard homeowners
insurance policy in Alabama?
A) Flood
B) Theft
C) Wear and Tear
D) Earthquake
Answer:
B) Theft
Explanation: Under a standard homeowners insurance policy, perils typically
covered include theft, fire, windstorm, and vandalism, among others. Flood and
earthquake typically require separate coverage endorsements.
2. Question:
What is the primary purpose of the Alabama Insurance Guaranty Association?
,A) To offer insurance discounts
B) To pay claims of policyholders when their insurance company becomes
insolvent
C) To provide low-cost health insurance
D) To regulate the rates of property and casualty insurance
Answer:
B) To pay claims of policyholders when their insurance company becomes
insolvent
Explanation: The Alabama Insurance Guaranty Association is designed to provide
protection to policyholders by covering claims if an insurance company becomes
insolvent. The association steps in to pay claims up to a certain limit.
3. Question:
Which of the following would NOT be covered under a standard Auto Insurance
Liability policy in Alabama?
A) Bodily injury to others
B) Damage to another person’s property
C) Injuries sustained by the insured while driving
D) Injuries caused by an uninsured motorist
Answer:
C) Injuries sustained by the insured while driving
Explanation: Standard auto insurance liability policies generally cover damages to
others, including bodily injury and property damage, as well as uninsured
motorist coverage. However, injuries sustained by the insured (driver) would
typically be covered under their own personal injury protection (PIP) or medical
payments coverage.
4. Question:
What is the minimum required liability coverage for automobile insurance in
Alabama?
, A) $25,000 for bodily injury per person, $50,000 for bodily injury per accident, and
$25,000 for property damage
B) $50,000 for bodily injury per person, $100,000 for bodily injury per accident,
and $50,000 for property damage
C) $15,000 for bodily injury per person, $30,000 for bodily injury per accident,
and $15,000 for property damage
D) $25,000 for bodily injury per person, $50,000 for bodily injury per accident,
and $100,000 for property damage
Answer:
C) $15,000 for bodily injury per person, $30,000 for bodily injury per accident, and
$15,000 for property damage
Explanation: In Alabama, the minimum required auto liability coverage is $15,000
for bodily injury per person, $30,000 for bodily injury per accident, and $15,000
for property damage.
5. Question:
What is the purpose of Umbrella Insurance?
A) To replace the standard homeowners insurance policy
B) To cover losses that exceed the limits of other insurance policies
C) To provide life insurance coverage
D) To provide coverage only for commercial property
Answer:
B) To cover losses that exceed the limits of other insurance policies
Explanation: Umbrella insurance is designed to provide additional coverage above
and beyond the limits of your primary insurance policies, such as auto or
homeowners insurance. It can help protect against large claims or lawsuits that
exceed the limits of your other policies.
6. Question:
