Alabama Life and Health Insurance
Complete Exam Study Questions with
Answers | Latest Edition
1. Underwriting helps to protect the insurer against adverse selection and
accepting risks that are more likely than average to suffer losses.
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
2. _________ refers to the jurisdiction where an insurer was formed or
incorporated. - ANSWER Domicile: Domicile refers to the jurisdiction
either state or country where an insurer was formed or incorporated.
3. _____________ insurance allows for insurance coverage to be obtained
when not available from admitted carriers. - ANSWER Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-
admitted insurers.
4. To make insurance more affordable and protect the insurance company from
paying out too much in claims, insurers will: - ANSWER Reinsure the risk
Reinsurance is what makes insurance affordable. Reinsurance companies are
insurance companies that accept all or a portion of the financial risk of loss
from the insurance company.
,5. The field underwriter is the _________ and is not a determiner of
insurability. - ANSWER Producer
6. Allen purchases an estate builder (jumping juvenile) policy for his 5-year old
son, Donald. Suppose that when Donald reaches age 21 his father presents
him with the policy as a gift. Which of the following statements is NOT
correct? - ANSWER Donald must change the beneficiaries immediately
CORRECT:
The premium will continue to be based on his original age of 5
Donald has enjoyed protection against the problems of premature death
The face value of Donald's policy has increased by 5 times
7. Term insurance differs from permanent insurance in that term: - ANSWER
Builds no cash value, pays a death benefit only
8. An indeterminate premium policy offers: - ANSWER A low initial
premium with succeeding premiums based on the company's investment
return, mortality and expenses
9. With regard to the waiver of premium rider, after the disability a policy
owner normally: - ANSWER Need not repay the premiums paid by the
company during disability
10.In many jurisdictions, permanent policies are required to have some cash
value by the end of: - ANSWER The Third Year
,11.Loan values and retirement income are: - ANSWER Called the living
benefits of life insurance
12.With a modified premium whole life contract, premium payments: -
ANSWER Are lower in the early years of the contract
13.A variable life policy: - ANSWER Death benefit varies to reflect the
investment results of the underlying separate account, but never falls below
a guaranteed minimum
14.The type of policy that can be changed from one that does not accumulate
cash values to one that does is a: - ANSWER Convertible term policy
15.A limited pay life policy: - ANSWER Requires premium payments for a
specified number of years or until a specified age is reached
16.Should an insured become totally and permanently disabled two months
before the cut-off date for the waiver of premium rider: - ANSWER The
insured remains eligible for all provisions
17.Warren and Wilma have a joint life policy. Warren dies and the policy pays
nothing. Later on, Wilma dies and the policy death benefit is paid to the
beneficiary. This is called a: - ANSWER Survivorship or second-to-die
policy
18.A whole life policy: - ANSWER Requires the insured to pay premiums for
life and endows at age 100
, 19.Which of the following would be considered a speculative risk? - ANSWER
The possibility 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.
20.Which is the proper term for a company owned by its policy owners? -
ANSWER A mutual insurance company
21.A producer who is acting as an agent is representing: - ANSWER Always
the insurer
22.All of the following are elements of a contract, except: - ANSWER
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.
23.Each of the following would be an element in the definition of fraud, except:
- ANSWER An individual warrants a fact stated on the application
24.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.
Examples of Fraud - ANSWER Intentional material misrepresentation with the
intent of causing injury to another party
Complete Exam Study Questions with
Answers | Latest Edition
1. Underwriting helps to protect the insurer against adverse selection and
accepting risks that are more likely than average to suffer losses.
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
2. _________ refers to the jurisdiction where an insurer was formed or
incorporated. - ANSWER Domicile: Domicile refers to the jurisdiction
either state or country where an insurer was formed or incorporated.
3. _____________ insurance allows for insurance coverage to be obtained
when not available from admitted carriers. - ANSWER Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-
admitted insurers.
4. To make insurance more affordable and protect the insurance company from
paying out too much in claims, insurers will: - ANSWER Reinsure the risk
Reinsurance is what makes insurance affordable. Reinsurance companies are
insurance companies that accept all or a portion of the financial risk of loss
from the insurance company.
,5. The field underwriter is the _________ and is not a determiner of
insurability. - ANSWER Producer
6. Allen purchases an estate builder (jumping juvenile) policy for his 5-year old
son, Donald. Suppose that when Donald reaches age 21 his father presents
him with the policy as a gift. Which of the following statements is NOT
correct? - ANSWER Donald must change the beneficiaries immediately
CORRECT:
The premium will continue to be based on his original age of 5
Donald has enjoyed protection against the problems of premature death
The face value of Donald's policy has increased by 5 times
7. Term insurance differs from permanent insurance in that term: - ANSWER
Builds no cash value, pays a death benefit only
8. An indeterminate premium policy offers: - ANSWER A low initial
premium with succeeding premiums based on the company's investment
return, mortality and expenses
9. With regard to the waiver of premium rider, after the disability a policy
owner normally: - ANSWER Need not repay the premiums paid by the
company during disability
10.In many jurisdictions, permanent policies are required to have some cash
value by the end of: - ANSWER The Third Year
,11.Loan values and retirement income are: - ANSWER Called the living
benefits of life insurance
12.With a modified premium whole life contract, premium payments: -
ANSWER Are lower in the early years of the contract
13.A variable life policy: - ANSWER Death benefit varies to reflect the
investment results of the underlying separate account, but never falls below
a guaranteed minimum
14.The type of policy that can be changed from one that does not accumulate
cash values to one that does is a: - ANSWER Convertible term policy
15.A limited pay life policy: - ANSWER Requires premium payments for a
specified number of years or until a specified age is reached
16.Should an insured become totally and permanently disabled two months
before the cut-off date for the waiver of premium rider: - ANSWER The
insured remains eligible for all provisions
17.Warren and Wilma have a joint life policy. Warren dies and the policy pays
nothing. Later on, Wilma dies and the policy death benefit is paid to the
beneficiary. This is called a: - ANSWER Survivorship or second-to-die
policy
18.A whole life policy: - ANSWER Requires the insured to pay premiums for
life and endows at age 100
, 19.Which of the following would be considered a speculative risk? - ANSWER
The possibility 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.
20.Which is the proper term for a company owned by its policy owners? -
ANSWER A mutual insurance company
21.A producer who is acting as an agent is representing: - ANSWER Always
the insurer
22.All of the following are elements of a contract, except: - ANSWER
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.
23.Each of the following would be an element in the definition of fraud, except:
- ANSWER An individual warrants a fact stated on the application
24.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.
Examples of Fraud - ANSWER Intentional material misrepresentation with the
intent of causing injury to another party
