ALABAMA LIFE INSURANCE 2026
TEST PAPER VERIFIED QUESTIONS
AND ANSWERS
◉ Which is the proper term for a company owned by its policy owners?
Answer: A mutual insurance company
◉ A producer who is acting as an agent is representing: Answer: Always
the insurer
◉ 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.
◉ Each of the following would be an element in the definition of fraud,
except: Answer: 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.
,◉ Examples of Fraud Answer: 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
◉ A company that is licensed to sell insurance in a particular state is:
Answer: An authorized Company
◉ 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
◉ An insurance contract is an aleatory contract. This means: Answer:
Equal value is not given by both parties to the contract
Aleatory: contract of unequal values exchanged
◉ 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
◉ 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.
◉ 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
◉ _________ 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.
◉ _____________ 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.
◉ 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.
, ◉ The field underwriter is the _________ and is not a determiner of
insurability. Answer: 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 insurable prospects.
◉ Third-party ownership refers to: Answer: A situation where the
policyowner is someone other than the insured
◉ Which statement best describes the term reserve? Answer: That
amount that, when increased by future premiums on outstanding
policies, and interest on those premiums will enable the company to
meet future death claims
◉ The applicant, if other than the proposed insured, must have: Answer:
An insurable interest in the life of the insured
◉ Controlled business may be defined as insurance sold: Answer: To the
producer, the producer's family and friends, and the producer's business
associates
◉ With regard to life insurance policies, loading refers to: Answer:
Assignment of the appropriate share of the company's operating
expenses to each policy
TEST PAPER VERIFIED QUESTIONS
AND ANSWERS
◉ Which is the proper term for a company owned by its policy owners?
Answer: A mutual insurance company
◉ A producer who is acting as an agent is representing: Answer: Always
the insurer
◉ 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.
◉ Each of the following would be an element in the definition of fraud,
except: Answer: 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.
,◉ Examples of Fraud Answer: 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
◉ A company that is licensed to sell insurance in a particular state is:
Answer: An authorized Company
◉ 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
◉ An insurance contract is an aleatory contract. This means: Answer:
Equal value is not given by both parties to the contract
Aleatory: contract of unequal values exchanged
◉ 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
◉ 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.
◉ 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
◉ _________ 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.
◉ _____________ 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.
◉ 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.
, ◉ The field underwriter is the _________ and is not a determiner of
insurability. Answer: 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 insurable prospects.
◉ Third-party ownership refers to: Answer: A situation where the
policyowner is someone other than the insured
◉ Which statement best describes the term reserve? Answer: That
amount that, when increased by future premiums on outstanding
policies, and interest on those premiums will enable the company to
meet future death claims
◉ The applicant, if other than the proposed insured, must have: Answer:
An insurable interest in the life of the insured
◉ Controlled business may be defined as insurance sold: Answer: To the
producer, the producer's family and friends, and the producer's business
associates
◉ With regard to life insurance policies, loading refers to: Answer:
Assignment of the appropriate share of the company's operating
expenses to each policy
