Alabama Life & Health
Insurance Exam Test Bank 2
Newest Actual Exam With
Complete Questions And
Correct Detailed Answers
(Verified Answers) |Already
Graded A+
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.
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
3
COPYRIGHT©JOSHCLAY 2025/2026. YEAR PUBLISHED 2026. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
, 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 Exam Test Bank 2
Newest Actual Exam With
Complete Questions And
Correct Detailed Answers
(Verified Answers) |Already
Graded A+
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.
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
3
COPYRIGHT©JOSHCLAY 2025/2026. YEAR PUBLISHED 2026. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
, 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
