Alabama Life & Health Insurance Exam
2026 Questions and Answers
Which of the following would be considered a speculative risk? - Correct 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? - Correct
answer-A mutual insurance company
A producer who is acting as an agent is representing: - Correct answer-Always the
insurer
All of the following are elements of a contract, except: - Correct answer-Authority
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,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: -
Correct 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 - Correct 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: - Correct
answer-An authorized Company
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,In order to be valid, a contract must be between individuals considered legally able
to enter into an agreement. This principle is known as: - Correct answer-Competent
parties
An insurance contract is an aleatory contract. This means: - Correct 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. -
Correct answer-Residual
To address adverse selection what can an insurer legally do? - Correct 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): - Correct answer-Contract of Adhesion
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, _________ refers to the jurisdiction where an insurer was formed or incorporated. -
Correct 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. - Correct 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: - Correct 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. -
Correct answer-Producer
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
2026 Questions and Answers
Which of the following would be considered a speculative risk? - Correct 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? - Correct
answer-A mutual insurance company
A producer who is acting as an agent is representing: - Correct answer-Always the
insurer
All of the following are elements of a contract, except: - Correct answer-Authority
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,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: -
Correct 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 - Correct 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: - Correct
answer-An authorized Company
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,In order to be valid, a contract must be between individuals considered legally able
to enter into an agreement. This principle is known as: - Correct answer-Competent
parties
An insurance contract is an aleatory contract. This means: - Correct 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. -
Correct answer-Residual
To address adverse selection what can an insurer legally do? - Correct 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): - Correct answer-Contract of Adhesion
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, _________ refers to the jurisdiction where an insurer was formed or incorporated. -
Correct 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. - Correct 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: - Correct 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. -
Correct answer-Producer
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
