Alabama Life Insurance Exam ACTUAL
QUESTIONS AND CORRECT ANSWERS
Which clause allows the insured to change an existing policy to any other policy
of any type as long as the new policy has a higher premium, without any proof
of insurability? - CORRECT ANSWERS Privilege of change clause
The extended term nonforfeiture option provides: - CORRECT ANSWERS
Paid-up term coverage equal to that of the original policy
With a collateral assignment of a life policy to a creditor: - CORRECT
ANSWERS You assign a partial amount of the policy values to the
creditor
An accounting measure used to determine a contract owner's interest in the
separate account of a variable annuity before payments begin is called: -
CORRECT ANSWERS An accumulation unit
Group Insurance Market: A certificate of insurance is issued to whom? -
CORRECT ANSWERS Each individual covered by the group life
insurance
The principal difference between an entity purchase and a cross purchase buy-
sell agreement is: - CORRECT ANSWERS The identity of the policy
owner (the main difference is who owns the policy)
How long is the probationary period for group life insurance? - CORRECT
ANSWERS The probationary period is usually 90 days.
, What is the primary purpose of a section 303 redemption? - CORRECT
ANSWERS To provide liquidity to pay estate taxes and administration
and funeral costs
What is it called when an insurance company sells part of their risk to another
insurance company? - CORRECT ANSWERS Reinsurance (also, risk-
sharing)
The policy conditions represent the obligation of whom? - CORRECT
ANSWERS Both the insured and the insurer
Does social insurance provide equal benefits to all citizens that contribute? -
CORRECT ANSWERS No. As income is re-distributed through the
governmental system, insureds who put less into the system such as the poor,
elderly, and those with dependents get proportionately greater benefits.
In determining whether disability is permanent, most companies call for a
waiting period of how long? - CORRECT ANSWERS 3 to 6 months
What can the cash value of a permanent life insurance policy be used for? -
CORRECT ANSWERS Cash values can be used as nonforfeiture option,
policy loans, full or partial surrender's, but not for accidental death benefits.
What are the essential elements of a contract? - CORRECT ANSWERS
Remember the acronym: CLOC: consideration, offer and acceptance, competent
parties, and legal purpose
What market is a private source of coverage of last resort for individuals or
businesses that have been rejected by voluntary market insurers? - CORRECT
ANSWERS The residual marketplace
QUESTIONS AND CORRECT ANSWERS
Which clause allows the insured to change an existing policy to any other policy
of any type as long as the new policy has a higher premium, without any proof
of insurability? - CORRECT ANSWERS Privilege of change clause
The extended term nonforfeiture option provides: - CORRECT ANSWERS
Paid-up term coverage equal to that of the original policy
With a collateral assignment of a life policy to a creditor: - CORRECT
ANSWERS You assign a partial amount of the policy values to the
creditor
An accounting measure used to determine a contract owner's interest in the
separate account of a variable annuity before payments begin is called: -
CORRECT ANSWERS An accumulation unit
Group Insurance Market: A certificate of insurance is issued to whom? -
CORRECT ANSWERS Each individual covered by the group life
insurance
The principal difference between an entity purchase and a cross purchase buy-
sell agreement is: - CORRECT ANSWERS The identity of the policy
owner (the main difference is who owns the policy)
How long is the probationary period for group life insurance? - CORRECT
ANSWERS The probationary period is usually 90 days.
, What is the primary purpose of a section 303 redemption? - CORRECT
ANSWERS To provide liquidity to pay estate taxes and administration
and funeral costs
What is it called when an insurance company sells part of their risk to another
insurance company? - CORRECT ANSWERS Reinsurance (also, risk-
sharing)
The policy conditions represent the obligation of whom? - CORRECT
ANSWERS Both the insured and the insurer
Does social insurance provide equal benefits to all citizens that contribute? -
CORRECT ANSWERS No. As income is re-distributed through the
governmental system, insureds who put less into the system such as the poor,
elderly, and those with dependents get proportionately greater benefits.
In determining whether disability is permanent, most companies call for a
waiting period of how long? - CORRECT ANSWERS 3 to 6 months
What can the cash value of a permanent life insurance policy be used for? -
CORRECT ANSWERS Cash values can be used as nonforfeiture option,
policy loans, full or partial surrender's, but not for accidental death benefits.
What are the essential elements of a contract? - CORRECT ANSWERS
Remember the acronym: CLOC: consideration, offer and acceptance, competent
parties, and legal purpose
What market is a private source of coverage of last resort for individuals or
businesses that have been rejected by voluntary market insurers? - CORRECT
ANSWERS The residual marketplace
