Alabama Life & Health Insurance Exam
1. Which of the following would be considered a speculative risk ANS The possi-bility 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, wherethere is no chance of
gain, only a chance of loss exists.
2. Which is the proper term for a company owned by its policy owners ANS Amutual
insurance company
3. A producer who is acting as an agent is representing ANS Always the insurer
4. All of the following are elements of a contract, except ANS 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.
5. Each of the following would be an element inthe definition of fraud, except:-
: 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 guaranteedto be true.
6. Examples of Fraud: Intentional material misrepresentation with the intent ofcausing
injury to another party
Withholding of known material facts
A false statement on the application that is material to the acceptance of the risk
7. A company that is licensed to sell insurance in a particular state is ANS Anauthorized
Company
8. In order to be valid, a contract must be between individuals considered legally able to
enter into an agreement.This principle is known as ANS Competentparties
9. An insurance contract is an aleatory contract.This means ANS Equal value is notgiven by
both parties to the contract
Aleatory: contract of unequal values exchanged
,10. The market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market insurers ANS
Residual
, 11. To address adverse selection what can an insurer legally do ANS Establish andenforce
sound underwriting practices
Underwriting helps to protect the insurer against adverse selection and acceptingrisks that
are more likely than average to suffer losses.
12. A contract that is drafted by an insurer and receives no input or alterationfrom the
insured, is considered a(n) ANS Contract of Adhesion
13. refers to the jurisdiction where an insurer was formed or incor-porated ANS
Domicile: Domicile refers to the jurisdiction either state or country where an insurer was
formed or incorporated.
14. insurance allows for insurance coverage to be obtainedwhen not
available from admitted carriers ANS Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-ad-mitted
insurers.
15. To make insurance more affordable and protect the insurance companyfrom paying
out too much in claims, insurers will ANS Reinsure the risk
Reinsurance is what makes insurance affordable. Reinsurance companies are in-surance
1. Which of the following would be considered a speculative risk ANS The possi-bility 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, wherethere is no chance of
gain, only a chance of loss exists.
2. Which is the proper term for a company owned by its policy owners ANS Amutual
insurance company
3. A producer who is acting as an agent is representing ANS Always the insurer
4. All of the following are elements of a contract, except ANS 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.
5. Each of the following would be an element inthe definition of fraud, except:-
: 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 guaranteedto be true.
6. Examples of Fraud: Intentional material misrepresentation with the intent ofcausing
injury to another party
Withholding of known material facts
A false statement on the application that is material to the acceptance of the risk
7. A company that is licensed to sell insurance in a particular state is ANS Anauthorized
Company
8. In order to be valid, a contract must be between individuals considered legally able to
enter into an agreement.This principle is known as ANS Competentparties
9. An insurance contract is an aleatory contract.This means ANS Equal value is notgiven by
both parties to the contract
Aleatory: contract of unequal values exchanged
,10. The market is a private source of coverage of last resort for
individuals or businesses that have been rejected by voluntary market insurers ANS
Residual
, 11. To address adverse selection what can an insurer legally do ANS Establish andenforce
sound underwriting practices
Underwriting helps to protect the insurer against adverse selection and acceptingrisks that
are more likely than average to suffer losses.
12. A contract that is drafted by an insurer and receives no input or alterationfrom the
insured, is considered a(n) ANS Contract of Adhesion
13. refers to the jurisdiction where an insurer was formed or incor-porated ANS
Domicile: Domicile refers to the jurisdiction either state or country where an insurer was
formed or incorporated.
14. insurance allows for insurance coverage to be obtainedwhen not
available from admitted carriers ANS Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-ad-mitted
insurers.
15. To make insurance more affordable and protect the insurance companyfrom paying
out too much in claims, insurers will ANS Reinsure the risk
Reinsurance is what makes insurance affordable. Reinsurance companies are in-surance
