Alabama Life Insurance Exam

Which of the following best describes risk?

the uncertainty of loss

A peril is defined as

a cause of loss

Which type of risk is insurable?

pure risk

The principle of indemnity means

the insured cannot profit from a loss

An insurance contract is considered

conditional

Which is not a characteristic of an ideally insurable risk?

loss must be catastrophic

Aleatory contracts are characterized by

unequal exchange of value

The party who makes an offer in insurance is the

applicant

The law of large numbers allows insurers to

predict group losses

A moral hazard is

a dishonest tendency

Which clause states the insurer's promise to pay?

insuring clause

Insurance regulation is primarily the responsibility of

state government

Which authority is not granted to producers?

contractual authority

Twisting refers to

misrepresenting a policy to replace another

Rebating is

offering inducements not in the policy

A warranty is

guaranteed to be true

A unilateral contract means

only one party makes a legally enforceable promise

Which is not a type of insurer?

Tertiary

A domestic insurer is

in the same state

Underwriting primarily evaluates

applicant risk

Spreading risk among many insureds is called

risk pooling

A void contract is

not enforceable

An example of a physical hazard is

smoking

A policy is considered adhesion because

insurers draft the contract

Consideration for the insured includes

premium + statements on application

The age calculation most commonly used for life insurance is

age nearest birthday

Whole life insurance provides coverage

until age 100 or 120

Term insurance is best described as

temporary protection

Cash value in whole life grows through

guaranteed interest

Universal life insurance features

flexible premiums

Variable life invests cash value in the

separate account

A policy loan is taken from the

cash value

Insurable interest must exist at

application

A participating policy pays

dividends

Dividends are

not guaranteed

Level term life means

death benefit stays level

The incontestability clause prevents denial after

2 years

The payor benefit rider is used for

juvenile policies

The suicide clause typically excludes for

2 years

Waiver of premium waives premiums if insured

becomes disabled

Minimum free-look period is

10 days

A beneficiary designation that cannot be changed

irrevocable

A viatical settlement is

selling a policy by a terminally ill person

Replacement involves

exchanging one policy for another

Cost of insurance in ul policies is

deducted monthly

Limited-pay whole life premiums are paid

for a set number of years

Which is not a settlement option?

accelerated benefits

AD&D pays for

accidental death or dismemberment

Spendthrift clause protects from

creditors

Graded-premium life features

premiums increase then level off

The purpose of health insurance is to

financially protect against medical expenses

A deductible is

the amount the insured pays before insurance begins

A copayment is

a fixed amount paid for a service

Coinsurance is

percentage shared between insured and insurer

An HMO requires members to use

network providers only

The primary care physician in an HMO acts as

gatekeeper

7.PPO plans allow

out-of-network coverage at higher cost

An FSA is funded by

pre-tax employee contributions

An HSA requires enrollment in

high-deductible health plan (HDHP)

The elimination period in disability insurance is

waiting period before benefits begin

Short-term disability typically covers up to

2 years or less

Long-term disability typically covers

beyond 2 years

Social insurance includes

Medicare and Medicaid

Medicare part a covers

hospital care

Medicare part b covers

outpatient services

Medicare part d covers

prescription drugs

Medicaid is funded by

federal and state government

Guaranteed renewable policies

cannot be canceled but premiums can increase by class

Noncancelable policies

cannot change premiums or cancel policy

The grace period for health insurance is typically

30 days

A pre-existing condition is

an illness diagnosed before coverage

AD&D pays benefits for

accidental death or dismemberment

The probationary period prevents

immediate claims for sickness

A cob (coordination of benefits) provision prevents

duplicate benefits from multiple policies

Supplemental policies like Aflac are known as

limited or accident-supplement policies

The Alabama department of insurance is headed by the

commissioner of insurance

The commissioner is

appointed by the governor

A producer license in Alabama must be renewed every

2 years

Continuing education (CE) requirement for producers is

24 hours including 3 hours ethics

Alabama requires reporting address changes within

30 days

A temporary license lasts up to

6 months

Controlled business is defined as

insurance for family, employer, or associates

Alabama prohibits commissions on

controlled business as the majority of sales

Rebating in Alabama is

illegal

Twisting is defined as

misrepresenting to replace a policy

A producer must report criminal convictions within

30 days

The free-look period for life insurance in Alabama is

10 days

The free-look period for replacements in Alabama is

30 days

Alabama requires insurers to maintain

appointments for producers

Commissions may only be paid to

licensed producers

Alabama defines misrepresentation as

making false statements about a policy

Defamation in insurance refers to

making false statements about another insurer

A cease and desist order is issued for

unfair or illegal practices

The purpose of the Alabama life & disability guaranty association is

protect policy owners if insurer becomes insolvent

The maximum liability of the guaranty association for life insurance death benefits is

$300,000

Replacement regulations require giving the applicant

replacement notice

Producers must keep records of insurance transactions for

3 years

A domestic insurer in Alabama is

incorporated in Alabama

An alien insurer is

incorporated in another country

The commissioner may examine insurers at least once every

3 to 5 years