Alabama Department of Insurance Producer Examination Content Outline (Life and Health)

Part I - General - Life and Health Insurance

Part I covers fundamental insurance principles applicable to both life and health insurance producers. It consists of three chapters focusing on the purpose of insurance, contract law, and the underwriting process.

• Chapter 1: Purpose of Insurance     * The Purpose of Life and Health Insurance: Understanding the socio-economic roles of these insurance types.     * Dealing with Risk: Identification, assessment, and management of risk through insurance.     * The Law of Large Numbers: The statistical principle stating that as the number of similar exposure units increases, the actual loss experience will shift closer to the expected loss experience.     * Insurance Company Structures: Organization and operational models of insurers.     * Domestic, Foreign, and Alien Companies: Classifications based on the insurer's place of incorporation (Domestic is in-state, Foreign is another state, Alien is another country).     * Admitted and Nonadmitted Companies: Determining which companies are authorized (admitted) to conduct business within the state of Alabama.     * Examination Question Count:         * Life: $8$         * Life and Health (Combined): $8$         * Health: $6$

• Chapter 2: Contract Law     * Introduction to the Law of Contracts: General principles governing legal agreements.     * Contractual Terms and Concepts: Definitions and specific elements required for insurance contracts.     * Law of Agency: The legal relationship where a producer (agent) acts on behalf of the insurer (principal).     * Powers of Producers: Authorizations and limitations of insurance agents.     * Examination Question Count:         * Life: $11$         * Life and Health (Combined): $10$         * Health: $7$

• Chapter 3: Underwriting and the Application     * Underwriting: The process of evaluating and selecting risks.     * Risk Classification: Categorizing applicants (e.g., standard, substandard, preferred, declined).     * Premium Calculation: Factors involved in determining the cost of insurance.     * Mortality Risk Factors: Statistical considerations for life insurance risk.     * Premium Mode: Frequency of premium payments (monthly, quarterly, semi-annually, annually).     * Conditional Receipt: The document given to the applicant upon payment of the initial premium, providing coverage subject to underwriting approval.     * Agent Responsibilities: Legal and ethical duties during the application process.     * Insurance Marketing Systems: Various methods used to sell insurance products.     * Examination Question Count:         * Life: $11$         * Life and Health (Combined): $9$         * Health: $8$

• Total Questions for Part I:     * Life: $30$     * Life and Health (Combined): $27$     * Health: $21$

Part II - Life Insurance

Part II focuses specifically on life insurance products, provisions, and retirement planning. It contains Chapters 4 through 11.

• Chapter 4: Traditional Life Policies     * Term Life: Coverage for a specific duration.     * Whole Life: Permanent coverage with a cash value component.     * Joint Life and Survivorship Life Policies: Coverage for two or more lives (Joint pays on first death; Survivorship pays on last death).     * Modified Life and Graded Premium Whole Life: Policies with premiums that increase after an initial period.     * Examination Question Count: Life: $11$, L&H: $18$.

• Chapter 5: Flexible Feature Life Policies     * Adjustible Life: Allows the policyowner to change the premium, face amount, and coverage period.     * Universal Life: Flexible premiums and adjustable death benefits with unbundled components.     * Variable Life and Variable Universal Life: Policies that allow for investment in separate accounts (stocks/bonds).     * Equity Indexed Life: Cash value growth linked to a stock market index.     * Examination Question Count: Life: $3$, L&H: $5$.

• Chapter 6: Policy Provisions     * Entire Contract and Policyowner's Rights Clauses: Defining the components of the contract and the rights of the owner.     * Beneficiaries: Designating who receives proceeds (primary, contingent).     * Incontestable Clause: Prevents the insurer from denying a claim after the policy has been in force for a set period (usually two years).     * Misstatement of Age or Gender: Adjusting benefits if demographic data was incorrect on the application.     * Suicide Clause: Limitations on coverage if the insured commits suicide within a specified timeframe.     * Free Look: Period (e.g., $10$ days) to review and return the policy for a full refund.     * Grace Period: Time allowed for late premium payment before the policy lapses.     * Reinstatement: Process for restoring a lapsed policy.     * Automatic Premium Loan (APL): Feature that uses cash value to pay overdue premiums automatically.     * Assignment: Transferring policy ownership rights (absolute vs. collateral).     * Exclusions: Specific hazards (e.g., war, aviation) not covered by the policy.     * Accelerated (Living) Benefit Options & Viatical Settlements: Provisions for accessing death benefits while the insured is still alive due to terminal illness.     * Examination Question Count: Life: $15$, L&H: $22$.

• Chapter 7: Policy Options     * Dividend Options: Methods for receiving mutual insurer dividends (Cash, Reduction of Premium, Accumulation at Interest, Paid-up Additions, One-year Term).     * Nonforfeiture Options: Options for cash value if the policy lapses (Cash Surrender, Reduced Paid-up, Extended Term).     * Settlement Options: How death proceeds are paid out (Lump Sum, Interest Only, Fixed Period, Fixed Amount, Life Income).     * Examination Question Count: Life: $10$, L&H: $13$.

• Chapter 8: Policy Riders     * Waiver of Premium Rider: Suspends premiums if the insured becomes totally disabled.     * Disability Income Rider: Provides monthly income if the insured is disabled.     * Payor Rider: Waives premiums for a juvenile policy if the payor becomes disabled or dies.     * Accidental Death Rider: Increases the benefit (e.g., Double Indemnity) if death results from an accident.     * Guaranteed Insurability Rider: Allows purchase of additional coverage without proving insurability at specific ages or events.     * Term Riders: Adds temporary coverage to a permanent policy.     * Other Insureds Rider: Provides coverage for family members or spouses.     * Cost of Living Rider: Adjusts face amount based on inflation indices.     * Examination Question Count: Life: $5$, L&H: $8$.

• Chapter 9: Annuities and Retirement Plans     * Annuity Basics: Purpose (liquidation of an estate), accumulation vs. annuitization, and payment types.     * Fundamentals of Retirement Plans: Overview of qualified vs. non-qualified plans.     * Examination Question Count: Life: $5$, L&H: $6$.

• Chapter 10: Business and Group Life     * Business uses for Life Insurance: Buy-sell agreements, key person insurance, and executive bonuses.     * Group Life Insurance Characteristics: Underwriting the group as a whole, Master Policy vs. Certificates of Insurance, and conversion rights.     * Examination Question Count: Life: $4$, L&H: $6$.

• Chapter 11: Social Security     * Purpose and Funding: Federal Old-Age, Survivors, and Disability Insurance (OASDI) program.     * Types of OASDI Benefits: Retirement, survivor, and disability benefits.     * Examination Question Count: Life: $2$, L&H: $2$.

• Total Questions for Part II:     * Life: $55$     * Life and Health (Combined): $80$     * Health: $0$

Part III - Health Insurance

Part III focuses on medical coverage, disability, and government health programs. It covers Chapters 12 through 18.

• Chapter 12: Health Foundations     * Health Insurance in General: Basic concepts of medical and disability coverage.     * Health Insurance Providers: Commercial insurers, Blue Cross/Blue Shield, and HMOs.     * Managed Care: Systems like HMOs and PPOs that control costs and quality.     * High Deductible Plans: Insurance plans with higher deductibles often paired with savings accounts.     * Flexible Spending Account (FSA): Tax-advantaged accounts for health expenses.     * Common Provisions: Foundational health policy terms.     * Examination Question Count: Life: $0$, L&H: $10$, Health: $12$.

• Chapter 13: Medical Expense Policies     * Major Medical Policies: Coverage for catastrophic medical costs.     * Major Medical Claims: Processes for claim filing and reimbursement.     * Medical Expense Policy Provisions: Specific clauses like deductibles, coinsurance, and out-of-pocket limits.     * Examination Question Count: Life: $0$, L&H: $7$, Health: $9$.

• Chapter 14: Disability Income Policies     * Disability Income Features: Elimination periods and benefit periods.     * Unique Provisions: Definitions of total vs. partial disability.     * Business Uses: Disability buy-sell and overhead expense insurance.     * Riders: Additional disability-specific options.     * Income Replacement: Specific policies designed to replace lost wages.     * Examination Question Count: Life: $0$, L&H: $8$, Health: $10$.

• Chapter 15: Uniform Individual Health Policy Provisions Law     * Required Provisions: Clauses that must be in every policy (e.g., Grace Period, Notice of Claim, Proof of Loss).     * Optional Provisions: Clauses that insurers may choose to include (e.g., Change of Occupation, Misstatement of Age).     * Examination Question Count: Life: $0$, L&H: $7$, Health: $11$.

• Chapter 16: Group Health     * Group Health Generally: Characteristics of group coverage.     * Group Health Provisions and Guidelines: Coordination of benefits and employer requirements.     * Coordination of Benefits: Preventing over-insurance when a person is covered by multiple plans.     * Portability, COBRA, and HIPAA: Laws governing the continuation and transfer of health coverage.     * Examination Question Count: Life: $0$, L&H: $5$, Health: $7$.

• Chapter 17: Medicare and Medicaid     * Medicare: Federal health program for individuals aged $65+$ or with certain disabilities.     * Medicaid: State/federal program for individuals with low income and limited resources.     * Examination Question Count: Life: $0$, L&H: $3$, Health: $4$.

• Chapter 18: Limited Health Insurance Policies     * Medicare Supplement Policies (MSP): Private insurance designed to fill "gaps" in Medicare.     * Long Term Care Policies (LTC): Coverage for care in nursing homes or home settings.     * Accidental Death & Dismemberment (AD&D): Benefits for traumatic injuries or accidental death.     * Dread Disease and Critical Illness Policies: Coverage for specific named diseases like Cancer or Heart Attack.     * Miscellaneous Limited Benefit Policies: Hospital Indemnity, Dental, and Vision plans.     * Examination Question Count: Life: $0$, L&H: $5$, Health: $10$.

• Total Questions for Part III:     * Life: $0$     * Life and Health (Combined): $45$     * Health: $63$

Part IV - Alabama Insurance Law

Part IV covers statutes and regulations specific to the state of Alabama. It contains Chapters 19 through 21.

• Chapter 19: All Licensing Candidates     * Overview: Structure of Alabama insurance regulation.     * Insurance Commissioner: Powers, duties, and authority to conduct investigations and hearings.     * Authorized Companies: Licensing requirements for insurers including the Certificate of Authority.     * Producer License: Requirements for obtaining and maintaining a license.     * Continuing Education (CE): Requirements for license renewal.     * Producer Appointment and Termination: Procedures for insurers to appoint or fire agents.     * Unfair Trade Practices Law: Prohibited behaviors (e.g., rebating, twisting, misrepresentation).     * Domestic Abuse Protection Act: Specific Alabama protections for victims of domestic abuse.     * Examination Question Count: Life: $8$, L&H: $9$, Health: $9$.

• Chapter 20: Life Insurance Candidates     * Approval of Policies: Filings and required policy provisions in Alabama.     * Industrial Life Provisions: Rules for small face-amount policies with frequent premium collection.     * Nonforfeiture Laws: Required options for cash value in Alabama.     * Advertisements, Solicitations, and Disclosures: Rules for marketing life insurance and annuities.     * Life Insurance Illustrations: Regulations regarding the presentation of hypothetical policy performance.     * Life and Annuity Replacement: Regulations to protect consumers when replacing existing policies.     * Minors and Insurance: Statutes regarding insurance contracts for minors.     * Alabama Life and Disability Insurance Guaranty Association: State fund providing protection to policyholders if an insurer becomes insolvent.     * Examination Question Count: Life: $7$, L&H: $9$, Health: $0$.

• Chapter 21: Accident and Health (Disability) Insurance Candidates     * Individual Accident and Health Policies: Alabama-specific required benefits and coverages.     * Health Maintenance Organizations (HMOs): Specific regulations for managed care providers in Alabama.     * General Accident and Health Plan Provisions: Uniform standards in the state.     * Medicare Supplement and Long Term Care Insurance: State-specific regulations for these products.     * Examination Question Count: Life: $5$, L&H: $0$, Health: $7$.

• Total Questions for Part IV:     * Life: $20$     * Life and Health (Combined): $18$     * Health: $16$

Examination Overall Statistics

General summary of the examination metrics as reviewed by the Industry Advisory Committee on $8/8/2023$.

• Combined Life & Health Exam (L&H):     * Total Questions: $150$     * Maximum Time Allowed: $180$ minutes     * Minimum Correct for Passing: $105$ ($70\%$)

• Life Only Exam:     * Total Questions: $125$     * Maximum Time Allowed: $150$ minutes     * Minimum Correct for Passing: $87$ ($69.6\%$)

• Health Only Exam:     * Total Questions: $100$     * Maximum Time Allowed: $120$ minutes     * Minimum Correct for Passing: $70$ ($70\%$)

• Summary of Sections by Number of Questions:     * Part I (General): Life ($30$), L&H ($27$), Health ($21$)     * Part II (Life Insurance): Life ($55$), L&H ($80$), Health ($0$)     * Part III (Health Insurance): Life ($0$), L&H ($45$), Health ($63$)     * Part IV (Alabama Law): Life ($20$), L&H ($18$), Health ($16$)     * Grand Totals: Life ($105$ from outline, $125$ exam actual), L&H ($170$ from outline, $150$ exam actual), Health ($100$)