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Alabama Life & Health Insurance Practice
Exam
1. Insurance is a method risk is transferred to an insurer for consideration upto ANS a predetermined limit. 2. Which of the following would be considered proper establishment of insur- able interest in the life insurance area? ANS 1. spouses in each other 2. parents in their children 3. creditors in their debtors 3. Which of the following statements about the average number of people who die each year is true? ANS It is called the mortality rate 4. An insurance contract is an aleatory contract.This means ANS Equal value is notnecessarily given by both parties to the contract 5. A life insurance policy is a unilateral contract because ANS Only the insurancecompany is bound to live up to its side of the agreement
6. All of the following are elements of a contract ANS 1. Legal purpose 2. Offer and acceptance 3. Consideration 7. A company that has not received permission from an Insurance Commis- sioner to do business in his or her state is called a/an ANS Unauthorized company 8. Misrepresentation is ANS A written or oral statement which is false 9. The chance that a person who anticipates a loss will purchase insuranceis ANS Adverse Selection 10. Assuming a deductible with your insurance policy is which type of risk management technique? ANS Assumption of risk 11. In the Health-Disability area we use what type data to produce rates? ANS Mor-bidity tables 12. A company that is licensed to sell insurance in a particular state is ANS An authorized company 13. he most effective way to ensure that the applicant will accept the policy when it is issued is ANS To have the applicant pay the initial premium at the
19. Each of the following would be an element in the definition of fraud ANS 1.Statements relied upon by a second party who then suffers a loss 2. Intent to gain advantage 3. An intentional misrepresentation made by the applicant 20. Risk may be defined as ANS The uncertainty of loss 21. A father did not reveal that his daughter suffers from asthma on the application for a health policy. In order to avoid paying a claim the insurer must ANS prove this was both intentional and material 22. 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 23. When signing the application form, the proposed insured is ANS Making aformal request to the company for an insurance policy. 24. What constitutes an entire insurance contract? ANS The policy, its endorse-ments, and any attached papers 25. T/F Misrepresentations on the part of an applicant as to the health or other conditions of the applicant must be deliberate and material for an insurer to
avoid coverage. ANS True
26. T/F Misrepresentation is a deliberate false representation on the part of the agent or insurer as to the terms and conditions of the policy its terms and benefits. ANS True 27. T/F Warranties are not used in the life-health-disability area. ANS True 28. A pure risk ANS generally presents no possibility of financial gain. 29. Which of the following would be considered a speculative risk? ANS The pos-sibility the painting you bought might be a long lost masterpiece 30. To what does the statement spreading the result of financial loss created by an individual's death among many persons, so the cost for each individual is small refer? ANS The principle of life insurance 31. Select the correct statement. ANS A producer is never permitted to make a changein policy wording 32. The policy conditions represent the obligations of ANS Both the insured and theinsurer 33. Mortality figures are normally developed by studying and interpreting statistics ANS Developed from the deaths of millions of persons over long periods oftime.
- Lloyd's of London is involved ANS 1. in marine insurance 2. in insuring famous people 3. in the reinsurance business 36. The legal concept of Adhesion is a bit of a problem to insurers because.- ANS the insured does have to accept the contract as written by the insurer so all ambiguities will be resolved in favor of the insured. 37. Living a healthy life style is an example of which risk management tech- nique? ANS Reduction of risk 38. Purchasing a life policy is a good example of ANS A transfer of risk 39. A company is domiciled ANS In the state where its home office is located 40. Contract law terms unilateral and adhesion have a common element? ANS Onepromiser unilateral and one author adhesion. 41. What is the basic purpose of life insurance? ANS 1.estate creation2.survivor protection 3.estate protection
- In insurance and contract law in general the term consideration means? ANS 1. statements made on the on the application 2. premium 3. promise to pay if a loss occurs 43. Under your agency contract you are know as? ANS the agent or producer 44. Offering any inducement of valuable consideration whatever not specifiedin the terms of the contract. ANS Rebating 45. Life-Health and Disability policies written or subjects of insurance in Al- abama must be issued by and through a ANS Licensed Alabama Producer. 46. A violation of the Alabama Insurance Code may result in the following ANS 1.
Denial of an insurance license.
2. Suspension of an insurance license. 3. Revocation of an insurance license. 47. Insurers in Alabama authorized and approved to do business in this state receive this in a ANS Certificate of Authority. 48. A producer offered to give half his commission to a client if he would buy a policy from him,this is illegal and is called? ANS Rebating 49. A producer who is subject to the continuing education requirement will be required to show they have complete at least of continuing education every two years. ANS 24 hours. 50. Which type of insurance person does not actually sell insurance but sells advice about insurance? ANS Consultant. 51. Alabama law exempts the following from license requirement except ANS - Salaried service representatives who receive commissions
of business in Alabama.
61. The penalty for soliciting insurance in Alabama without a license couldbe ANS 1. Fine. 2. Imprisonment. 3. Revocation of license. 62. If an agent is called a producer what is another name for the insurer? ANS Prin-cipal 63. It is you personal responsibility to report to the insurance department a change in your address or legal name within 30 days of the change. A failureto do so could result ANS in a 50$ fine 64. Which of the following are exempt from the pre-qualification educational course? ANS Holders of the CLU CPCU and CIC designation. 65. Insurance companies incorporated under the laws of foreign countries are ANS Alien companies.
66. Regulation 69 under Alabama law concerning marketing practices would apply to all the following except ANS A client's birthday card 67. Insurance licenses generally expire unless renewed on what date? ANS Theproducer's birth month. 68. If an insurer should decide to terminate a producer, they must give the Insurance Commissioner days notice and the producer days notice. the producer will then have to respond if they so chose. ANS 30,15, 69. A licensed producer must keep records of all insurance transactions for at least how many years? ANS 3 years 70. Money collected by a producer is held by that producer in what capacity?- ANS Fiduciary accounts. 71. Major sources of regulation of the insurance industry include all the fol- lowing except ANS Federal government. 72. The Commissioner may issue a cease and desist order if one is suspectedof violating any of the unfair trade practices a hearing will be held no sooner than ANS 10 days of thenotice. 73. What company department is responsible for accepting and rejecting applications based on company standards? ANS Underwriting. 74. Domestic insurance companies must be examined by the Commissioner's office at least every ANS 3 years 75. Alabama law requires that an applicant for an insurance agents license must be at least ANS 18 years of age. 76. A willful violation of the Alabama State Insurance Code may result in the following ANS 1. Up to $1,000 fine for each violation.
82. Independent agents generally may do all the following except ANS Receivegood salaries from insurance companies. 83. The purpose of the Alabama Insurance Guarantee Association is to ANS 1. Assist in the detection and prevention of insolvencies. 2. To avoid delays in the payment of claims by insolvent insurers. 3. To provide a method of paying claims for insolvent insurers. 4. To provide a method of assessment of cost of claims due to insolvent insurers. 84. In Alabama any person who is authorized or acknowledged by an insurerto act in the solicitation of, negotiation for, or pronouncement of making of a contract of insurance is termed ANS A producer. 85. Producer terminations require the insurer to notify the Commissioner's office and the producers in how many days? ANS 3o days and 15 days 86. Alabama law requires an applicant for an insurance producers licenseto ANS 1. Be a U. S. citizen. 2. Be an Alabama resident for at least 6 months 3. Be of good moral character and not convicted of any felony. 4. Have satisfied the 40 hour pre-licensing educational requirement 87. Can states require insurance companies to use certain forms or rates in connection with certain types of insurance? ANS Yes, some states have mandatoryforms or rates for certain coverage's. 88. A state insurance department licensed company that is permitted to do business in the state is called ANS An authorized company. 89. The penalty for a producer who over charges or fails to return premiumsto persons so entitled is ANS 1. A fine. 2. Imprisonment.
3. Suspension or revocation of license.
- Solicitors may not ANS 1. Issue or countersign policies. 2. Sell insurance unless they are licensed. 3. Sign an insurance policy. 91. A licensed producer may procure insurance in an unauthorized compa-ny ANS If the insurer is an eligible surplus line insurer and has been placed on the Commissioner's approved list of unauthorized insurers. 92. All of the following are duties of a producer except ANS Evaluate an insured'sfinancial condition. 93. ABC Insurance Company, agents are employees of the company who are paid a salary plus commissions. This an example of what type of insurance marketing system? ANS Direct Writer. 94. The Commissioner of Insurance, who is the chief officer and head of the department of insurance, is ANS Appointed by the governor for a four year term.
106. An insurer will have how many days to respond to the state under oblig- ations from the Alabama Insurance Guarantee Association? ANS 30 days. 107. Who is responsible for licensing insurance producers? ANS State insurancedepartment. 108. Which of the following statements about Whole Life are true? ANS 1. The faceamount of the policy will remain the same as long as the policy is in force. 2. The shorter the premium paying period the faster the cash value will grow. 3. The longer the premium paying period the lower the premium an the slower thecash value build up. 109. Which of the following insureds would be the most suited for a Variable Universal Life policy? ANS 30 year old professional with a professional spouse. 110. Bob is 24 and would like to take advantage of variable interest rates and investment performances and be able to vary his premium payments
throughout the year.Which policy would you recommend? ANS variable universallife
111. The bank suggest that Bob purchase a life insurance policy that will payoff his mortgage in the event of his premature death.Which of the following would best help him achieve this purpose? ANS Decreasing term policy 112. A Variable Life policy would guarantee all the following except? ANS cashvalue 113. Term insurance differs from permanent insurance in that term ANS Builds nocash value, pays a death benefit only 114. Who owns a Key-Man life policy? ANS the corporation 115. Premium payments made into a variable universal life policy ANS Are investedin one or more investment portfolios at the policy owner's option 116. The situation below that most likely calls for the purchase of term insur- ance is ANS George has two years of medical school to complete. He and his wife haveone child 117. The type of policy that can be changed from one that does not accumulate cash values to one that does is a ANS Convertible term policy 118. Warren and Wilma have joint life policy. Warren dies and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a ANS Survivorship or second to die policy 119. A Continuous-Premium/Straight Life policy ANS Requires the insured to pay thepremium for life and endows at age 100 120. Which of the following policies would most likely be a step-rated policy?- ANS annual renewal term 121. All of the following provisions of an adjustable life policy may be changedto
126. What life insurance policy provision will allow automatically any available cash values to be use to pay policy premiums once the grace period has ended? ANS automatic premium loan clause 127. A joint life policy can have many uses some of these could include? ANS 1. To cover two lives on the same policy 2. To pay estate taxes when the second spouse dies 3. To pay off a home mortgage should one of the working spouses die 128. Life insurance that does not require a medical exam is known as ANS Simpli-fied issue 129. The cash value of a variable life policy ANS Is determined by the investment 130. In a whole life insurance policy ANS The cash value is greatest at the end of thepolicy period, and the insurance protection is greatest at the start of the policy 131. When the cash value account of a universal life policy reaches zero, the policy owner must make a premium payment after the grace period or ANS The policy will lapse 132. What type of life insurance policy will pay the full face amount of the policy at maturity even if the insured is still alive? ANS an endowment policy 133. A variable life policy ANS Death benefit varies to reflect the investment results ofthe underlying separate account, but never falls below a guaranteed minimum 134. The number of years excluded from the conversion privilege on a on a convertible term policy ANS Varies among insurance companies 135. A term to 65 life policy will mature when ANS when the insured dies.
136. The cash value accumulation in a life-insurance policy ANS Can be used forloans or later as retirement income 137. The death benefit of a variable life policy ANS May go up or down but will neverfall below the face amount 138. A limited pay life policy ANS requires premium payments for a specified numberof years or until a specified age is reached 139. Which of the following policies could be expected to have the lowest premium? ANS Whole life 140. With a modified premium whole life contract, premium payments ANS Arelower in the early years of the contract 141. In a universal life policy, the two adjustments usually made to the cash value account are ANS Cost of insurance protection is charged and current interest iscredited 142. A child may be a dependent beyond the ages of 19 or 21 ANS Only if the childis permanently mentally or physically disabled before that age
