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Alabama State Life & Health Insurance Exam
(6 Sets of Exam’s)
Alabama State Life & Health Insurance Exam
Set 1
1. Which policy accumulates cash value at the fastest rate? ANS A. 10 - pay life policy 2. The legal doctrine that prevents one from exercising a right of privilege iscalled ANS Estoppel 3. If the consideration clause states that the premium payment keeps thepolicy in force until the next premium is due plus 30 days thereafter, the policy ANS contains a grace period. 4. If an insurance carrier decides to cancel a producer's appointment, each ofthe following is true EXCEPT ANS The Commissioner can immediately cancel the producer's license based upon the Company's allegation of wrong doing by the producer.
5. Under the waiver of premium provision of a life insurance policy, if a dis- ability proves total and permanent, what happens to any premiums paid by the policyowner during the waiting period ANS All premiums paid by the policyholderduring the waiting period are typically refunded. 6. A company chartered in Alabama would be considered what type of insur-ance company in Ohio? ANS Foreign 7. The Entire Contract Provision stipulates each of the following EXCEPT ANS Anyverbal changes made by the agent are permissible if in writing. 8. If the insurance company accepts a special class risk ANS the premium will be higher than for a normal risk. 9. The Optional Provisions of a standard Health policy address the issue of claims arising from "illegal occupations," "commission of felonies," and "useof narcotics." According to these provisions ANS the insurer is not liable for claimsarising under the conditions described in these provisions. 10. The application has two parts. Part 1 is? ANS General information about the applicant. 11. All Health Insurers must pay claims as prescribed by Alabama law. Which of these
15. When a dependent child covered under the parents' major medical policyreaches the limiting age, what is the provision that allows the child to purchase his or her own policy without establishing insurability? ANS conversion privilege 16. When Jonas died, it was discovered that he was actually six years older than he had claimed when applying for an insurance policy. Upon his death what will the insurance company pay? ANS The company will pay only the amount ofinsurance that Jonas' premiums would have purchased at his correct age. 17. If you qualify for COBRA, coverage under the group health plan ANS all of theabove 18. The duties of the Alabama Insurance Commissioner include all of the following EXCEPT ANS. Represent the State of Alabama in any legal proceedings. 19. If Todd has been named the irrevocable beneficiary of a life insurancepolicy, he ANS cannot be replaced as beneficiary without his consent 20. Why are insurance contracts said to be contracts of adhesion? ANS One partywrites the contract and the other party must accept or reject the contract as written. 21. How can 'Key Employee' disability income insurance purchased by abusiness be used by the business? ANS Both of the above. 22. All of the following are examples of insurable interest EXCEPT ANS an airline
insuring the lives of its passengers.
23. A beneficiary is always which of the following? ANS The person named to receivethe sum specified in a life insurance contract when the insured dies. 24. A straight life annuity provides which of the following? ANS A periodic incometo the annuitant for life 25. A defined contribution plan ANS promises a specified payment to the plan by the employer 26. Which of the following is TRUE concerning willful violations of Alabamainsurance regulations? ANS All of the above are correct.
- Each instance of violation is considered as a separate offense.
- Each violation is punishable as a misdemeanor.
- Each violation, upon conviction, may result in both fines and hard labor 27. The factors that determine the amount of each payment to a beneficiary under the fixed period (fixed time) option are the ANS length of the fixed period andthe death benefit of the policy, and interest.
commission payments may be fined up to three times the amount of the commis-sions paid.
30. Which of the following riders could decrease the amount of the policy death benefit if utilized? ANS Automatic Premium Loan Rider 31. A company domiciled in another state that has received permission from the insurance commissioner to do business in this state is called a/an ANS foreign admitted company. 32. Contracts must have consideration. Insurance contracts are considered to be aleatory contracts. This means what? ANS The promise to pay claims will mostlikely not be equal to all premium payments. 33. Billy is the owner of a life insurance policy and has chosen a policy set- tlement option under which the company will pay the beneficiary (his widow)an income each month for as long as she lives. Payment stops at her death. Which settlement option has Billy selected? ANS Life income option 34. Medical expense policies generally provide ANS medical service or expense reimbursement benefits. 35. Under the typical Coordination of Benefits Clause in Group Health Insur-ance, how
is primary coverage determined? ANS The husband's policy is primary and the other is excess
36. Which policy will have immediate cash? ANS Single premium 37. An Attending Physician's Statement is used to do what? ANS Obtain detailed information regarding a specific medical condition. 38. Many major medical policies include a provision whereby when expensesreach a certain dollar amount, the insured no longer shares in the cost of expenses; the insurer pays 100% of remaining covered charges. This isreferred to as the ANS maximum benefit. 39. Each of the following statements is true about Disclosures EXCEPT ANS Youmust deliver a Policy Summary at policy delivery. 40. If an insured under a Major Medical insurance policy with a $200 deductibleand an 80% coinsurance clause incurred the following covered expenses ANS Hospital room and board $2,000; Surgeon's fee $1,500. How much would thepolicy pay? ANS $2, [2,000 + 1,500 = 3,500 - 200 = 3,300 x .80] 41. What are the two major approaches to defining "totally disabled" for Dis-ability Income insurance? ANS "Actual" disability or "Presumptive" disability 42. If you have not met the Continuing Education requirement when it is timeto renew your license, you may? ANS 43. ANS Use of large amounts of direct mail to market a specific LTC policy.
higher than stated
56. The income period when a surviving spouse does not qualify for SocialSecurity survivor or retirement benefits is called the ANS Blackout Period. 57. In noncontributory group insurance plans, what percentage of eligible employees must be covered by the plan? ANS 100% 58. The type of health insurance policy most likely used to cover all studentsattending a large university is ANS a blanket policy. 59. The usual payment arrangement under a Preferred Provider Organization(PPO) contract is ANS a negotiated fee-for-service. 60. For weekly premium disability policies in Alabama, there must be a graceperiod of ANS 7 days 61. With respect to an insurance application ANS all statements made by the appli- cant are considered to be representations.
62. The "entire contract" law in Alabama says ANS the policy and the application (ora summary of the application) constitute the entire contract. 63. Interest Sensitive Whole Life is also called? ANS Universal Term. 64. Most major medical policies include as eligible expenses coverage of ANS allof the above.
- hospital room and board, intensive care, and hospital medical and surgical services.
- physicians' medical, diagnostic and surgical services.
- nursing services, outpatient services and ambulance charges. 65. Dividend options are defined as ways in which the policyowner can ANS useor collect policy dividends 66. If William has a major medical plan on himself, his wife Harriet, and theirson Bill, what happens when daughter Bess is born? ANS She is covered from themoment of birth even if the policy does not provide maternity benefits. 67. When may agents change a policy or waive its provisions, according toRequired Provision 1 of a standard Health policy? ANS Never. 68. Annuities have two basic stages. They are called what? ANS Accumulation Peri-od and Income Period 69. The General Provisions that apply to all Medicare Supplement Plans (MSPs) are all of the following EXCEPT ANS MSPs must be more restrictive thanMedicare. 70. If an agent tells a proposed insured he has authority to issue a policy, which he is actually disallowed to do by his agency contract, the insured mayreasonably assume the agent had this authority. This is an example of ANS impliedauthority. 71. The Suicide Clause has what effect? ANS It excludes suicide during the first two
76. "Community Rating" generally means the insurer charges ANS the same ratefor everyone in a geographic area. 77. The basic purpose for the coinsurance provision in a major medical policyis to ANS limit over-utilization of the policy benefits. 78. Paid-up Additions act as a default if the Policyholder doesn't indicate an option. Paid-up Additions are ANS Single payment premiums which purchaseadditional amounts of insurance which add to the face amount. 79. To sell a variable life insurance policy, an insurance producer must ANS All ofthe above.
- have a valid life insurance license.
- have a variable life and variable annuity products license.
- be registered with FINRA (the Financial Regulatory Authority) 80. Mr. and Mrs. Carter receive annuity payments. Mr. Carter dies, but Mrs. Carter continues to receive payments for the rest of her life. The Carters havea ANS joint and survivor life annuity. 81. The kind of life insurance that acquires no cash value is ANS term life. 82. Under a credit disability policy, what is the maximum amount payable? ANS - The amount of outstanding indebtedness at any given time 83. An insured allows a permanent policy to lapse. Most insurance companieswill ANS automatically institute the extended term option. 84. The life and health insurance marketing system utilizing producers that represent multiple insurance companies at the same time, are compensated on a commission basis, and own their own "book of business" is the ANS indepen-dent agency system.
85. What is the definition of Risk? ANS uncertainty or chance of loss 86. Which of the following characteristics apply to Medicare Supplement Poli-cies (MSPs)? ANS All of the above.
- First-time applicants (over age 65) for MSPs cannot be turned down.
- The definitions used in MSPs must be the same definitions used in Medicare.
- MSPs may not duplicate coverage provided by Medicare. 87. A disability income policy typically covers ANS just the wage earners. 88. A life insurance company may pay a death claim for less than the face amount of a policy under which of the following conditions? ANS All of the above
EXCEPT ANS Profit margins.
100. An individual insurance producer who allows his or her license to lapsemay, within a maximum period of months from the due date of the renewal fee, reinstate the same license without having to complete the prelicensing course or pass a written examination. ANS 12 101. If you surrender your policy early or simply stop paying premiums, youstill own the equity you have built. You can choose to ANS get a check for the remaining cash values 102. According to Required Health Policy Provisions, the insured is prevented from filing suit against the insurer for at least ANS 60 days and not longer than threeyears from the date of proof of loss 103. Which of these is NOT a feature of Health Savings Accounts? ANS the ac-counts earn no interest
104. How can interest rates or investments affect premiums? ANS companies pass the cost of borrowing money along to customers 105. An applicant for insurance may pay the initial premium and receive a document from the agent indicating that if the policy is issued as requested,coverage begins on the date of the document. What is this document called?- ANS Conditional receipt 106. Withholding of facts that should be included in an application for insur-ance is called ANS concealment. 107. Which of the following statements is true? ANS policy dividends cannot be guaranteed 108. In the life insurance agency relationship, what party is the principal? ANS The insurance company 109. When the owner of a life insurance policy transfers ownership to a third party in return for payment of a large percentage of the death benefit, this is known as ANS a viatical settlement agreement 110. When a policy claim contains a deductible and a coinsurance provision, the policyholder's portion of the claim is calculated by ANS applying the deductiblefirst 111. To receive some Social Security benefits and be considered "currentlyinsured", an individual must have ANS at least 6 quarters of coverage 112. The State's Nonforfeiture Law is supported by? ANS Nonforfeiture Clause. 113. Under which of the following circumstances will the payor rider waive premiums and allow a life insurance policy to remain in force? ANS if the policy owner dies or becomes disabled prior to the insured reaching either age 21 or 25 114. Which of the following accurately describes the 'free look' provision? ANS - Allows the insured to look over the issued policy for a specific number of days and return it for
118. Normally, Blue Cross and Blue Shield organizations make payments formedical expenses ANS directly to the providers. 119. Disability income policies are designed to ANS pay you enough to maintain your current standard of living. 120. If administrative action is taken against you, or you are criminally pros-ecuted in another jurisdiction, you have how long to submit notice to the Alabama Commissioner? ANS 30 days 121. Which of the following premium payment modes will result in the highesttotal premium? ANS Monthly 122. The Alabama Life and Disability Insurance Guaranty Association coversthe contractual obligations of an insolvent life and disability insurer, but its aggregate liability for CASH VALUES shall not exceed ANS $100,000. 123. When a policy is written so that no one may change the beneficiary, thepolicy has ANS an irrevocable beneficiary. 124. In a decreasing term policy which of the following decreases each year?- ANS The cash value 125. Oliver has a life insurance policy with a $50,000 death benefit. At his death, there is a $5000 policy loan outstanding. Which of the following state-ment is CORRECT? ANS The insurer will subtract the amount of the loan and pay $45,000 to the beneficiary. 126. Laws have been enacted to prohibit cancellation of a Medicare supple- ment policy on the sole basis of age or deterioration of health. This require- ment is called ANS guaranteed renewability 127. The fact that insurance is more likely to be purchased by people whoexpect to experience a loss is known as ANS adverse selection.
128. The current rate of interest paid to the cash value account of a universallife policy consists of ANS Guaranteed Interest plus Excess interest 129. A certificate of insurance ANS is issued to each individual covered by the group life insurance. 130. A parent who purchases a policy on the life of a minor child and wishes to retain complete control of the policy until the child reaches age 18 may do so by means of ANS the ownership clause. 131. Regardless of where the insurance company was chartered, in order tooperate in Alabama, which statement is most accurate ANS All companies doing business in Alabama must comply with Alabama Code. 132. Which life policy starts as term insurance but after a certain period of time automatically converts to whole life? ANS Modified Life. 133. Bill's Major Medical policy is reinstated on September 10. If he is hit by atruck and hospitalized on September 15, he will receive ANS full benefits.
