Alabama Life & Health Insurance Exam 2024 - 2025 (Verified ANSWERS) ALREADY GRADED A, Exams of Nursing

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Alabama Life & Health Insurance Exam

2024 - 2025 (Verified ANSWERS) ALREADY

GRADED A

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, where there 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 in the 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 guaranteed to be true.
6. Examples of Fraud: Intentional material misrepresentation with the intent of causing 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 accepting risks that are more likely than average to suffer losses.
12. A contract that is drafted by an insurer and receives no input or alteration from 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 wherean insurer was formed or incorporated.
14. insurance allows for insurance coverage to be obtained when 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 company from paying out too much in claims, insurers will ANS Reinsure the risk Reinsurance is what makes insurance affordable. Reinsurance companies are in- surance companies that accept all or a portion of the financial risk of loss from the insurance company.

16. The field underwriter is the and is not a determiner of insura- bility ANS Producer The producer is in the field soliciting applications for insurance and in effect is another pair of eyes and ears for the insurer in helping to issue policies to insurable prospects.
17. Third-party ownership refers to ANS A situation where the policyowner is some-one other than the insured
18. Which statement best describes the term reserve ANS That amount that, when increased by future premiums on outstanding policies, and interest on those premi-ums will enable the company to meet future death claims
19. The applicant, if other than the proposed insured, must have ANS An insurableinterest in the life of the insured
20. Controlled business may be defined as insurance sold ANS To the producer, the producer's family and friends, and the producer's business associates
21. With regard to life insurance policies, loading refers to ANS Assignment of theappropriate share of the company's operating expenses to each policy

22. Which of the following statements about the average number of people who die each year is true ANS It is called the mortality rate Mortality Rate: which is the statistical probability of death in a large population of insureds.
23. Which of the following is NOT a characteristic of life insurance as proper- ty ANS It requires a fund portfolio manager Characteristics: It creates an immediate estate It requires no physical maintenance It may be paid for in installments
24. The 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 time ofapplication
25. Allen purchases an estate builder (jumping juvenile) policy for his 5 - year old son, Donald. Suppose that when Donald reaches age 21 his father pre- sents him with the policy as a gift. Which of the following statements is NOT correct ANS Donald must change the beneficiaries immediately CORRECT: The premium will continue to be based on his original age of 5 Donald has enjoyed protection against the problems of premature death The face value of Donald's policy has increased by 5 times

26. Term insurance differs from permanent insurance in that term ANS Builds nocash value, pays a death benefit only
27. An indeterminate premium policy offers ANS A low initial premium with succeed-ing premiums based on the company's investment return, mortality and expenses
28. With regard to the waiver of premium rider, after the disability a policyown- er normally ANS Need not repay the premiums paid by the company during disability
29. In many jurisdictions, permanent policies are required to have some cash value by the end of ANS The Third Year

30. Loan values and retirement income are ANS Called the living benefits of lifeinsurance
31. With a modified premium whole life contract, premium payments ANS Arelower in the early years of the contract
32. A variable life policy ANS Death benefit varies to reflect the investment results ofthe underlying separate account, but never falls below a guaranteed minimum
33. 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
34. A limited pay life policy ANS Requires premium payments for a specified numberof years or until a specified age is reached
35. Should an insured become totally and permanently disabled two months before the cut-off date for the waiver of premium rider ANS The insured remains eligible for all provisions
36. Warren and Wilma have a 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
37. A whole life policy ANS Requires the insured to pay premiums for life and endowsat age 100
38. If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance ANS On his own life at certain specified ageswithout proof of insurability
39. Any extra premium charged for the waiver of premium rider ANS Does not applyto the policy's cash value
40. If a policyowner has a $100,000 policy with an accumulated cash value of

$6,000, the policyowner can borrow up to ANS The entire accumulated cash valueof $6,000, less interest for 1 year

41. An insured allows a permanent policy to lapse. Unless otherwise instruct- ed, the insurance company ANS Will automatically institute the extended term option
42. Each of the following statements about policy loans is correct, except ANS - Policy loans may be made on any type of policy
43. What is a postmortem dividend ANS A dividend earned, but not yet paid, in theyear of the insured's death and paid with the death claim
44. The factors that determine the amount of each payment under the fixed period settlement option are ANS Length of the fixed period, face amount of the policyand interest
45. Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any proceeds if Wilma dies before Fred, or if she dies after Fred, but before receiving all the policy proceeds. Fred elected the interest settlement option for Wilma, with the right

of withdrawal after 5 years. No settlement option was stipulated for Pebbles. Fred dies on May 6th, 1991. When Fred dies, his insurance company will make settlement by paying ANS Interest in periodic payments to Wilma

46. Each of the following is a source of life insurance policy dividends, ex- cept ANS Guaranteed cash value accumulations
47. Why should a policyowner be especially careful when deciding to increase the amount of an outstanding policy loan ANS If the outstanding loan balance, plus interest, equals or exceeds the cash value of the policy, the company could cancelthe insurance
48. The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of the following, except:- : Purchasing a new car once the claim has been settled and proceeds have been paid out according to the beneficiary designations
49. Collateral for a policy loan is ANS The cash value of the policy itself
50. If an insured has an outstanding loan of $5,000 on a policy with a face amount of $25,000, at death the company will ANS Pay the beneficiary $20,000, aftersubtracting the amount of the outstanding loan
51. The nonforfeiture option that provides the most life insurance protection is the ANS Extended Term Option The extended term option provides the most life insurance protection of the available nonforfeiture options. Paid up additions are considered dividend options and are not considered a nonforfeiture option.
52. The settlement option that provides for the proceeds plus interest to be paid in installments for a specified period of time is called the ANS Fixed PeriodOption

53. All of the following are situations in which the insurer is obligated to pay out a death benefit after the insured has died, except ANS The premiums have notbeen paid and have been overdue for 3 years
54. A client purchases an individual disability income policy and receives the policy from the insurer 45 days after application. Upon receipt of the policy, the client typically has days to review and return the policy to receive a full refund for any reason ANS 10
55. An annuitant has a temporary annuity certain, and dies shortly after the payments start but before the certain period of 10 years has elapsed. Any money remaining is ANS Paid to the beneficiary for the rest of the certain period
56. The type of annuity that guarantees to pay total income at least equal to the purchase price of the contract is a ANS Refund life annuity

57. 'Annuity Period' refers to which of the following ANS The time during whichpayments are made to the annuitant The annuity period begins when the annuitant starts to receive payments from the accumulated funds in the annuity policy. This is also referred to as 'the Annuitization period'.
58. An annuity owner can change all of the following in an annuity, except ANS - Mortality Table
59. Which of the following will receive the smallest monthly income benefit check if an annuity is annuitized ANS 50 year old female
60. Which of the following Annuities is generally not backed by the insurer's general account assets ANS Variable
61. When converting a group life policy to an individual policy, the departing group member's new policy must be a ANS Permanent or whole life policy
62. When underwriting group life insurance ANS The underwriter generally focuseson the group as a whole, rather than on individual members
63. Which of the following statements is NOT true about the tax treatment of Social Security ANS Employee paid payroll deductions for Social Security are taxdeductible to the employee
64. Split-dollar plan: Divides the cost of additional insurance for an employee between that employee and the company
65. George, who has a group policy, may upon leaving his place of employ- ment ANS Convert it to permanent insurance without proof of insurability, within a specified period

66. The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who served as senior executives. This benefit is not available to other retirees of the company. This is an example of a ANS Non-qualified plan
67. Incidental limitations refer to which of the following ANS The amount of lifeinsurance that may be included in a qualified retirement plan
68. If a policyowner paid $18,000 in premiums for a policy that is cashed in for $21,000, how much of the policy's cash surrender value would be subject to federal income tax ANS $3, Any proceeds from a surrendered or matured life insurance policy that exceed policy costs are subject to federal income tax. This is referred to as the cost recovery rule.
69. Distributions from a qualified retirement plan ANS Are received tax-free only ifthey result from previously taxed contributions
70. A group deferred annuity or an individual deferred annuity would be most likely used ANS To fund a defined benefit plan

When a group deferred annuity is used to fund a defined benefit plan, specified amounts of deferred annuity are bought by the employer each year to provide the 'defined benefit' for the employee at retirement, thus providing a guaranteed defined benefit at retirement.

71. Defined Contribution Plan:
72. Which of the following would NOT be permitted as a Section 1035 policy exchange ANS An annuity contract exchanged for a life contract
73. TSAs are tax-sheltered retirement programs for employees of all the fol- lowing kinds of organizations, except ANS Corporations
74. How are employer paid premiums on a group life insurance plan treated for tax purposes ANS As an ordinary and necessary business expense
75. With a Profit Sharing Plan contributions must generally be made in at least consecutive years ANS 3 out of last 5
76. A stay at home father wants to open up an IRA. What is required in order for him to do so ANS Be married to a spouse that has earned income
77. The tendency for poor risks to seek and be covered for insurance more than average risks is known as ANS Adverse Selection
78. What type of policy pays weekly or monthly benefits for loss of income due to sickness or injury ANS Disability Income Disability income pays benefits either weekly or monthly when an insured becomes disabled and unable to perform some or all of their job duties, due to a sickness or injury.
79. The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following ANS Probationary

Period

80. All of the following statements regarding an insurance application are correct, except ANS It is not included as part of the contract Correct: It is a formal written request by an applicant to an insurer requesting a policy It is the primary source of information for underwriting purposes It must be signed by at least the applicant and producer
81. If a policy was issued at a higher premium due to a higher risk exposure, all of the following can be used to reflect the higher risk, except ANS Declined
82. Information about an applicant's work behavior or character gathered from neighbors or co-workers would be included on an ANS Inspection Report

83. Timothy owns an individual A&H policy, and in the event of an accident, he is required to prove only that the injury itself is unforeseen and unintended. Tim's policy is based on which of the following definitions of accident ANS Acci-dental Bodily Injury
84. If the insurer issues a health insurance policy without an initial premium, the producer must obtain a signed ANS Statement of Good Health
85. Comprehensive dental plans usually provide ANS Routine dental care serviceswithout deductibles or coinsurance
86. Which of the following is NOT a common exclusion for a dental expense policy ANS The preventative care exclusion Common Exclusions: The 5 - year replacement exclusion The missing tooth exclusion The cosmetic exclusion
87. Under a credit health policy, what is the maximum amount of any accidental death benefit included ANS The amount of outstanding indebtedness at any given time
88. Dental policies that limit benefits to specified maximums per procedure, with first dollar coverage are ANS Scheduled: policies provide first dollar coverage,but limit benefits to specified maximums per procedure.
89. A policy that pays surgical expense benefits does not schedule the ap- proved benefit payable for every type of surgery. Instead, surgeries not listed are paid on the basis of a comparison to one or more types of common- ly-performed major surgeries that are scheduled. Under this arrangement, the

unscheduled surgeries are paid on the basis of ANS Their relative value

90. Which of the following statements is FALSE regarding credit health insur- ance ANS Credit health insurance operates like an HMO and provides death benefit protection regardless of the cause of death
91. Which provision allows medical expenses from the last 3 months of a calendar year to be used during the next calendar year to meet a deductible?- : Carryover provision
92. For nonroutine treatments, a comprehensive policy generally pays ANS Aspecified percentage of the reasonable and customary charges
93. A certain major medical policy states a maximum number of days for which convalescent care will be paid as well as a maximum number of X-rays that

will be paid for under any one claim. These are examples of ANS Inside Limits The limits sometimes placed on specific coverages in a major medical policy are called inside or internal limits. These limits resemble scheduled benefits, as to the fact that they are stated in the policy as either maximum lifetime limits or limits per policy period. Either way they are stated inside the policy.

94. Which of the following is true about a policy that pays for room and board expenses on a indemnity basis ANS The policy pays a specified, pre- established amount per day for a maximum number of days
95. Before Cranston was disabled, he was a full time engineer earning about $70,000 annually. Now, two years later, he is able to work part-time, earning about $25,000 annually. It is likely that Cranston would be classified as ANS Par-tially Disabled
96. As compared to individual disability income policies, group disability income policies are generally ANS Less costly and have more liberal provisions
97. Which of the following is NOT one of the categories of benefits incorporat- ed by State Workers' Compensation Laws ANS Long-term care coverage All state Workers' Compensation laws incorporate for categories of benefits: disabil- ity (loss of income), benefits, medical bills, survivor (death) benefits, and rehabilita- tion benefits. No long-term care coverage applies.
98. Under Workers' Compensation, a disability that is a permanent physi- cal impairment leaving the individual incapable of performing the previous regular occupation, but capable of performing some other type of work, is a ANS Permanent partial disability

99. What type of disability income policies are most likely used to cover only nonoccupational disability as opposed to both occupational and nonoccupa- tional ANS Short-term disability policies
100. Social Security disability benefits become available to eligible workers after a waiting period of ANS 5 months
101. In Individual Disability Income underwriting, the single most important rating factor from an underwriting standpoint is the applicant's ANS Occupation
102. Under a Key Employee Disability Income Policy, the employer is the ANS Pol-icy Owner Recipient of proceeds Premium Payor
103. What type of disability income insurance pays a benefit to a business to help in the search, cost, and hiring of a replacement when an employee becomes disabled and is unable to work for the company ANS Key Employee

104. For hospital stays of over 90 days, patients can draw from a pool of 60 reserve days that may be used ANS Once in a lifetime
105. Which of the following statements is FALSE regarding Medigap policies?- : A Medigap policy provides the same coverage as a Medicare policy A Medigap policy supplements and fills the gaps of Medicare, it never duplicates Medicare.
106. Medicare supplement policies must provide a 'free look' period of ANS 30 days
107. The Medicare home health care benefit will provide for which of the following services ANS Medical Supplies
108. A Medicare SELECT policy differs from a regular Medicare Supplement (Medigap) policy in that it ANS Is a managed care version of the traditional MedicareSupplement policy
109. Which part of Medicare requires premium payments by most eligible participants ANS Part B Medical Insurance/ Outpatient
110. All Medicare supplement (or Medigap) policies must ANS Have the same corebenefits
111. The first year commission for the sale of a Medicare supplement policy may be no more than of the commission paid for selling or servicing the policy in the second year ANS 200%
112. Michelle is 65 and starting to receive Social Security benefits. To receive Medicare Part A, she needs to ANS Do nothing
113. A Medicare supplement policy may not limit benefits for losses incurred more than from the effective date of coverage because they involve

a preexisting condition ANS 6 months

114. Primary support for Medicare Part A comes from ANS Social Security payrolltaxes
115. Part B of Medicare excludes which of the following medical expenses ANS Aregular dental checkup
116. Which of the following is true of Medicare Part A, in terms of coverage ANS - Helps pay for hospital care and skilled nursing facility care as an inpatient plus homeor hospice care
117. Policies are considered incontestable after ANS 2 years
118. All of the following statements about noncancellable policies are true, except ANS The insurer may choose not to renew the policy, but only on the policy renewal or anniversary date The only right to cancel a noncancellable policy is nonpayment of premium, because

it is guaranteed renewable to age 65. The only type of renewal provision that allows an insurer the right not to renew on the policy anniversary is the optionally renewable option.

119. Required/Mandatory Provision 'Proof of Loss' indicates that except in the absence of the insured's legal capacity, if it was not reasonably possible for the insured to provide proof of loss as required in a policy, the latest time the proof of loss may be furnished is ANS 1 year from the time proof is otherwise required
120. Each of the following would be found in the insuring clause of an insur- ance policy, except ANS General information about the named insured
121. Under Optional Provision 'Unpaid Premiums', when premiums are unpaid at the time a claim is submitted, the insurer may ANS Deduct unpaid premiums frombenefits before paying the claim
122. Required Provision 'Reinstatement' addresses reinstatement of a lapsed policy. According to this provision, when an insured applies for reinstatement and receives a conditional receipt, how long does the insurer have to approve or deny reinstatement before the policy will be automatically reinstated ANS 45 days from the date of the conditional receipt
123. The Time Limit on Certain Defenses (Incontestable) period is years under individual health and disability contracts ANS 2
124. Under the Legal Actions Mandatory Uniform Provision, an insured must wait at least days after providing proof of loss before he or she can take legal action against the insurer ANS 60 days
125. John has had his individual Health and Disability Income policies for many years. While intoxicated, he was injured as the driver in a single car

accident. Who covers the medical expenses for John ANS John is liable for allexpenses According to the Intoxicants and Narcotics Provision (an Optional Uniform Provi- sion), the insurer may deny coverage for John's injuries, making John liable for all expenses.

126. An insured should receive necessary claim forms within days after notice of claim ANS 15
127. Which of the following is not a Mandatory Uniform Provision of an Acci- dent and Health policy ANS Waiver of Premium
128. Precertification, Mandatory Second Surgical Opinion, and Concurrent Re- view are provisions in health insurance policies known as ANS Case ManagementProvisions

129. Managed Health Care attempts to contain costs by controlling the behav- ior of participants in all of the following ways, except ANS Partial Case Manage- ment
130. Which statement concerning individual A&H policy renewal provisions is most correct from the perspective of the insured ANS The more favorable therenewal provision to the insured, the higher the cost The more favorable a renewal provision is to the insured, the higher the premium will be. A Noncancellable policy will cost the most because its premium may not be changed in the future.
131. Which of these is a Mandatory Uniform Provision ANS Legal Actions
132. The Coordination of Benefits Provision is designed to ANS Give insureds asmuch coverage as possible while eliminating overinsurance
133. Which of the following statements is NOT true concerning a coordination of benefits situation ANS Where children are involved, the primary group insurer is the insurer for the parent who is oldest by age at the time of claim When double coverage exists, the coordination of benefits provision simply steps in and stipulates which insurer pays and when. The insured's plan is always primary, the spouses plan is secondary, the parent whose birthday comes first in the calendar year is primary for the children, not who is oldest. The purpose of this provision is to provide the most possible coverage without allowing any overinsurance from occurring.
134. A plan in which employees select health benefits from a variety of cover- age options, based on their individual coverage needs is a ANS Cafeteria

Plan

135. The main benefit of 501(c)9 trusts is ANS Contributions to these trusts may bededucted immediately, instead of when benefits are distributed Contributions to a 501(c)9 trust can be deducted immediately, where as contribu- tions to regular self-funded plans may not be deducted until benefits are distributed. Maintaining these trusts may be high enough to eliminate any tax advantages offered. Distributions may be taxable.
136. Which of the following would NOT be a likely consideration in determining premium rates for group health insurance ANS Whether the company produced a profit or a loss in the previous year What would? Degree of occupational hazard associated with the group