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  4. General Insurance Concepts

Free General Insurance Concepts Practice Questions

Alabama Life exam — 47 practice questions.

Subtopics: Risk pooling, Adverse selection, Insurable interest, Utmost good faith, Contract of adhesion, Aleatory contract, Warranty vs representation, Definition of risk, Hazard, Peril, Handling risk, Retention, Insurable risk, Stock insurer, Mutual insurer, Admitted insurer, Domestic foreign alien, Consideration, Legal purpose, Competent parties, Offer and acceptance, Express authority, Apparent authority, Indemnity, Representations, Concealment, Pure vs speculative risk, Law of large numbers, Moral hazard, Morale hazard, Physical hazard, Implied authority, Fiduciary duty, Unilateral contract, Conditional contract, Warranty, Waiver, Estoppel, Reciprocal insurer, Fraternal benefit society, Reinsurance, Surplus lines insurer, Self-insurance

Read the General Insurance Concepts study guide

Sample questions & answers

1. The principle letting insurers predict losses more accurately as the number of similar exposures grows is the:

Law of large numbers

The law of large numbers states that as similar exposure units increase, actual results approach predicted results.

2. Adverse selection refers to the tendency of:

Higher-than-average risks to seek or keep coverage more than average risks

Adverse selection is the tendency of poorer-than-average risks to seek insurance, which underwriting controls.

3. For an individual life policy, insurable interest must exist:

At the time the policy is applied for

In life insurance, insurable interest must exist at policy inception, not at the time of loss.

4. Insurance contracts are described as contracts of utmost good faith because:

Both parties rely on the honesty and full disclosure of the other

Both the applicant and insurer must deal honestly and disclose material facts in good faith.

All Life topics

Practice: General Insurance Concepts

Take a randomized, timed-style practice test. Answer choices are shuffled and your results are scored instantly with an explanation for every question.

Practice questions are study aids generated for exam preparation and are not actual exam questions. Content is provided for educational purposes and is not legal advice. Verify current statutes, rules, and exam specifications with the Insurance Department and the exam administrator before relying on it.