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Free Life Insurance Basics Practice Questions

Alabama Life exam — 79 practice questions.

Subtopics: Premium factors, Underwriting purpose, STOLI, Self insurable interest, Risk classification, Field underwriting, MIB, Consideration, Insurable interest, Insurable interest parties, Personal uses, Liquidity, Human life value, Needs approach, Buy-sell funding, Key person, Term vs permanent, Participating policies, Separate account, Variable products licensing, Mortality, Interest assumption, Premium mode, Advertising, Application accuracy, Sources of underwriting, Substandard risk, Effective date, Statement of good health, Backdating, Unfair discrimination underwriting, Group vs individual, Warranties vs representations, Disclosure statement, Estate conservation, Executive compensation, Expense factor, Declined risk, Surrender comparison index, Net amount at risk, Legal reserve, CSO mortality table, Level premium funding, Cash value accumulation, Endowment maturity, Free look period, Policy replacement rules, Twisting, Churning, Rebating, Defamation, Binding receipt, Insuring clause, Consideration clause, Owner vs insured, Stranger-originated life insurance, Suitability, Sales illustration, Producer appointment, Paramedical exam, Inspection report, Nonmedical limit, Split-dollar plan, Section 162 executive bonus, Dependency period need, Social Security blackout period, Capital retention approach, Final expense need, Insurance age, Flat extra premium, Postponed risk, Agent's report, Policy summary, Material misrepresentation

Read the Life Insurance Basics study guide

Sample questions & answers

1. The three primary factors used to price a life insurance premium are:

Mortality, interest, and expense

Life premiums are based on mortality (expected claims), interest (assumed earnings), and expense (operating costs).

2. The main purpose of life insurance underwriting is to:

Classify and price risk appropriately

Underwriting evaluates and classifies applicants by risk so an equitable premium can be charged.

3. Stranger-originated life insurance (STOLI) is problematic because it:

Lacks insurable interest at inception

STOLI involves investors with no insurable interest, conflicting with the requirement that interest exist at inception.

4. A person applying for insurance on their own life is generally considered to have:

An unlimited insurable interest in their own life

Individuals are presumed to have unlimited insurable interest in their own lives.

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Practice: Life Insurance Basics

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.