AL P&C Exam Flashcards

Q: What are Alabama's minimum auto liability limits?

Alabama requires 25/50/25 minimum limits: $25,000 bodily injury per person, $50,000 bodily injury per accident, and $25,000 property damage per accident. Alabama is a traditional at-fault (tort) state, not a no-fault state, so the at-fault driver's liability coverage pays the other party's damages. Drivers must keep proof of insurance in the vehicle for roadside verification.

Q: How many questions are on the Alabama P&C exam?

The combined Alabama Property & Casualty producer exam has 150 multiple-choice questions with a 3-hour (180-minute) limit, and 70% (about 105 correct) is required to pass. Alabama also offers separate exams: the Property exam (100 questions, 2 hours) and the Casualty exam (125 questions, 2.5 hours).

Q: What is the Strengthen Alabama Homes program?

Strengthen Alabama Homes is an Alabama-specific mitigation program that provides grants to retrofit homes to the FORTIFIED construction standard, reducing severe-weather losses. The standard grant is up to $10,000 for a qualifying FORTIFIED roof upgrade, with a possible supplemental amount up to $4,000 for a FORTIFIED Silver path, for a combined maximum of up to $14,000.

Q: When is workers' compensation required in Alabama?

Alabama generally requires workers' compensation coverage for employers with five or more employees, subject to statutory exemptions. Workers' compensation is the exclusive remedy for covered job injuries — the worker receives statutory benefits instead of suing the employer in tort. Employers Liability (Part Two) responds to certain suits outside the statutory benefit system.

Q: What does the Alabama Insurance Guaranty Association cover?

The Alabama Insurance Guaranty Association pays covered property and casualty claims when an admitted insurer becomes insolvent, generally up to $300,000 per covered claim, with a separate cap of $10,000 for return of unearned premium. Workers' compensation obligations are treated separately from the covered-claim cap. Surplus lines (non-admitted) policies are not protected.

Question 1

Alabama Department of Insurance (ALDOI)

Accepted Answer

The state agency that regulates insurers and producers in Alabama, headed by the Insurance Commissioner. It enforces the Insurance Code, licenses producers, and administers producer exams. It is the authority cited on Alabama-specific questions.

Question 2

Alabama Pre-Licensing Education

Accepted Answer

Alabama has no mandatory pre-licensing education requirement to sit for the producer exam. A 40-hour P&C course is recommended; if a pre-license course is taken, its certification exam must be passed at 70% or higher.

Question 3

Alabama Producer CE Requirement

Accepted Answer

24 hours of continuing education every two-year cycle, including at least 3 hours of ethics. Both the total hours and the ethics minimum must be satisfied before renewal.

Question 4

Alabama Licensing Logistics

Accepted Answer

Proof of U.S. citizenship is required, fingerprinting is completed after passing, and address changes must be reported within 30 days. Non-resident applicants must hold an active license in good standing in their home state (NIPR reciprocity).

Question 5

Alabama Exam Retake Limits

Accepted Answer

After 2 failed attempts a candidate must wait 90 days; after 4 failed attempts the wait increases to 180 days. These repeat-attempt limits apply per line of authority.

Question 6

Alabama Auto Liability Minimums (25/50/25)

Accepted Answer

$25,000 bodily injury per person / $50,000 per accident / $25,000 property damage. These are the mandatory financial-responsibility limits — higher than the low PA minimums, so do not confuse states.

Question 7

Alabama Is an At-Fault (Tort) State

Accepted Answer

Alabama is a traditional fault/tort state, NOT a no-fault state. The at-fault driver's liability coverage pays the injured party's damages, and the injured party may sue the at-fault driver directly.

Question 8

Proof of Insurance in the Vehicle (Alabama)

Accepted Answer

Alabama drivers must keep proof of insurance in the vehicle to support roadside enforcement of the state's mandatory liability requirements. Failure to show proof can lead to penalties.

Question 9

UM/UIM Offer Requirement (Alabama)

Accepted Answer

Insurers must OFFER uninsured/underinsured motorist coverage with every auto policy. The named insured may reject it, but the rejection must be made in writing.

Question 10

Contributory Negligence (Alabama)

Accepted Answer

Alabama follows pure contributory negligence: a claimant who is even slightly at fault for an accident can be barred from recovering damages. This makes liability defense and fault determination critical in AL casualty claims.

Question 11

Commercial General Liability (CGL)

Accepted Answer

Protects a business against third-party bodily injury and property damage from its premises, operations, products, and completed work. Coverage A = BI/PD liability; Coverage B = personal/advertising injury; Coverage C = medical payments.

Question 12

CGL Coverage C — Medical Payments

Accepted Answer

Pays limited medical expenses for third parties injured on the insured's premises or by its operations, regardless of legal liability. It is goodwill coverage, not a substitute for workers' comp or auto coverage.

Question 13

Occurrence vs. Claims-Made Form

Accepted Answer

Occurrence: covers injury that happens during the policy period regardless of when the claim is filed. Claims-made: covers only claims first made during the policy period, subject to a retroactive date and possible extended reporting period.

Question 14

Umbrella / Excess Liability

Accepted Answer

Provides liability limits above underlying auto, homeowners, or CGL policies and may drop down for some claims excluded by underlying coverage, subject to a self-insured retention.

Question 15

Vicarious Liability

Accepted Answer

Legal responsibility imposed on one party (e.g., an employer) for the negligent acts of another (e.g., an employee within the scope of employment). Common in Alabama commercial liability scenarios.

Question 16

Alabama Workers' Compensation Threshold

Accepted Answer

Workers' compensation is generally required for employers with five or more employees, subject to statutory exemptions. With exactly five employees and no exemption, coverage is required.

Question 17

Exclusive Remedy Doctrine

Accepted Answer

A covered worker receives statutory workers' compensation benefits instead of suing the employer in tort for a covered injury. This balances no-fault benefits for employees against limited liability for employers.

Question 18

Employers Liability (Part Two)

Accepted Answer

The Part Two coverage of a workers' comp policy responds to certain employee injury suits that fall OUTSIDE the statutory benefit system. It complements — it does not replace — the core statutory workers' comp obligation.

Question 19

Workers' Comp Benefit Types

Accepted Answer

Covers medical treatment, wage-loss (indemnity) benefits, permanent partial/total disability, and death benefits to dependents — all on a no-fault basis for job-related injury or illness.

Question 20

Strengthen Alabama Homes Program

Accepted Answer

An Alabama state mitigation program providing grants to retrofit homes to the FORTIFIED standard, reducing tornado/hurricane losses. Goal: stronger, more storm-resilient construction.

Question 21

Strengthen Alabama Homes Grant Amounts

Accepted Answer

Standard grant up to $10,000 for a qualifying FORTIFIED roof upgrade, plus a possible supplemental up to $4,000 for the FORTIFIED Silver path — a combined maximum of up to $14,000 for eligible homeowners.

Question 22

Alabama FAIR Plan

Accepted Answer

A shared-market mechanism that provides basic property insurance to Alabama owners who cannot obtain coverage in the voluntary market — important for severe-weather-exposed and coastal/wind-prone properties.

Question 23

Severe Weather Coverage (AL)

Accepted Answer

Alabama property exposures emphasize tornado, hurricane, and windstorm losses. Standard homeowners policies cover wind/hail, but separate or higher wind/hurricane deductibles and named-storm provisions are common in coastal areas.

Question 24

Homeowners Policy Forms (HO)

Accepted Answer

HO-2 (broad named perils), HO-3 (special — open perils on dwelling, named perils on contents — most common), HO-4 (renters), HO-5 (comprehensive), HO-6 (condo), HO-8 (modified for older homes).

Question 25

Replacement Cost vs. Actual Cash Value

Accepted Answer

Replacement cost rebuilds/replaces with no depreciation deduction. Actual cash value (ACV) is replacement cost minus depreciation, paying less on older property.

Question 26

Coinsurance Clause

Accepted Answer

Requires the insured to carry coverage equal to a stated percentage (often 80%) of replacement value. If underinsured at the time of loss, the claim payment is reduced by the coinsurance penalty formula.

Question 27

Builder's Risk Policy

Accepted Answer

A commercial property form covering buildings, structures, and materials during construction against perils like fire, theft, vandalism, and wind. It is property — not liability — coverage.

Question 28

Dwelling Fire Policy (DP)

Accepted Answer

Property coverage for residences ineligible for a homeowners policy (rentals, vacant or non-owner-occupied homes). DP forms lack the liability and theft breadth of an HO policy unless endorsed.

Question 29

Flood Insurance (NFIP)

Accepted Answer

Homeowners and dwelling policies exclude flood. Flood is bought separately, mostly through the National Flood Insurance Program, with a standard 30-day waiting period before coverage starts.

Question 30

Deductible

Accepted Answer

The amount the insured absorbs before the insurer pays a covered loss. The insurer pays the covered loss above the deductible, up to policy limits; higher deductibles lower premiums.

Question 31

Admitted vs. Non-Admitted (Surplus Lines) Insurer

Accepted Answer

An admitted insurer is licensed by ALDOI for that line and backed by the guaranty association. A non-admitted (surplus lines) insurer is not licensed in Alabama for that business and is used only for hard-to-place risks.

Question 32

Surplus Lines Placement Rule (Alabama)

Accepted Answer

Surplus lines is appropriate only after admitted insurers decline or cannot provide the needed coverage on reasonable terms. The producer/broker must document admitted-market unavailability (diligent-search/due-diligence requirement).

Question 33

Alabama Insurance Guaranty Association — Claim Cap

Accepted Answer

Generally pays covered property and casualty claims up to $300,000 per covered claim when an admitted insurer becomes insolvent. Workers' compensation obligations are treated separately from this cap.

Question 34

Alabama Guaranty — Unearned Premium Cap

Accepted Answer

Return of unearned premium under the Alabama Insurance Guaranty Association is generally capped at $10,000 per policy — a separate, smaller limit from the $300,000 covered-claim cap.

Question 35

Guaranty Association Is Not a Sales Point

Accepted Answer

Guaranty protection only responds to admitted-insurer insolvency and is not a substitute for careful carrier selection. Producers should not market guaranty limits as a selling feature or safety guarantee.

Question 36

Misrepresentation

Accepted Answer

Knowingly making false or misleading statements about policy terms, benefits, or conditions during solicitation, sale, or claims handling. A prohibited unfair trade practice under Alabama law.

Question 37

Rebating

Accepted Answer

Offering an unauthorized inducement not specified in the policy — such as returning part of the producer's commission — to secure a sale. Prohibited because it undermines rate integrity and fair competition.

Question 38

Twisting

Accepted Answer

Inducing a policyholder to replace an existing policy through deceptive or misleading comparisons. Harms consumers by obscuring true cost/coverage differences; prohibited under Alabama unfair-practice rules.

Question 39

Unfair Claims Settlement Practices

Accepted Answer

Includes misrepresenting policy facts to claimants, failing to act promptly on communications, and not attempting good-faith settlement when liability is clear. Regulators expect truthful, consistent claim communications.

Question 40

Fiduciary Duty / Premium Trust

Accepted Answer

Premiums a producer collects belong to the insurer or insured. Commingling or converting premium funds for personal use is a serious breach of the producer's fiduciary responsibility.

Question 41

Insurable Interest

Accepted Answer

A financial stake such that a loss would cause genuine financial harm. For property/casualty it must exist at the time of loss; without it the contract is unenforceable, preventing wagering.

Question 42

Principle of Indemnity

Accepted Answer

Insurance restores the insured to the pre-loss financial position — no profit from a loss. It underlies ACV settlement, subrogation, and other-insurance provisions.

Question 43

Subrogation

Accepted Answer

After paying a claim, the insurer takes over the insured's right to recover from the negligent third party, preventing double recovery and supporting indemnity.

Question 44

Utmost Good Faith

Accepted Answer

Both parties must act honestly and disclose material facts. Concealment (silence on a material fact) and misrepresentation can void coverage.

Question 45

Representations vs. Warranties

Accepted Answer

A representation is a statement believed true to the best of the applicant's knowledge; a warranty is guaranteed literally true. A material misrepresentation can void coverage; a breached warranty more readily voids the policy.

Question 46

Adhesion, Aleatory & Unilateral Contract

Accepted Answer

Adhesion: insurer drafts the contract; ambiguity is construed against the insurer. Aleatory: unequal exchange depending on chance. Unilateral: only the insurer makes a legally enforceable promise.

Question 47

Concealment

Accepted Answer

Intentional failure to disclose a known material fact the insurer would have used in underwriting. If material and intentional, it can void the policy.

Question 48

Binder

Accepted Answer

A temporary agreement (written or oral) providing immediate coverage until the formal policy is issued. It contains the essential terms and is enforceable while in effect.

Question 49

Pro Rata vs. Short-Rate Cancellation

Accepted Answer

Pro rata (insurer-initiated): the insured receives a full proportional refund of unearned premium. Short rate (insured-initiated): the refund is reduced by an administrative penalty.

Question 50

Hazards: Physical, Moral, Morale

Accepted Answer

Physical hazard: a tangible condition increasing chance of loss. Moral hazard: dishonesty/intentional acts (e.g., arson for profit). Morale hazard: carelessness or indifference because insurance exists.

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