Free AL P&C Exam Flashcards

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.

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.

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.

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).

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.

$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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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).

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

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.

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.

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.

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.

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.

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.

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).

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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

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.

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.

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

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.

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.

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.