17 Free Alabama Health Insurance Exam Practice Questions (2026)
How to Use This Health Insurance Question Set
Health Insurance is Part III of Alabama's content outline, worth 45 of the 150 questions on the combined Life & Health exam. Candidates who take Health as its own standalone exam face 100 questions in 120 minutes for $50, needing 70 correct to pass, again a flat percentage rather than a scaled score. Alabama's own outline calls this line of authority simply 'Health,' not 'Accident and Health' the way some other states' exams do, even though the subject matter — medical expense, disability income, Medicare, Medicaid, group health and limited-benefit policies — is the same.
These 17 questions come from Chapters 6 and 7 of LanePrep's Alabama Life & Health quiz bank, none of them repeated from the free 25-question sample across the whole exam: 9 on health insurance foundations, medical expense and disability income (Chapter 6), and 8 on individual health policy provisions, group health, Medicare and Medicaid (Chapter 7). Each question shows its chapter, so a miss tells you exactly which audio lesson to replay.
Work them before you read the answer. Every question has the explanation folded underneath it. Guessing and then reading is worth more than reading and then agreeing.
Practice Questions 1-6: Business Disability Coverage and Managed Care
Chapter 6 opens the Health section with coverage built around a business and its owner: Business Overhead Expense insurance versus disability income and key person coverage, the point in treatment when a managed-care review happens, the ACA's rule against excluding a pre-existing condition, a disability buy-out policy funding a buy-sell agreement, and capitation as a managed-care payment method.
Question 1 (Chapter 6)
Dr. Miller, a self-employed chiropractor in Auburn, is concerned about how her office rent, utilities, and employee salaries would be paid if she became disabled. Which type of policy should she purchase?
- A) Disability Income Insurance
- B) Key Person Disability Insurance
- C) Disability Buy-Sell Insurance
- D) Business Overhead Expense (BOE) Insurance
Show answer & explanation
Answer: D
Business Overhead Expense (BOE) insurance is designed specifically to cover the actual costs of running a business (rent, utilities, non-owner salaries) while the owner is disabled. Disability Income (A) replaces the owner's personal income. Key Person (B) protects the business against the loss of a vital employee.
Question 2 (Chapter 6)
Which managed care process involves a review of the necessity of a medical procedure before it is actually performed?
- A) Concurrent Review
- B) Retrospective Review
- C) Capitation
- D) Prospective Review (Pre-certification)
Show answer & explanation
Answer: D
Prospective review, often called pre-certification or pre-authorization, occurs before the treatment is provided to verify necessity and coverage. Concurrent review (A) happens during treatment, and retrospective review (B) happens after.
Question 3 (Chapter 6)
A 45-year-old Alabama resident applies for an individual major medical policy. During underwriting, the insurer discovers the applicant was treated for hypertension three years ago but has been stable on medication for two years. Under current federal law and Alabama practice, how must the insurer handle this pre-existing condition?
- A) The insurer must offer the policy without any pre-existing condition exclusion or premium surcharge for the hypertension.
- B) The insurer may impose a 12-month pre-existing condition exclusion period before covering hypertension-related claims.
- C) The insurer may deny coverage entirely based on the hypertension history.
- D) The insurer may issue the policy but attach a permanent exclusion rider for all cardiovascular conditions.
Show answer & explanation
Answer: A
Under the Affordable Care Act (ACA), which applies to all individual major medical policies in Alabama, insurers cannot impose pre-existing condition exclusions, deny coverage, or charge higher premiums based on health status. The hypertension must be covered from day one without exclusions or surcharges. Options B, C, and D describe practices that were common before the ACA but are now prohibited for ACA-compliant plans.
Question 4 (Chapter 6)
An Alabama small business with three partners purchases a Disability Buy-Out policy funded by disability insurance on each partner. The policy has a 12-month elimination period. One partner becomes totally disabled. After 12 months, the policy pays a lump sum to the business. What is the typical use of these proceeds?
- A) To fund the buy-out of the disabled partner's ownership interest per the buy-sell agreement.
- B) To pay the disabled partner's salary for the next year.
- C) To cover the business's overhead expenses during the partner's disability.
- D) To pay the premiums on the other partners' disability policies.
Show answer & explanation
Answer: A
A Disability Buy-Out policy is designed to fund the purchase of a disabled owner's business interest according to a buy-sell agreement. The lump sum benefit (after the elimination period) provides the capital for the remaining owners to buy out the disabled partner's share. Option B describes salary continuation, not a buy-out. Option C describes Business Overhead Expense insurance. Option D is not a standard use of buy-out proceeds.
Question 5 (Chapter 6)
A primary care physician in a Montgomery-based HMO receives a fixed monthly payment for every member assigned to her, regardless of whether those members seek medical care. This payment method is known as:
- A) Fee-for-service
- B) Indemnity
- C) Relative value scale
- D) Capitation
Show answer & explanation
Answer: D
Capitation is a managed care payment system where providers are paid a set fee per member per month (PMPM) to provide all necessary covered services.
Question 6 (Chapter 6)
An insured's disability policy contains a 'Presumptive Disability' provision. Which of the following would trigger an immediate full benefit payment without an elimination period?
- A) A broken leg that heals in 4 months
- B) A diagnosis of Type 2 Diabetes
- C) Total and permanent loss of speech
- D) Partial loss of hearing in one ear
Show answer & explanation
Answer: C
Presumptive disability typically covers total loss of sight, speech, hearing, or use of two limbs. These are 'presumed' to be total disability regardless of the insured's ability to work.
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Practice Questions 7-12: Disability Policy Mechanics and Health Policy Provisions
Chapter 6 closes with the benefit period, what Business Overhead Expense actually excludes, and the underwriting still required to exercise a guaranteed insurability rider. Chapter 7 then opens with the waiting period that applies right after a lapsed health policy is reinstated, the coordination-of-benefits rule that makes an individual's own employer plan primary, and the intoxicants and narcotics provision.
Question 7 (Chapter 6)
In a disability income policy, the 'Benefit Period' refers to:
- A) The time the insured must wait before benefits begin
- B) The maximum length of time that benefits will be paid
- C) The time during which the insurer can contest the policy
- D) The grace period for premium payments
Show answer & explanation
Answer: B
The benefit period is the duration for which the insurer will pay benefits (e.g., 2 years, 5 years, or to age 65).
Question 8 (Chapter 6)
Which of the following expenses would be covered under a Business Overhead Expense (BOE) policy purchased by a sole practitioner in Hoover?
- A) Employee wages and office rent
- B) The owner's lost salary
- C) The owner's personal mortgage payment
- D) Income taxes on the business profits
Show answer & explanation
Answer: A
BOE insurance is designed to keep the business doors open. It covers actual overhead expenses like rent, utilities, and employee salaries, but it specifically excludes the owner's salary or personal expenses.
Question 9 (Chapter 6)
An insured has a disability income policy with a 'Guaranteed Insurability Rider.' Which of the following is a requirement for the insured to exercise this option to increase coverage?
- A) The insured must provide evidence of good health (underwriting).
- B) The insured's income must have increased sufficiently to justify the higher benefit.
- C) The insured must be currently disabled.
- D) The insured must wait until the policy has been in force for at least 10 years.
Show answer & explanation
Answer: B
The Guaranteed Insurability Rider allows the insured to buy more coverage without a medical exam (A is wrong), but the insurer will still require financial underwriting to ensure the new total benefit does not exceed income-replacement limits.
Question 10 (Chapter 7)
A policyholder is reinstated on a Monday. On Thursday of the same week, they are hospitalized due to a sudden onset of appendicitis. How will the insurer handle this claim?
- A) The claim will be paid because the policy is active.
- B) The claim will be denied because there is a 10-day waiting period for sickness.
- C) The claim will be paid only if it was an accidental injury.
- D) The claim will be denied because the policy was not in force for 30 days.
Show answer & explanation
Answer: B
Upon reinstatement of a health policy, accidents are covered immediately. However, to prevent adverse selection, there is a mandatory 10-day waiting period for claims resulting from sickness (illness).
Question 11 (Chapter 7)
A husband and wife are both covered by their respective employers' group health plans. The wife is injured. According to the 'Coordination of Benefits' (COB) provision, which plan is considered primary for her claim?
- A) The wife's own employer's plan
- B) The husband's plan
- C) The plan of the spouse with the earlier birthday in the year
- D) The plan that has been in force the longest
Show answer & explanation
Answer: A
Under Coordination of Benefits rules, an individual's own employer plan is primary for them. Their spouse's plan would be secondary. The 'birthday rule' applies to determining primary coverage for dependent children, not the spouses themselves.
Question 12 (Chapter 7)
An insured has a policy with the 'Intoxicants and Narcotics' optional provision. They are injured in a car accident while driving with a blood alcohol level twice the legal limit. How will the insurer likely handle the claim?
- A) The claim will be paid in full.
- B) The insurer will pay the claim but notify the police.
- C) The insurer will pay the claim but exclude all future alcohol-related injuries.
- D) The insurer is not liable for the loss because the insured was intoxicated.
Show answer & explanation
Answer: D
The 'Intoxicants and Narcotics' optional provision allows an insurer to deny a claim if the loss occurred while the insured was under the influence of alcohol or any narcotic unless administered on the advice of a physician.
Practice Questions 13-17: Renewability, Continuation and Long-Term Care
Chapter 7 closes with four different clocks that get tested against each other: an optionally renewable policy's non-renewal rights, a long-term care elimination period functioning as a time-based deductible, the 45-day deadline that deems a reinstatement application approved, COBRA's 18-month continuation period, and the noncancelable provision that locks both premium and terms for the life of the contract.
Question 13 (Chapter 7)
An Alabama resident has an 'Optionally Renewable' health policy. On the policy anniversary, the insurer decides not to renew the policy for the entire class of insureds in that zip code. Which of the following is true?
- A) The insurer must prove the insureds are now uninsurable.
- B) The insurer can only do this if the insureds agree in writing.
- C) The insurer has the right to non-renew for any reason on the anniversary or premium due date.
- D) Optionally renewable policies cannot be canceled by the insurer until age 65.
Show answer & explanation
Answer: C
With an 'Optionally Renewable' policy, the insurer has the option to increase premiums or decline renewal for any reason, but only on the policy anniversary or premium due date.
Question 14 (Chapter 7)
An Alabama LTC policy has a 90-day 'Elimination Period.' How does this function when a claim begins?
- A) The insurer pays for the first 90 days, then the insured pays.
- B) The insured must wait 90 days after buying the policy before any illness is covered.
- C) It acts like a time-based deductible where the insured pays for the first 90 days of care.
- D) The insurer will only pay for 90 days of care in total.
Show answer & explanation
Answer: C
The elimination period in an LTC policy is the period of time the insured must receive care before the policy begins to pay benefits. It functions as a 'waiting period' or time deductible.
Question 15 (Chapter 7)
An insured's health policy lapses, and they submit a reinstatement application with the required premium. The insurer does not respond to the application. After how many days is the policy automatically deemed reinstated?
- A) 10 days
- B) 45 days
- C) 30 days
- D) 60 days
Show answer & explanation
Answer: B
Under the Reinstatement provision, if the insurer requires an application for reinstatement and issues a conditional receipt, the policy is reinstated upon approval or, in the absence of approval, on the 45th day following the date of the conditional receipt if the insurer has not notified the insured of its disapproval.
Question 16 (Chapter 7)
A worker at a firm with 25 employees in Dothan is fired for chronic tardiness (not gross misconduct). How long can this worker continue their group health coverage under COBRA?
- A) 12 months
- B) 29 months
- C) 18 months
- D) 36 months
Show answer & explanation
Answer: C
Under COBRA, termination of employment (other than for gross misconduct) or reduction in hours is a qualifying event that allows for 18 months of continued coverage.
Question 17 (Chapter 7)
An Alabama policyholder with a noncancelable individual health policy turns 60 and develops a chronic condition. The insurer wants to increase the premium for this individual's policy class. Under Alabama law, which statement is correct?
- A) The insurer may increase the premium for this policy class because noncancelable only prevents cancellation, not premium changes.
- B) The insurer may not increase the premium or change any policy terms for this class, as noncancelable guarantees both renewability and level premiums.
- C) The insurer may increase the premium but only with prior approval from the Alabama Department of Insurance.
- D) The insurer may increase the premium for this individual only, based on their new health status.
Show answer & explanation
Answer: B
A noncancelable policy is the most favorable renewability provision for the insured. It guarantees that the insurer cannot cancel the policy, cannot increase premiums, and cannot change any policy provisions for the duration of the contract, as long as premiums are paid on time. Option A describes a guaranteed renewable policy (premiums can be increased by class). Option C is incorrect because no regulatory approval can override the noncancelable contract terms. Option D is incorrect because individual rating based on health status is prohibited under a noncancelable provision.
The Mistakes That Cost Marks
Confusing Business Overhead Expense insurance with Disability Income or Key Person coverage. BOE pays the business's rent, utilities and non-owner salaries while an owner is disabled; it does not replace the owner's own income and does not cover the owner's personal expenses.
Mixing up prospective, concurrent and retrospective review. Only a review done before treatment is prospective (pre-certification); the exam tests all three in the same question stem.
Assuming a pre-existing condition can still be excluded or surcharged on an individual major medical policy. Under the ACA, it cannot — this set tests that the pre-ACA underwriting practice is no longer the correct answer.
Treating 'noncancelable' and 'guaranteed renewable' as the same renewability provision. Noncancelable locks both the premium and the terms for the life of the contract; guaranteed renewable only locks the insurer out of canceling, not out of raising premiums by class.
Losing track of which waiting period applies where. A reinstated health policy carries a 10-day wait for sickness (accidents are covered immediately); an LTC elimination period is a time-based deductible paid in days of care, not a wait after purchase; a reinstatement application left unanswered is deemed approved on the 45th day. Three different clocks that get swapped for each other.
Your Next Step
How did you score?
13 or more correct: You're clearing most of Part III. Move to the Life insurance exam set next, then read how to pass the Alabama Life & Health exam on the first try for the full study plan.
9-12 correct: You're in reasonable shape but not comfortable. Note which chapter your misses fell in and replay that chapter's audio lesson before retesting.
Under 9 correct: Start with Chapter 6 of the LanePrep Alabama Life & Health course and work forward through Chapter 7 rather than testing yourself again right away. A free preview is available at /al/l-and-h/preview, no signup required.
For a 25-question sample across the whole exam, see the free practice set.
Content outline weights from the Alabama Producer Examination Content Outline for Life and Health Examinations ('2023 LH 11 Public.xlsx'), Industry Advisory Committee review 8/8/2023. Read October 2026.
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