17 Free Alabama Life & Health Practice Questions: Health Insurance Foundations, Medical Expense and Disability Income (2026)

Question 1 (Chapter 6)

Sarah has a Major Medical policy with a $500 deductible and an 80/20 coinsurance provision. She incurs $2,500 in covered medical expenses for a minor surgery in Mobile. Assuming this is her first claim of the year, how much will Sarah be required to pay out-of-pocket?

• A) $400
• B) $900
• C) $500
• D) $1,000

Question 2 (Chapter 6)

Which of the following is a characteristic of a Preferred Provider Organization (PPO) that distinguishes it from a traditional HMO?

• A) PPOs do not allow members to see out-of-network providers.
• B) PPO providers are paid via capitation rather than fee-for-service.
• C) PPOs are only offered through government-sponsored programs.
• D) PPOs generally do not require a gatekeeper to see a specialist.

Question 3 (Chapter 6)

In the event an Alabama health insurer becomes insolvent, which entity provides protection for resident policyholders' claims, subject to statutory limits?

• A) The Alabama Insurance Commissioner's Emergency Fund
• B) The NAIC Insolvency Pool
• C) The Federal Deposit Insurance Corporation (FDIC)
• D) The Alabama Life and Disability Insurance Guaranty Association

Question 4 (Chapter 6)

A disability policy has a 'Waiver of Premium' rider. The insured becomes totally disabled on January 1st. The policy has a 90-day waiting period for the waiver. When will the premiums be waived and any paid premiums refunded?

• A) April 1st
• B) January 1st
• C) July 1st
• D) Never; premiums are only waived for partial disability.

Question 5 (Chapter 6)

Which of the following is a common exclusion in a medical expense policy?

• A) Emergency room visits for accidents
• B) Complications arising from pregnancy
• C) Physical therapy following a stroke
• D) Intentional self-inflicted injuries

Question 6 (Chapter 6)

A 55-year-old Alabama resident enrolls in a Medicare Advantage (Part C) HMO plan. The plan has a $0 premium, a $3,000 annual out-of-pocket maximum for in-network services, and requires referrals for specialists. In February, the member sees an in-network cardiologist without a referral from her primary care physician. The visit costs $400. How much will the plan pay?

• A) $0 — the plan denies the claim because no referral was obtained.
• B) $400 — the plan pays in full because the provider is in-network.
• C) $320 — the plan pays 80% after the member's $80 copay.
• D) $200 — the plan pays 50% for out-of-network equivalent services.

Question 7 (Chapter 6)

An Alabama employer offers a Health Reimbursement Arrangement (HRA) to employees. The HRA is funded solely by the employer with $2,000 per year per employee. An employee incurs $1,500 in qualified medical expenses in Year 1 and submits claims for reimbursement. In Year 2, the employee has no medical expenses. What happens to the unused $500 from Year 1?

• A) It rolls over to Year 2 and is available for future medical expenses.
• B) It is forfeited back to the employer (use-it-or-lose-it).
• C) It is paid to the employee as taxable income.
• D) It is contributed to the employee's HSA if they have one.

Question 8 (Chapter 6)

A 25-year-old Alabama resident applies for an individual disability income policy. The applicant is a professional rock climber. During underwriting, the insurer adds an 'Aviation and Hazardous Activities Exclusion' rider that excludes coverage for disabilities resulting from rock climbing. The applicant accepts the policy with this rider. Two years later, the applicant becomes disabled due to a rock climbing accident. What is the insurer's obligation?

• A) Deny the claim because the disability resulted from an excluded hazardous activity.
• B) Pay full benefits because the incontestability period has passed.
• C) Pay benefits only if the applicant can prove the accident wasn't caused by negligence.
• D) Pay a reduced benefit equal to the premium difference for the exclusion.

Question 9 (Chapter 6)

An actuary for an Alabama health insurer is calculating premiums for a new group medical plan. The actuary uses a table that predicts the frequency and severity of non-fatal illnesses and accidents within the group. This statistical data is known as:

• A) Morbidity data
• B) Mortality data
• C) Insurable interest data
• D) Loss ratio data

Question 10 (Chapter 6)

A consumer in Tuscaloosa purchases a 'Cancer-Only' policy. This is an example of which type of coverage?

• A) Comprehensive Major Medical
• B) HMO
• C) Dread Disease (Limited) Policy
• D) Blanket Insurance

Question 11 (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

Question 12 (Chapter 6)

A worker is disabled for 4 months, returns to work for 3 weeks, and then suffers a relapse of the same condition. If the policy has a 'Recurrent Disability' provision with a 6-month window, what happens?

• A) A new elimination period must be satisfied.
• B) The second period of disability is treated as a continuation of the first.
• C) The insurer will deny the claim as a pre-existing condition.
• D) The benefit period is reset to the beginning.

Question 13 (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

Question 14 (Chapter 6)

A Montgomery-based HMO pays its participating primary care physicians a fixed amount every month for each member assigned to them, regardless of whether the member actually visits the doctor. This arrangement is known as:

• A) Fee-for-service
• B) Capitation
• C) Usual, Customary, and Reasonable (UCR)
• D) Indemnity

Question 15 (Chapter 6)

Three partners in a Birmingham law firm enter into a Disability Buy-Sell agreement. What is the primary purpose of the disability insurance policies they purchase on each other?

• A) To provide the disabled partner with a lifetime income
• B) To pay for the firm's malpractice insurance premiums
• C) To provide the funds for the healthy partners to purchase the disabled partner's interest in the business
• D) To reimburse the firm for the cost of hiring a replacement lawyer

Question 16 (Chapter 6)

Under the Affordable Care Act (ACA), an Alabama individual chooses a 'Bronze' metal tier plan. What percentage of the total average costs of covered benefits will the plan pay?

• A) 90%
• B) 60%
• C) 80%
• D) 70%

Question 17 (Chapter 6)

A policyholder has a Major Medical plan with a $500 deductible and 80/20 coinsurance. He incurs a $2,500 medical bill. This is his first claim of the year. What is the insurer's portion of the payment?

• A) $2,000
• B) $1,600
• C) $1,500
• D) $400