17 Free Alabama Life & Health Practice Questions: Life Policy Provisions, Options and Riders (2026)
How to Use This Set
Policy provisions, options and riders are the second life insurance topic in Part II of the Alabama outline, the block that is 55 of 150 questions on the combined exam and 80 of 125 on the Life-only exam. The questions are about what the contract says, what the policyowner may elect, and what each rider adds.
Most of the marks here come from precision. A beneficiary is primary or contingent, revocable or irrevocable. A nonforfeiture option protects you in one way and not another. A rider pays on one trigger and not a similar one. These 17 questions come from LanePrep's Alabama L&H quiz bank.
Practice Questions 1-6: Concealment, Beneficiaries, Nonforfeiture and Reinstatement
What the insurer can do when a material fact was hidden, who collects when a primary beneficiary dies first, which nonforfeiture option lasts longest, and what reinstatement requires after a lapse.
Question 1 (Chapter 4)
Thomas purchased a life insurance policy in Birmingham three years ago. It is discovered upon his death that he intentionally concealed a chronic heart condition on his original application. How will the insurer likely respond?
- A) Deny the claim due to material misrepresentation
- B) Refund only the premiums paid plus interest
- C) Reduce the death benefit to what the premium would have purchased if the truth were known
- D) Pay the claim in full because the Incontestability period has passed
Show answer & explanation
Answer: D
Under the Incontestability provision, an insurer generally cannot challenge a life insurance policy's validity due to misstatements (except for age or sex) after it has been in force for two years.
Question 2 (Chapter 4)
A policyowner has named his wife as the primary beneficiary and his two children as contingent beneficiaries. If the wife dies before the policyowner, who will receive the death benefit upon the policyowner's death?
- A) The children (contingent beneficiaries)
- B) The wife's estate
- C) The policyowner's estate
- D) The Alabama Life and Disability Insurance Guaranty Association
Show answer & explanation
Answer: A
Contingent (secondary) beneficiaries receive the proceeds only if the primary beneficiary predeceases the insured.
Question 3 (Chapter 4)
Which non-forfeiture option provides the longest period of protection but results in a smaller death benefit than the original policy?
- A) Reduced Paid-Up Insurance
- B) Cash Surrender
- C) Extended Term
- D) One-Year Term Option
Show answer & explanation
Answer: A
The Reduced Paid-Up option uses the cash value to buy a single-premium policy of the same type as the original, but with a lower face amount. It lasts for the rest of the insured's life.
Question 4 (Chapter 4)
Robert is totally disabled for seven months. His life insurance policy remains in force because the insurer is paying his premiums. Which rider is responsible for this?
- A) Waiver of Premium
- B) Waiver of Cost of Insurance
- C) Payor Benefit Rider
- D) Guaranteed Insurability Rider
Show answer & explanation
Answer: A
The Waiver of Premium rider waives the policyowner's premiums if they become totally disabled, usually after a 6-month waiting period.
Question 5 (Chapter 4)
Under the Accelerated Death Benefit rider, what is the typical requirement for the insured to receive a portion of the death benefit while still living?
- A) Diagnosis of a terminal illness with a life expectancy of 24 months or less
- B) Total disability for at least 2 years
- C) Unemployment for more than 6 months
- D) Reaching age 65
Show answer & explanation
Answer: A
Accelerated Death Benefits (Living Needs Riders) allow a terminally ill insured to access a portion of the death benefit to pay for medical or living expenses.
Question 6 (Chapter 4)
A whole life policy in Alabama lapses due to nonpayment of premiums. Three years later, the former policyowner applies for reinstatement. The insurer requires evidence of insurability and payment of all overdue premiums with interest. Which provision governs this process?
- A) Grace Period provision
- B) Incontestability provision
- C) Non-forfeiture provision
- D) Reinstatement provision
Show answer & explanation
Answer: D
The Reinstatement provision allows a lapsed policy to be restored within a specified period (often 3-5 years) upon payment of back premiums with interest and proof of insurability. The Grace Period (A) applies before lapse. Incontestability (B) limits the insurer's ability to contest the policy after a period, not reinstatement. Non-forfeiture (C) provides options at lapse, not reinstatement.
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Practice Questions 7-12: Beneficiary Changes, Automatic Loans, Settlements and Dividends
Irrevocable beneficiaries, the automatic premium loan, the interest-only settlement option, the accidental death rider and the dividend options on a participating policy.
Question 7 (Chapter 4)
A policyowner names their spouse as an irrevocable beneficiary on an Alabama life insurance policy. Two years later, the policyowner wants to change the beneficiary to their adult child. What is required to make this change?
- A) The policyowner can change the beneficiary at any time without consent.
- B) The policyowner needs a court order to change the beneficiary.
- C) The change cannot be made because irrevocable beneficiary designations are permanent.
- D) The policyowner needs written consent from the irrevocable beneficiary (the spouse).
Show answer & explanation
Answer: D
An irrevocable beneficiary has a vested right in the policy proceeds and must consent to any change of beneficiary. The policyowner cannot unilaterally change an irrevocable beneficiary. Option A describes a revocable beneficiary. Option B is not required unless consent cannot be obtained and a court intervenes. Option C is incorrect because irrevocable designations can be changed with consent.
Question 8 (Chapter 4)
An Alabama policyowner has a whole life policy with an Automatic Premium Loan (APL) provision. The policyowner misses a premium payment and does not pay during the grace period. The policy has sufficient cash value. What happens?
- A) The policy lapses immediately.
- B) The insurer converts the policy to extended term insurance.
- C) The insurer automatically pays the premium by lending the amount from the policy's cash value.
- D) The insurer reduces the death benefit to pay the premium.
Show answer & explanation
Answer: C
The Automatic Premium Loan provision allows the insurer to automatically pay an overdue premium by making a loan against the policy's cash value, preventing lapse, provided the cash value is sufficient. This occurs after the grace period expires. Option A would happen without APL or insufficient cash value. Option B is a non-forfeiture option, not APL. Option D is not a standard mechanism.
Question 9 (Chapter 4)
A beneficiary selects the 'Interest Only' settlement option for a $300,000 life insurance death benefit. What does the beneficiary receive?
- A) The earnings generated by the $300,000 principal, with the principal remaining intact.
- B) A fixed monthly payment for a guaranteed period.
- C) A fixed monthly payment for the beneficiary's lifetime.
- D) The entire $300,000 in a lump sum.
Show answer & explanation
Answer: A
Interest Only settlement option means the insurer holds the principal and pays only the interest earnings to the beneficiary. The principal remains intact and may be paid to a contingent beneficiary or the estate upon the primary beneficiary's death. Option B describes Fixed Period. Option C describes Life Income. Option D is Lump Sum.
Question 10 (Chapter 4)
An Alabama insured has a $100,000 life policy with a Double Indemnity (Accidental Death) rider. The insured dies from a heart attack while driving, causing a car accident. The death certificate lists 'acute myocardial infarction' as the cause of death. How much will the insurer pay?
- A) $100,000 (base face amount only).
- B) $200,000 (double indemnity applies because death occurred in an accident).
- C) $150,000 (base plus partial accidental death benefit).
- D) Nothing, because the accident was caused by a health condition.
Show answer & explanation
Answer: A
Double Indemnity riders pay the additional benefit only if death results directly and independently from accidental bodily injury. If the heart attack (natural cause) caused the accident, the death is not considered accidental for double indemnity purposes. The base face amount is still payable. Option B incorrectly assumes any accident triggers double indemnity. Option C is not a standard provision. Option D is incorrect because the base policy still pays.
Question 11 (Chapter 4)
An Alabama policyowner has a participating whole life policy. The policyowner elects the dividend option that applies the dividend to reduce the next premium payment due. Which dividend option is this?
- A) Premium Reduction
- B) Cash Payment
- C) Accumulate at Interest
- D) Paid-Up Additions
Show answer & explanation
Answer: A
The correct answer is A. The Premium Reduction option (also called 'apply to premium') uses the dividend to reduce the policyowner's next premium payment. Option B (Cash Payment) sends the dividend to the policyowner. Option C (Accumulate at Interest) leaves the dividend with the insurer to earn interest. Option D (Paid-Up Additions) uses the dividend to buy additional paid-up insurance.
Question 12 (Chapter 4)
An Alabama policyowner has a whole life policy with a Cost of Living Rider (COLA). The rider increases the face amount annually based on the Consumer Price Index (CPI). What happens to the premium?
- A) The premium remains level for the life of the policy.
- B) The premium increases each year along with the face amount increase.
- C) The premium decreases as the cash value grows.
- D) The premium is paid only when the CPI increases.
Show answer & explanation
Answer: B
The correct answer is B. A Cost of Living Rider (COLA) increases the policy's face amount periodically (usually annually) based on an inflation index like the CPI. To fund this increased coverage, the premium also increases correspondingly. The insured typically does not need to provide evidence of insurability for these increases. Option A describes a standard whole life policy without COLA. Option C is incorrect; premiums don't decrease with cash value growth in whole life. Option D is nonsensical.
Practice Questions 13-17: Riders and Policy Loans
Guaranteed insurability, long-term care acceleration and the waiver of premium waiting period, then the effect of an outstanding policy loan on a lapse and on a death claim. Several of these ask you to do a short calculation.
Question 13 (Chapter 4)
An Alabama policyowner, Sarah, notices a discrepancy between what her agent told her about the policy's growth and the actual written terms in the contract. Which provision ensures that only the written policy and the attached application are legally binding?
- A) The Insuring Clause
- B) The Consideration clause
- C) The Owner's Rights provision
- D) The Entire Contract provision
Show answer & explanation
Answer: D
The Entire Contract provision states that the policy and the attached application constitute the entire agreement. It prevents the insurer or agent from referencing outside documents or verbal promises to alter the contract's terms.
Question 14 (Chapter 4)
An Alabama policyowner has a whole life policy with a Long-Term Care (LTC) rider. The insured becomes chronically ill and qualifies for LTC benefits. The policy has a $250,000 death benefit. The rider allows acceleration of up to 2% of the face amount per month for LTC expenses. The insured receives the maximum monthly acceleration for 12 months. What is the remaining death benefit?
- A) $250,000
- B) $190,000
- C) $130,000
- D) $60,000
Show answer & explanation
Answer: B
The rider accelerates 2% of $250,000 = $5,000 per month. Over 12 months, that totals $60,000 accelerated. The death benefit is reduced by the amount accelerated: $250,000 - $60,000 = $190,000. Option A ignores the acceleration. Option C incorrectly calculates the reduction. Option D is the total amount accelerated, not the remaining death benefit.
Question 15 (Chapter 4)
An Alabama policyowner has a whole life policy with a Waiver of Premium rider. The waiting period is 6 months. The insured becomes totally disabled on January 1. The insurer approves the claim on July 1. What premiums are waived?
- A) Only premiums due after July 1.
- B) Premiums due during the 6-month waiting period plus all future premiums.
- C) All premiums from January 1 forward, including the waiting period.
- D) Only the premium due on January 1.
Show answer & explanation
Answer: B
Most Waiver of Premium riders waive premiums that come due during the waiting period (retroactively) and all subsequent premiums while disability continues. The waiver is effective from the onset of disability, but the insurer typically reimburses or credits premiums paid during the waiting period once the claim is approved. Option A is incorrect because it excludes the waiting period. Option C is similar but less precise; the waiver applies to premiums *due* during the waiting period, not necessarily 'from January 1' if no premium was due that day. Option D is too narrow.
Question 16 (Chapter 4)
An Alabama policyowner has a whole life policy with a $100,000 face amount and $30,000 cash value. The policyowner takes a $15,000 policy loan. Later, the policyowner stops paying premiums and the policy lapses. The policy has an Automatic Premium Loan (APL) provision. Why did the policy lapse despite APL?
- A) The outstanding loan reduced the net cash value below the amount needed to cover the premium.
- B) APL only works if the policyowner requests it each time.
- C) APL does not apply to whole life policies.
- D) The policyowner had selected the Extended Term non-forfeiture option.
Show answer & explanation
Answer: A
APL uses the policy's net cash value (cash value minus outstanding loans) to pay premiums. Here, cash value is $30,000, loan is $15,000, so net cash value is $15,000. If the premium due exceeds the available net cash value, APL cannot pay the full premium and the policy will lapse (or go into a non-forfeiture option). Option B is incorrect; APL is automatic. Option C is incorrect; APL applies to whole life. Option D is incorrect; Extended Term is a non-forfeiture option, not a reason APL fails.
Question 17 (Chapter 4)
An Alabama policyowner has a whole life policy with a $200,000 death benefit and a $50,000 cash value. The policyowner takes a $20,000 policy loan. The policyowner then dies. The loan interest rate is 6% and one year of interest has accrued. How much does the beneficiary receive?
- A) $200,000
- B) $180,000
- C) $178,800
- D) $130,000
Show answer & explanation
Answer: C
The death benefit is reduced by the outstanding loan balance plus accrued interest. Loan: $20,000. Interest for one year at 6%: $1,200. Total indebtedness: $21,200. Death benefit payable: $200,000 - $21,200 = $178,800. Option A ignores the loan. Option B subtracts only the principal. Option D incorrectly subtracts the cash value.
The Mistakes That Cost Marks
Patterns from the questions above that cost candidates marks on exam day:
- Confusing revocable and irrevocable beneficiaries. An irrevocable beneficiary must consent before the owner changes the designation.
- Mixing up the nonforfeiture options. Extended term and reduced paid-up protect in different ways, and the exam asks which does which.
- Treating a rider as if it covers everything. A rider pays on its defined trigger, such as accidental death or total disability, and not on a nearby one.
- Ignoring the loan. An outstanding policy loan and unpaid interest reduce what is paid at death or at surrender.
- Missing the waiting period. Read when a waiver of premium starts and what it covers before you pick an answer.
Your Next Step
If these questions exposed a gap, listen to the matching lesson in the Alabama Life & Health course preview, then come back and rework the questions you missed. For more topics, see all of our free Alabama Life & Health practice questions.
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