Insurance Licensing and Regulations Quiz

What is required by Alabama law for drivers regarding insurance?

• Have comprehensive coverage

• Maintain minimum liability coverage

• Have uninsured motorist coverage

• Have collision coverage

Answer explanation

Alabama law requires drivers to maintain minimum liability coverage to ensure they can cover damages or injuries they may cause in an accident. This is essential for legal driving in the state.

What must drivers carry as evidence of insurance?

• A digital or physical insurance card

• A copy of their vehicle registration

• A letter from their insurer

• A receipt of payment

Answer explanation

Drivers must carry a digital or physical insurance card as it serves as proof of insurance coverage, which is legally required in most jurisdictions. Other options do not fulfill this requirement.

What is the role of a surplus lines broker?

• To investigate claims

• To adjust premiums

• To provide temporary coverage

• To place coverage with nonadmitted carriers

Answer explanation

A surplus lines broker specializes in placing coverage with nonadmitted carriers, which are insurers not licensed in a particular state. This role is crucial for obtaining insurance for risks that standard markets cannot cover.

What is required for a new producer to obtain a license in Alabama?

• Complete prelicensing education, pass the state exam, and submit fingerprints

• Only pass the state exam

• Submit fingerprints and proof of citizenship

• Complete a 40-hour course

Answer explanation

To obtain a license in Alabama, a new producer must complete prelicensing education, pass the state exam, and submit fingerprints. This ensures they are adequately prepared and vetted for the responsibilities of the role.

What does the Alabama Insurance Guaranty Association do?

• Regulates insurance rates

• Offers discounts on insurance premiums

• Protects policyholders if an admitted insurer becomes insolvent

• Provides grants for home retrofitting

Answer explanation

The Alabama Insurance Guaranty Association protects policyholders by providing coverage if an admitted insurer becomes insolvent, ensuring that claims are paid even if the insurer cannot fulfill its obligations.

What is a binder in the context of insurance?

• A document for policy cancellation

• A type of insurance claim

• A temporary coverage agreement

• A permanent insurance policy

Answer explanation

A binder is a temporary coverage agreement that provides immediate insurance protection until a formal policy is issued. It is not a cancellation document, claim, or permanent policy.

What is the minimum continuing education requirement for producers in Alabama?

• 24 hours every two years, including 3 hours of ethics

• 15 hours every year

• 30 hours every three years

• 12 hours every year

Answer explanation

In Alabama, producers must complete a minimum of 24 hours of continuing education every two years, which includes 3 hours specifically focused on ethics. This ensures they stay updated on industry standards and practices.

Who oversees the licensing and regulation of insurance professionals in Alabama?

• The Alabama Secretary of State

• The Alabama Department of Revenue

• The Alabama State Police

• The Alabama Insurance Commissioner

Answer explanation

The Alabama Insurance Commissioner is responsible for overseeing the licensing and regulation of insurance professionals in Alabama, ensuring compliance with state laws and protecting consumers.

What does uninsured motorist coverage provide?

• Coverage for vehicle damage

• Coverage for natural disasters

• Coverage for theft

• Coverage for injuries when the at-fault driver has no insurance

Answer explanation

Uninsured motorist coverage specifically provides protection for injuries sustained when the at-fault driver lacks insurance. It does not cover vehicle damage, natural disasters, or theft.

Which of the following actions is prohibited for producers?

• Completing continuing education

• Offering a rebate to induce a sale

• Providing accurate policy information

• Updating contact information

Answer explanation

Producers are prohibited from offering rebates to induce a sale, as this practice can create unfair competition and mislead consumers. The other actions listed are permissible and encouraged.