214 FLORIDA INSURANCE 2026 EXAM REVIEW
SOLVED QUESTIONS AND CORRECT
ANSWERS GRADED A+
◉ Which of the following risks is insurable?
A. pure risks
B. gambling
C. speculative risks
D. investing.
Answer: A. Only pure risks are insurable because they involve only
the chance of loss. They are pure in the sense that they do not mix
both profits and losses. Insurance is concerned with the economic
problems created by pure risks.
◉ Buying insurance is one of the most effective ways of
A. avoiding risk
B. transferring risk
C. reducing risk
D. retaining risk.
,Answer: B. Buying insurance is one of the most effective ways of
transferring risk. Through the insurance contract, the burden of
carrying the risk and indemnifying the financial loss is transferred
from the individual to the insurance company.
◉ Which of the following best describes the function of insurance?
A. it is a form of legalized gambling.
B. it spreads financial risk over a large group to minimize the loss to
any one individual
C. it protects against living too long
D. it creates and protects risks.
Answer: B. The function of insurance is to safeguard against financial
loss by having the losses of few paid by the contributions of many
who are exposed to the same risk.
◉ All of the following are elements of an insurable risk EXCEPT
A. the loss must be due to chance
B. the loss must be predictable
C. the loss must be catastrophic
D. the loss must have a determinable value.
Answer: C. One of the criteria for an insurable risk is that it NOT be
catastrophic. A principle of insurance holds that only a small portion
,of a given group will experience loss at any one time. Risks that
would adversely affect large numbers of people or large amounts of
property - wars or floods, for example - are typically not insurable.
◉ The amount of money an insurer sets aside to pay future claims is
called
A. a premium
B. a reserve
C. a dividend
D. an accumulated interest.
Answer: B. Reserves can be defined as the amounts that are set aside
to fulfill the insurance company's obligation to pay future claims.
The reserve is compiled from past premium payments and interest.
◉ Which of the following constitutes an insurable interest?
A. the policyowner must expect to benefit from the insured's death
B. the policyowner must expect to suffer a loss when the insured
dies or becomes disabled
C. the beneficiary, by definition, has an insurable interest in the
insured
D. the insured must have a personal or business relationship with
the beneficiary.
, Answer: B. Insurable interest requires the policyowner to benefit
from the insured's continuing to live or enjoy good health or to
suffer a loss when the insured dies or is disabled.
◉ Which of the following statements describes the parol evidence
rule?
A. a written contract cannot be changed once it is signed
B. an oral contract cannot be modified by written evidence
C. a written contract cannot be changed by oral evidence
D. an oral contract takes precedence over any earlier written
contract.
Answer: C. The parol evidence rule states that when parties put their
agreement in writing, all previous verbal statements come together
in that writing, and a written contract cannot be changed or
modified by parol (oral) evidence.
◉ Which of the following factors determines whether policy
dividends will be paid on a participating policy?
A. reserves and experience
B. expenses and claims costs
C. interest and benefits
D. premiums and renewability.
SOLVED QUESTIONS AND CORRECT
ANSWERS GRADED A+
◉ Which of the following risks is insurable?
A. pure risks
B. gambling
C. speculative risks
D. investing.
Answer: A. Only pure risks are insurable because they involve only
the chance of loss. They are pure in the sense that they do not mix
both profits and losses. Insurance is concerned with the economic
problems created by pure risks.
◉ Buying insurance is one of the most effective ways of
A. avoiding risk
B. transferring risk
C. reducing risk
D. retaining risk.
,Answer: B. Buying insurance is one of the most effective ways of
transferring risk. Through the insurance contract, the burden of
carrying the risk and indemnifying the financial loss is transferred
from the individual to the insurance company.
◉ Which of the following best describes the function of insurance?
A. it is a form of legalized gambling.
B. it spreads financial risk over a large group to minimize the loss to
any one individual
C. it protects against living too long
D. it creates and protects risks.
Answer: B. The function of insurance is to safeguard against financial
loss by having the losses of few paid by the contributions of many
who are exposed to the same risk.
◉ All of the following are elements of an insurable risk EXCEPT
A. the loss must be due to chance
B. the loss must be predictable
C. the loss must be catastrophic
D. the loss must have a determinable value.
Answer: C. One of the criteria for an insurable risk is that it NOT be
catastrophic. A principle of insurance holds that only a small portion
,of a given group will experience loss at any one time. Risks that
would adversely affect large numbers of people or large amounts of
property - wars or floods, for example - are typically not insurable.
◉ The amount of money an insurer sets aside to pay future claims is
called
A. a premium
B. a reserve
C. a dividend
D. an accumulated interest.
Answer: B. Reserves can be defined as the amounts that are set aside
to fulfill the insurance company's obligation to pay future claims.
The reserve is compiled from past premium payments and interest.
◉ Which of the following constitutes an insurable interest?
A. the policyowner must expect to benefit from the insured's death
B. the policyowner must expect to suffer a loss when the insured
dies or becomes disabled
C. the beneficiary, by definition, has an insurable interest in the
insured
D. the insured must have a personal or business relationship with
the beneficiary.
, Answer: B. Insurable interest requires the policyowner to benefit
from the insured's continuing to live or enjoy good health or to
suffer a loss when the insured dies or is disabled.
◉ Which of the following statements describes the parol evidence
rule?
A. a written contract cannot be changed once it is signed
B. an oral contract cannot be modified by written evidence
C. a written contract cannot be changed by oral evidence
D. an oral contract takes precedence over any earlier written
contract.
Answer: C. The parol evidence rule states that when parties put their
agreement in writing, all previous verbal statements come together
in that writing, and a written contract cannot be changed or
modified by parol (oral) evidence.
◉ Which of the following factors determines whether policy
dividends will be paid on a participating policy?
A. reserves and experience
B. expenses and claims costs
C. interest and benefits
D. premiums and renewability.
