Florida 2-15 Insurance Pre-Licensing
Course; Lesson 1: Basic Principles of
Life and Health Insurance and the
Insurance Industry
A producer must not allow _______ ____________to elapse without being appointed for each
class of insurance listed on the license - ANS -Four years
\A pure assessment mutual company bases premium cost on what method? - ANS -Loss
sharing
\Advantages of Self-Insurance - ANS -Insurers retain the use of their funds; cost savings
through elimination of carrying-costs (administrative) and if losses are less than projected
\Adverse selection - ANS -The tendency for those individuals who present less favorable
insurance risks (i.e people in poor health) to seek or continue insurance to a greater extent than
other risks. The systematic selection of loss exposure is prohibited due to these rules.
\Agents must maintain records of rebating schedules for how long? - ANS -Five years
\All insurance companies doing business in Florida must be... - ANS -Licensed (or certified,
admitted, authorized, etc.)
\Annuities provide - ANS -A stream of income by making a series of payments to the annuitant
for the annuitant's lifetime or for a specifically designated period of time
\Another name for Home Service Insurers - ANS -Debit Insurer
\Are speculative risks insurable? - ANS -No
\Attorney-in-fact - ANS -A person who holds a power of attorney and therefore is legally
designated to transact business and execute documents on behalf of another person.
\Both stock and mutual companies can write what types of insurance? - ANS -Life, health, and
property and casualty insurance
\By law the agent represents the_________. - ANS -Principle
\Define hazard. - ANS -Source of danger; the underlying factor behind the peril that leads to the
probability of a particular loss to the insurer. It is the active ingrediant that could create a peril,
which could then lead to a particular loss event.
\Define Home Service Insurers - ANS -A form of industrial insurance with lesser values;
premium payments made weekly or monthly; collected by agents at policyowner's home
\Define insurance - ANS -Financial protection against loss or harm - An arrangement by which a
company gives customers financial protection against loss or harm such as theft or illness in
return for premium payments.
\Define loss - ANS -the reduction in quality or value of a property (or insured item or person), or
a legal liability.
\Define peril - ANS -Cause of a risk; the immediate specific event causing loss and giving rise to
risk
, \Define Public Trust in the context of life insurance. - ANS -All insurance agents of all insurance
companaies have a common cause and obligation to work together to serve the best interests of
the public; The business of life insurance is concidered one of these.
\Define Rebating - ANS -When part of a commision or any compensation is given to the insured
as an incentive to purchase a policy; illegal in most states, except Florida
\Define reinsurance - ANS -an arrangement through which one insurance company transfers a
portion of a risk it has assumed to another insurer. Allows for sharing loss and hedging against
catastrophic loss to any one company
\Define Risk - ANS -The possibility of loss or injury
\Define risk as it pertains to insurance - ANS -Uncertainty regarding loss; the probability of loss
occurring for an insured or prospect
\Define Risk Avoidance - ANS -When individuals evade risk entirely; act of not doing something
that could possibly cause a loss or the inactivity of particiaption in an event that may potentially
cause a loss situation; i.e if Lee doesn't drive, he evades getting into an auto accident
\Define Risk Reduction - ANS -When the chances of loss are lessened; i.e changing one's
lifestyle to minimize a known risk; i.e Lee purchases an anti-theft device, limiting the chances of
his new car getting stolen.
\Define Risk Retention - ANS -Being aware of the risks involved and taking precautions for
financial protection. I.e Lee accepts the fact that accidents exists; he'll get a car but he must
decide what limits to put on his financial responsibility by choosing his deductible, through this
action he still holds part of the risk
\Define Risk Transfer - ANS -The act of shifting the responsibility of risk to another in the form of
an insurance contract.
\Demutualization - ANS -Process of converting a mutual insurance company to a stock
insurance company. In the conversuib process, a mutual insurer offers policyholders cash or
stock. The company may then also make a public stock offering.
\Describe physical hazards. - ANS -Being of a physical nature; i.e if a person being treated for
cancer, the disease is the physical endangerment that will lead to loss
\Disadvantages of Self-Insurance - ANS -Financial strain from loss being more than predicted;
administrative expenses may be increased if actual losses are higher than projected
\Do not require insureds to have a Primary Care Physician (PCP) - ANS -Preferred Provider
Organizations (PPOs)
\Does Florida allow rebating? - ANS -Yes, Florida allows this under strict regulations designed to
prohibit discrimination in favor of, or against, policy owners.
\Even if there is no loss, this risk involves the possibility of gain; one can only guess whether
this investment will produce a profit or a loss. - ANS -Speculative Risk
\Every policy contains what promise and obligation? - ANS -Whereby, for a set amount of
money (the premium), one party (the insurer) agrees to pay the other party (the insured or
beneficiary) a set sum (the policy benefit) upon the occurrence of some covered event."
\Exposure to loss must be large - ANS -Utilization of the law of large numbers
\Fiduciary - ANS -Person in position of special trust and confidence i.e; handling or supervising
affairs or funs of another
Course; Lesson 1: Basic Principles of
Life and Health Insurance and the
Insurance Industry
A producer must not allow _______ ____________to elapse without being appointed for each
class of insurance listed on the license - ANS -Four years
\A pure assessment mutual company bases premium cost on what method? - ANS -Loss
sharing
\Advantages of Self-Insurance - ANS -Insurers retain the use of their funds; cost savings
through elimination of carrying-costs (administrative) and if losses are less than projected
\Adverse selection - ANS -The tendency for those individuals who present less favorable
insurance risks (i.e people in poor health) to seek or continue insurance to a greater extent than
other risks. The systematic selection of loss exposure is prohibited due to these rules.
\Agents must maintain records of rebating schedules for how long? - ANS -Five years
\All insurance companies doing business in Florida must be... - ANS -Licensed (or certified,
admitted, authorized, etc.)
\Annuities provide - ANS -A stream of income by making a series of payments to the annuitant
for the annuitant's lifetime or for a specifically designated period of time
\Another name for Home Service Insurers - ANS -Debit Insurer
\Are speculative risks insurable? - ANS -No
\Attorney-in-fact - ANS -A person who holds a power of attorney and therefore is legally
designated to transact business and execute documents on behalf of another person.
\Both stock and mutual companies can write what types of insurance? - ANS -Life, health, and
property and casualty insurance
\By law the agent represents the_________. - ANS -Principle
\Define hazard. - ANS -Source of danger; the underlying factor behind the peril that leads to the
probability of a particular loss to the insurer. It is the active ingrediant that could create a peril,
which could then lead to a particular loss event.
\Define Home Service Insurers - ANS -A form of industrial insurance with lesser values;
premium payments made weekly or monthly; collected by agents at policyowner's home
\Define insurance - ANS -Financial protection against loss or harm - An arrangement by which a
company gives customers financial protection against loss or harm such as theft or illness in
return for premium payments.
\Define loss - ANS -the reduction in quality or value of a property (or insured item or person), or
a legal liability.
\Define peril - ANS -Cause of a risk; the immediate specific event causing loss and giving rise to
risk
, \Define Public Trust in the context of life insurance. - ANS -All insurance agents of all insurance
companaies have a common cause and obligation to work together to serve the best interests of
the public; The business of life insurance is concidered one of these.
\Define Rebating - ANS -When part of a commision or any compensation is given to the insured
as an incentive to purchase a policy; illegal in most states, except Florida
\Define reinsurance - ANS -an arrangement through which one insurance company transfers a
portion of a risk it has assumed to another insurer. Allows for sharing loss and hedging against
catastrophic loss to any one company
\Define Risk - ANS -The possibility of loss or injury
\Define risk as it pertains to insurance - ANS -Uncertainty regarding loss; the probability of loss
occurring for an insured or prospect
\Define Risk Avoidance - ANS -When individuals evade risk entirely; act of not doing something
that could possibly cause a loss or the inactivity of particiaption in an event that may potentially
cause a loss situation; i.e if Lee doesn't drive, he evades getting into an auto accident
\Define Risk Reduction - ANS -When the chances of loss are lessened; i.e changing one's
lifestyle to minimize a known risk; i.e Lee purchases an anti-theft device, limiting the chances of
his new car getting stolen.
\Define Risk Retention - ANS -Being aware of the risks involved and taking precautions for
financial protection. I.e Lee accepts the fact that accidents exists; he'll get a car but he must
decide what limits to put on his financial responsibility by choosing his deductible, through this
action he still holds part of the risk
\Define Risk Transfer - ANS -The act of shifting the responsibility of risk to another in the form of
an insurance contract.
\Demutualization - ANS -Process of converting a mutual insurance company to a stock
insurance company. In the conversuib process, a mutual insurer offers policyholders cash or
stock. The company may then also make a public stock offering.
\Describe physical hazards. - ANS -Being of a physical nature; i.e if a person being treated for
cancer, the disease is the physical endangerment that will lead to loss
\Disadvantages of Self-Insurance - ANS -Financial strain from loss being more than predicted;
administrative expenses may be increased if actual losses are higher than projected
\Do not require insureds to have a Primary Care Physician (PCP) - ANS -Preferred Provider
Organizations (PPOs)
\Does Florida allow rebating? - ANS -Yes, Florida allows this under strict regulations designed to
prohibit discrimination in favor of, or against, policy owners.
\Even if there is no loss, this risk involves the possibility of gain; one can only guess whether
this investment will produce a profit or a loss. - ANS -Speculative Risk
\Every policy contains what promise and obligation? - ANS -Whereby, for a set amount of
money (the premium), one party (the insurer) agrees to pay the other party (the insured or
beneficiary) a set sum (the policy benefit) upon the occurrence of some covered event."
\Exposure to loss must be large - ANS -Utilization of the law of large numbers
\Fiduciary - ANS -Person in position of special trust and confidence i.e; handling or supervising
affairs or funs of another
