FLORIDA 240 PRACTICE EXAM QUESTIONS WITH CORRECT DETAILED ANSWERS | ALREADY GRADED A+RECENT VERSION

FLORIDA 240 PRACTICE EXAM QUESTIONS WITH CORRECT DETAILED ANSWERS | ALREADY GRADED A+RECENT VERSION 1) The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called: - ANSWER Reserves 2) An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the: - ANSWER Fair Credit Reporting Act 3) A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as: - ANSWER A fraternal benefit society 4) What I the name of the law that requires insurers to disclose information gathering practices and where the information was obtained? - ANSWER Fair Credit Reporting Act 5) Who elects the governing body of a mutual insurance company? - ANSWER Policyholders 6) A group-owned insurance company that is formed to assume and spread the liability ricks of its members is known as a: - ANSWER Risk retention group 7) What type of reinsurance contract involves two companies automatically sharing their risk exposure? - ANSWER treaty 8) What year was the McCarran-Ferguson Act enacted? - ANSWER 1945 9) Which of these describe a participating life insurance policy? - ANSWER Policy owners are entitled to receive dividends 10) At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? - ANSWER Upon completion of the application 11) Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated: - ANSWER 1970 - Fair Credit Reporting Act 12) What type of reinsurance contract involves two companies automatically sharing their risk exposure? - ANSWER Treaty 13) A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a: - ANSWER risk retention group 14) All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: - ANSWER Bilateral 15) The part of a life insurance policy guaranteed to be true is called a(n) - ANSWER warranty 16) Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called - ANSWER representations 17) Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features? - ANSWER Aleatory 18) When must insurable interest be present in order for a life insurance policy to be valid? - ANSWER When the application is made 19) A life insurance arrangement which circumvents insurable interest statutes is called: - ANSWER Investor-Originated Life Insurance 20) Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements? - ANSWER Legal Purpose (Insurable Interest) 21) Who makes the legally enforceable promises in a unilateral contract? - ANSWER Insurance company 22) A policy of adhesion can only be modified by whom? - ANSWER insurance company 23) When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: - ANSWER insurable interest in the proposed insured 24) Which of these is considered a statement that is assured to be true in every aspect? - ANSWER Warranty 25) Which of these require an offer, acceptance, and consideration? - ANSWER contract 26) If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? - ANSWER insured 27) Insurance contracts are known as _____ because certain future conditions or acts must occur before any claims can be paid. - ANSWER conditional 28) Insurance policies are offered on a "take it or leave it" basis, which make them: - ANSWER Contracts of Adhesion 29) In regards to representations or warranties, which of these statements is TRUE? - ANSWER If material to the risk, false representations will void a policy 30) Which of these arrangements allows one to bypass insurable interest laws? - ANSWER Investor-Originated Life Insurance 31) In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? - ANSWER unilateral 32) Which of these is NOT a type of agent authority? - ANSWER principal 33) E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to? - ANSWER In this situation, the proceeds from E's life insurance policy will go to F. 34) When must insurable interest exist for a life insurance contract to be valid? - ANSWER Inception of the contract 35) Life and health insurance policies are: - ANSWER unilateral contracts 36) A policy of adhesion can only be modified by whom? - ANSWER insurance company 37) At what point does an informal contract become binding? - ANSWER When one party makes an offer and the other party accepts that offer 38) What is the consideration given by an insurer in the Consideration clause of a life policy? - ANSWER Promise to pay a death benefit 39) What is the consideration given by an insurer in the Consideration clause of life policy? - ANSWER Promise to pay a death benefit to a named beneficiary 40) Insurance policies are considered aleatory contracts because: - ANSWER performance is conditioned upon a future occurrence 41) Taking receipt of premiums and holding them for the insurance company is an example of - ANSWER fiduciary responsibility 42) The Consideration clause in a life insurance contract contains what pertinent information? - ANSWER The schedule and amount of premium payments 43) Which of the following consists of an offer, acceptance, and consideration? - ANSWER Contract 44) Which of the following consists of an offer, acceptance, and consideration? - ANSWER contract 45) Which of these is NOT considered to be an element of an insurance company? - ANSWER Negotiating 46) What is a warranty? - ANSWER is a statement guaranteed to be true 47) A life insurance policy would be considered a wagering contract WITHOUT: - ANSWER insurable interest 48) G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is - ANSWER Business Overhead Expense 49) Which of the following claims are typically excluded from Medical expense policies? - ANSWER Intentionally self-inflicted injuries 50) XYZ Company pays the entire premium for its group health plan. The MINIMUM percentage of eligible employees that must be covered is - ANSWER 100% 51) A Business Overhead Expense policy: - ANSWER covers business expenses such as rent and utilities 52) A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled? - ANSWER Utilities and office rent 53) What is issued to each employee of an employer health plan? - ANSWER certificate 54) The benefits under a Disability Buy-Out policy are - ANSWER payable to the company or another shareholder 55) A policy owner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need? - ANSWER irrevocable 56) Which contract permits the remaining partners to buy-out the interest of a disabled business partner? - ANSWER Disability Buy-Sell 57) T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive? - ANSWER $0 58) Which of the following medical expenses does Cancer insurance NOT cover? - ANSWER arthritis 59) The difference between group insurance and blanket health policies is: - ANSWER Blanket health policies do not issue certificates 60) Which type of policy would pay an employee's salary if the employer was injured in a bicycle accident and out of work for six weeks? - ANSWER Business Overhead Expense