FLORIDA 2-20 STATE EXAM PRACTICE | 145 QUESTIONS AND ANSWERS
WITH COMPLETE SOLUTIONS 100% CORRECT | UPDATE 2025
Question 1
Under a standard Personal Auto Policy (PAP), which of the following individuals would be
considered an "insured" while driving a covered auto?
A) The named insured and any resident family member.
B) Only the person listed first on the declarations page.
C) Any person who has a valid driver's license.
D) Any person using the auto with the insured's permission.
E) Both A and D.
Correct Answer: E) Both A and D.
Rationale: The definition of an "insured" under a PAP is broad. It automatically includes
the named insured and all relatives who reside in the same household. It also extends
coverage to any other person who is using the covered auto with the reasonable belief that
they have permission to do so.
Question 2
The part of an insurance policy that contains the fundamental promise of the insurer to pay for
covered losses, and describes the scope of coverage, is the:
A) Declarations Page
B) Insuring Agreement
C) Conditions
D) Exclusions
Correct Answer: B) Insuring Agreement
Rationale: The Insuring Agreement is the core of the policy. It contains the insurer's
promise to pay and outlines the major coverages provided (e.g., for property insurance, it
describes the perils insured against).
Question 3
In Florida, the minimum required limits for Personal Injury Protection (PIP) are:
A) $10,000 per person, $20,000 per accident.
B) $25,000 per person, $50,000 per accident.
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C) $10,000 per person, per accident.
D) $50,000 per person, per accident.
Correct Answer: C) $10,000 per person, per accident.
Rationale: The Florida Motor Vehicle No-Fault Law requires all owners of motor vehicles to
carry a minimum of $10,000 in PIP benefits. This benefit provides coverage for the
insured's own medical expenses, lost wages, and death benefits, regardless of fault.
Question 4
A fire destroys an insured's home. The homeowner had to live in a hotel for two months while
the house was being rebuilt. This expense would be covered under which section of a standard
Homeowners (HO-3) policy?
A) Coverage A - Dwelling
B) Coverage B - Other Structures
C) Coverage C - Personal Property
D) Coverage D - Loss of Use
Correct Answer: D) Coverage D - Loss of Use
Rationale: Coverage D, also known as Additional Living Expenses, is designed to cover the
necessary increase in living expenses incurred by the insured when a covered peril makes
their home uninhabitable. This includes costs like hotel bills, restaurant meals, and
laundry.
Question 5
The legal principle that requires an individual to have a financial interest in the property being
insured at the time of the loss is known as:
A) Subrogation
B) Insurable Interest
C) Proximate Cause
D) Adhesion
Correct Answer: B) Insurable Interest
Rationale: The principle of insurable interest states that to obtain insurance, the insured
must have a legitimate financial stake in the preservation of the property or life being
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insured. This prevents gambling and reduces moral hazard. For property insurance,
insurable interest must exist at the time of the loss.
Question 6
An insurance policy is considered a contract of adhesion because:
A) It is drafted by the insurer and is offered to the insured on a "take-it-or-leave-it" basis.
B) It requires the insured to adhere to all policy conditions.
C) It is a personal contract that cannot be transferred.
D) It is an exchange of unequal values.
Correct Answer: A) It is drafted by the insurer and is offered to the insured on a "take-it-or-
leave-it" basis.
Rationale: A contract of adhesion is one where one party has substantially more power in
drafting the terms. Because the insurer writes the policy, any ambiguity or unclear
language in the contract is typically interpreted by the courts in favor of the insured.
Question 7
What is the primary purpose of the Florida Automobile Joint Underwriting Association
(FAJUA)?
A) To provide low-cost auto insurance to all Florida residents.
B) To provide a market of last resort for individuals who are unable to obtain auto insurance
through the voluntary market.
C) To regulate the rates charged by auto insurance companies in Florida.
D) To handle the licensing of all auto insurance agents in Florida.
Correct Answer: B) To provide a market of last resort for individuals who are unable to
obtain auto insurance through the voluntary market.
Rationale: The FAJUA is a residual market mechanism. It is designed to make auto
insurance available to high-risk drivers who have been unable to secure coverage from
standard insurance carriers.
Question 8
Under a Commercial General Liability (CGL) policy, which of the following would be covered
under Coverage A - Bodily Injury and Property Damage Liability?
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A) An injury to an employee while on the job.
B) A libel or slander claim made against the business.
C) A customer who slips, falls, and is injured in the insured's store.
D) A lawsuit alleging that the insured's advertisement infringed on a copyright.
Correct Answer: C) A customer who slips, falls, and is injured in the insured's store.
Rationale: Coverage A of the CGL policy covers the insured's legal liability for bodily injury
or property damage to a third party (like a customer) arising out of the business's premises,
operations, or products. Employee injuries are covered by Workers' Compensation, and
advertising/personal injury claims are covered under Coverage B.
Question 9
The cause of a loss, such as a fire, hurricane, or theft, is known as a(n):
A) Hazard
B) Peril
C) Risk
D) Exposure
Correct Answer: B) Peril
Rationale: A peril is the specific cause of a loss. A hazard is a condition that increases the
likelihood or severity of a loss from a peril.
Question 10
A building has an actual cash value (ACV) of $200,000 and is insured for $120,000. The policy
has an 80% coinsurance clause. If a partial loss of $40,000 occurs, how much will the insurance
policy pay, ignoring any deductible?
A) $40,000
B) $30,000
C) $24,000
D) $32,000
Correct Answer: B) $30,000
Rationale: **The coinsurance formula is (Insurance Carried / Insurance Required) x Loss =
Payment.
WITH COMPLETE SOLUTIONS 100% CORRECT | UPDATE 2025
Question 1
Under a standard Personal Auto Policy (PAP), which of the following individuals would be
considered an "insured" while driving a covered auto?
A) The named insured and any resident family member.
B) Only the person listed first on the declarations page.
C) Any person who has a valid driver's license.
D) Any person using the auto with the insured's permission.
E) Both A and D.
Correct Answer: E) Both A and D.
Rationale: The definition of an "insured" under a PAP is broad. It automatically includes
the named insured and all relatives who reside in the same household. It also extends
coverage to any other person who is using the covered auto with the reasonable belief that
they have permission to do so.
Question 2
The part of an insurance policy that contains the fundamental promise of the insurer to pay for
covered losses, and describes the scope of coverage, is the:
A) Declarations Page
B) Insuring Agreement
C) Conditions
D) Exclusions
Correct Answer: B) Insuring Agreement
Rationale: The Insuring Agreement is the core of the policy. It contains the insurer's
promise to pay and outlines the major coverages provided (e.g., for property insurance, it
describes the perils insured against).
Question 3
In Florida, the minimum required limits for Personal Injury Protection (PIP) are:
A) $10,000 per person, $20,000 per accident.
B) $25,000 per person, $50,000 per accident.
,[Type here]
C) $10,000 per person, per accident.
D) $50,000 per person, per accident.
Correct Answer: C) $10,000 per person, per accident.
Rationale: The Florida Motor Vehicle No-Fault Law requires all owners of motor vehicles to
carry a minimum of $10,000 in PIP benefits. This benefit provides coverage for the
insured's own medical expenses, lost wages, and death benefits, regardless of fault.
Question 4
A fire destroys an insured's home. The homeowner had to live in a hotel for two months while
the house was being rebuilt. This expense would be covered under which section of a standard
Homeowners (HO-3) policy?
A) Coverage A - Dwelling
B) Coverage B - Other Structures
C) Coverage C - Personal Property
D) Coverage D - Loss of Use
Correct Answer: D) Coverage D - Loss of Use
Rationale: Coverage D, also known as Additional Living Expenses, is designed to cover the
necessary increase in living expenses incurred by the insured when a covered peril makes
their home uninhabitable. This includes costs like hotel bills, restaurant meals, and
laundry.
Question 5
The legal principle that requires an individual to have a financial interest in the property being
insured at the time of the loss is known as:
A) Subrogation
B) Insurable Interest
C) Proximate Cause
D) Adhesion
Correct Answer: B) Insurable Interest
Rationale: The principle of insurable interest states that to obtain insurance, the insured
must have a legitimate financial stake in the preservation of the property or life being
,[Type here]
insured. This prevents gambling and reduces moral hazard. For property insurance,
insurable interest must exist at the time of the loss.
Question 6
An insurance policy is considered a contract of adhesion because:
A) It is drafted by the insurer and is offered to the insured on a "take-it-or-leave-it" basis.
B) It requires the insured to adhere to all policy conditions.
C) It is a personal contract that cannot be transferred.
D) It is an exchange of unequal values.
Correct Answer: A) It is drafted by the insurer and is offered to the insured on a "take-it-or-
leave-it" basis.
Rationale: A contract of adhesion is one where one party has substantially more power in
drafting the terms. Because the insurer writes the policy, any ambiguity or unclear
language in the contract is typically interpreted by the courts in favor of the insured.
Question 7
What is the primary purpose of the Florida Automobile Joint Underwriting Association
(FAJUA)?
A) To provide low-cost auto insurance to all Florida residents.
B) To provide a market of last resort for individuals who are unable to obtain auto insurance
through the voluntary market.
C) To regulate the rates charged by auto insurance companies in Florida.
D) To handle the licensing of all auto insurance agents in Florida.
Correct Answer: B) To provide a market of last resort for individuals who are unable to
obtain auto insurance through the voluntary market.
Rationale: The FAJUA is a residual market mechanism. It is designed to make auto
insurance available to high-risk drivers who have been unable to secure coverage from
standard insurance carriers.
Question 8
Under a Commercial General Liability (CGL) policy, which of the following would be covered
under Coverage A - Bodily Injury and Property Damage Liability?
, [Type here]
A) An injury to an employee while on the job.
B) A libel or slander claim made against the business.
C) A customer who slips, falls, and is injured in the insured's store.
D) A lawsuit alleging that the insured's advertisement infringed on a copyright.
Correct Answer: C) A customer who slips, falls, and is injured in the insured's store.
Rationale: Coverage A of the CGL policy covers the insured's legal liability for bodily injury
or property damage to a third party (like a customer) arising out of the business's premises,
operations, or products. Employee injuries are covered by Workers' Compensation, and
advertising/personal injury claims are covered under Coverage B.
Question 9
The cause of a loss, such as a fire, hurricane, or theft, is known as a(n):
A) Hazard
B) Peril
C) Risk
D) Exposure
Correct Answer: B) Peril
Rationale: A peril is the specific cause of a loss. A hazard is a condition that increases the
likelihood or severity of a loss from a peril.
Question 10
A building has an actual cash value (ACV) of $200,000 and is insured for $120,000. The policy
has an 80% coinsurance clause. If a partial loss of $40,000 occurs, how much will the insurance
policy pay, ignoring any deductible?
A) $40,000
B) $30,000
C) $24,000
D) $32,000
Correct Answer: B) $30,000
Rationale: **The coinsurance formula is (Insurance Carried / Insurance Required) x Loss =
Payment.
