Florida 2-20 General Lines Insurance
Agent Examination Questions And
Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant
Download Pdf
Question 1
Which principle requires that both parties to an insurance contract
provide full and honest disclosure of all material facts?
A. Indemnity
B. Utmost Good Faith
C. Subrogation
D. Contribution
Correct Answer: B
Rationale: Utmost good faith (uberrimae fidei) requires both insurer
and insured to disclose all material facts that could influence the
underwriting decision. Insurance contracts rely heavily on trust
because one party (insured) has more knowledge of risk details than
the insurer. Failure to disclose material facts can lead to denial of
claims or voiding of the contract.
Question 2
,What is the primary purpose of insurance?
A. To eliminate risk entirely
B. To transfer risk from the insured to the insurer
C. To reduce government involvement in risk
D. To guarantee profit to policyholders
Correct Answer: A
Rationale: Insurance does not eliminate risk; it transfers risk from the
insured to the insurer in exchange for premium payments. The insurer
then spreads that risk among many policyholders. This mechanism
helps individuals and businesses manage financial uncertainty.
Question 3
Which of the following is considered a morale hazard?
A. Dishonest arson for profit
B. Careless attitude due to insurance coverage
C. Physical condition of a building
D. Geographic exposure to hurricanes
Correct Answer: C
Rationale: Moral hazard refers to intentional dishonesty, while morale
hazard refers to negligence or indifference caused by having
insurance. Careless behavior increases the likelihood of loss because
the insured feels protected. Physical conditions and geography are
physical hazards, not morale hazards.
Question 4
,What does a binder in insurance represent?
A. A permanent insurance contract
B. A temporary insurance agreement
C. A premium refund document
D. A claim settlement agreement
Correct Answer: D
Rationale: A binder is a temporary contract that provides immediate
coverage until the policy is formally issued. It ensures the insured has
protection during the underwriting process. It is legally binding and
typically lasts a short period.
Question 5
Which of the following is an example of insurable interest?
A. Buying insurance on a neighbor’s house
B. Owning a life insurance policy on a stranger
C. A homeowner insuring their own home
D. A friend insuring another friend’s car without consent
Correct Answer: C
Rationale: Insurable interest exists when the insured would suffer a
financial loss from damage or destruction of the insured property or
life. Homeowners have direct financial interest in their property.
Without insurable interest, contracts are invalid.
Question 6
, What type of insurance policy pays a stated amount regardless of actual
loss?
A. Indemnity policy
B. Valued policy
C. Replacement cost policy
D. Actual cash value policy
Correct Answer: B
Rationale: A valued policy pays a predetermined amount stated in the
contract, regardless of actual value at the time of loss. This is common
in life insurance and some property policies. It differs from indemnity-
based policies that reimburse actual loss.
Question 7
Which of the following best describes subrogation?
A. The insured waives all rights to claims
B. The insurer assumes insured’s legal rights against a third party
C. The insured receives double compensation
D. The insurer cancels a policy after loss
Correct Answer: B
Rationale: Subrogation allows the insurer to recover claim payments
from a responsible third party. After paying the insured, the insurer
steps into their legal position. This prevents the insured from being
compensated twice for the same loss.
Question 8
Agent Examination Questions And
Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant
Download Pdf
Question 1
Which principle requires that both parties to an insurance contract
provide full and honest disclosure of all material facts?
A. Indemnity
B. Utmost Good Faith
C. Subrogation
D. Contribution
Correct Answer: B
Rationale: Utmost good faith (uberrimae fidei) requires both insurer
and insured to disclose all material facts that could influence the
underwriting decision. Insurance contracts rely heavily on trust
because one party (insured) has more knowledge of risk details than
the insurer. Failure to disclose material facts can lead to denial of
claims or voiding of the contract.
Question 2
,What is the primary purpose of insurance?
A. To eliminate risk entirely
B. To transfer risk from the insured to the insurer
C. To reduce government involvement in risk
D. To guarantee profit to policyholders
Correct Answer: A
Rationale: Insurance does not eliminate risk; it transfers risk from the
insured to the insurer in exchange for premium payments. The insurer
then spreads that risk among many policyholders. This mechanism
helps individuals and businesses manage financial uncertainty.
Question 3
Which of the following is considered a morale hazard?
A. Dishonest arson for profit
B. Careless attitude due to insurance coverage
C. Physical condition of a building
D. Geographic exposure to hurricanes
Correct Answer: C
Rationale: Moral hazard refers to intentional dishonesty, while morale
hazard refers to negligence or indifference caused by having
insurance. Careless behavior increases the likelihood of loss because
the insured feels protected. Physical conditions and geography are
physical hazards, not morale hazards.
Question 4
,What does a binder in insurance represent?
A. A permanent insurance contract
B. A temporary insurance agreement
C. A premium refund document
D. A claim settlement agreement
Correct Answer: D
Rationale: A binder is a temporary contract that provides immediate
coverage until the policy is formally issued. It ensures the insured has
protection during the underwriting process. It is legally binding and
typically lasts a short period.
Question 5
Which of the following is an example of insurable interest?
A. Buying insurance on a neighbor’s house
B. Owning a life insurance policy on a stranger
C. A homeowner insuring their own home
D. A friend insuring another friend’s car without consent
Correct Answer: C
Rationale: Insurable interest exists when the insured would suffer a
financial loss from damage or destruction of the insured property or
life. Homeowners have direct financial interest in their property.
Without insurable interest, contracts are invalid.
Question 6
, What type of insurance policy pays a stated amount regardless of actual
loss?
A. Indemnity policy
B. Valued policy
C. Replacement cost policy
D. Actual cash value policy
Correct Answer: B
Rationale: A valued policy pays a predetermined amount stated in the
contract, regardless of actual value at the time of loss. This is common
in life insurance and some property policies. It differs from indemnity-
based policies that reimburse actual loss.
Question 7
Which of the following best describes subrogation?
A. The insured waives all rights to claims
B. The insurer assumes insured’s legal rights against a third party
C. The insured receives double compensation
D. The insurer cancels a policy after loss
Correct Answer: B
Rationale: Subrogation allows the insurer to recover claim payments
from a responsible third party. After paying the insured, the insurer
steps into their legal position. This prevents the insured from being
compensated twice for the same loss.
Question 8
