Florida 2-15 Insurance License Exam 2026/2027
COMPREHENSIVE REVIEW AND DETAILED
EXPLANATIONS
• Speculative Risk -✓✓ Risk that involves chance of both loss and gain; not insurable
• Pure Risk -✓✓ Risk that involves the chance of loss only, there is no opportunity for
gain; insurable
• Law of Large Numbers -✓✓ Basic principle of insurance that the larger the number of
individual risks combined into a group, the more certainty there is in predicting the
amount of loss that will be incurred in any given period.
• Elements of Insurable Risk -✓✓ Loss must be: due to chance, definite and
measurable, predictable, cannot be catastrophic, loss exposures to be insured must be
large, loss exposures to be insured must be randomly selected.
• Hazard -✓✓ Any factor that gives rise to a peril.
• Peril -✓✓ Specific event causing loss and giving rise to risk. (Fire is a peril to a burning
building)
• Risk Pooling -✓✓ Basic principle of insurance whereby a large number contribute to
cover the losses of a few. The risk is transferred from an individual to a group.
• Physical Hazard -✓✓ Individual characteristics that increase the chance of peril.
(Blindness or deafness)
• Moral Hazard -✓✓ Tendencies that people may have that increase risk and the chance
of loss. (Alcohol and drugs)
• Morale Hazard -✓✓ Individual tendencies that arise from an attitude or state of mind
causing indifference to loss. (Driving reckless with no fear of death)
• Risk Avoidance -✓✓ Avoiding as many risks as possible. (Never flying, never driving,
never investing)
• Risk Reduction -✓✓ Taking actions to reduce risk. (Installing a smoke alarm)
• Risk Retention -✓✓ Accepting the risk and confronting it if and when it occurs. (Self-
insurance)
,• Risk Transfer -✓✓ The practice of passing on the risk in question to another entity,
such as an insurance company.
• Adverse Selection -✓✓ less favorable insurance risks (people in poor health) to seek
or continue insurance to a greater extent than other risks. Tendency of policymakers to
take advantage of favorable options in insurance contracts.
• Multi-line insurers -✓✓ Companies that write more that one line of insurance
• Stock Insurance Company -✓✓ A private insurance company owned and controlled by
a group of stockholders whose investment in the company provides the safety margin
necessary in issuance of guaranteed, fixed premium, nonparticipation policies. Purpose
is making profit for stockholders.
• mutual insurance company -✓✓ Insurance company characterized by having no
capital stock; it is owned by it's policyowners and usually issues participating insurance.
Participating companies because policyowners participate in policy dividends.
• Mutualization -✓✓ Stock company converts to a mutual company
• Demutualizing -✓✓ Mutual company convert to stock company
• Commercial Insurers -✓✓ Stock and mutual companies; they both write life, health,
property, and casualty insurance.
• Assessment Mutual Company -✓✓ An insurance company characterized by member-
insureds who are assessed an individual portion of each loss that occurs. No premium
payment is payable in advance.
Not permitted in Florida
• Advance premium assessment mutual -✓✓ Charges a premium in advance, at the
beginning of the policy period.
Not permitted in Florida
• Reciprocal Insurance Company -✓✓ Insurance company characterized by the fact it's
policyholders insure the risks of other policyholders.
• Lloyd's of London -✓✓ An association of individuals and companies that underwrite
insurance on their own accounts and provide specialized coverages.
Not an insurer
• Reinsurers -✓✓ Specialized branch of the insurance industry because they insure
insurers.
,• Reinsurance -✓✓ Arrangement by which an insurance company transfers a portion of
a risk it has assumed to another insurer.
Limit the loss any one insurer would face should a very large claim become payable.
• ceding company -✓✓ Insurance Company transferring risk
• Risk Retentio Group (RRG) -✓✓ Mutual insurance company formed to insure people in
the same business, occupation, or profession (pharmacy, dentist, engineers)
• Fraternal benefit society -✓✓ Non-profit benevolent organization that provides
insurance to its members. Based on religious, national, or ethnic lines
• Home service or Debt Insurance -✓✓ Industrial insurance
Insurance in small amounts (usually $1,000 to $2,000) with premiums collected weekly
by the selling agent
• Reinsurer -✓✓ An insurance company assuming the risk
• Service providers -✓✓ Organization that provides health coverage by contracting with
service providers to provide medical services to subscribers who pay in advance
through premiums.
HMOs PPOs
• Participating Life Insurance -✓✓ Policy which pays a dividend to its owner based on
financial success of the insurance company
• When a stock life insurance company issues both participating and nonparticipating
policies, the company is doing business as a ________________? -✓✓ MIXED PLAN
• nonparticipating policy -✓✓ life insurance that does not provide policy dividends; also
called a nonpar policy
• Mutual Life Insurance Companies -✓✓ owned by policyholders
• mutual insurers -✓✓ Participating policies
Owned by policyholders
Vote for directors and trustees
Directors and management have control
Typically higher rates
• Demutualization -✓✓ a mutual insurer is converted into a stock insurer
• Domiciliary State -✓✓ The state in which the decedent's domicile (legal home) is
located.
, • Stock and Mutual companies can both write ... -✓✓ Life, health, property and casualty
insurance policies
• Reciprocal Insurers -✓✓ are unincorporated groups of individual members that provide
insurance for other members through indemnity contracts. Each member acts as both
insurer and insured and are managed by Attorney in Fact.
• Assessment insurance -✓✓ Prohibited in Florida
• Lloyd's of London -✓✓ An association of individuals and companies that underwrite
insurance on their own accounts and provide specialized coverages.
• Reinsurers -✓✓ Companies which sell insurance to insurers to reduce the insurer's
exposure to loss.
• ceding company -✓✓ The company transferring the risk
• Risk Retention Group (RRG) -✓✓ a mutual insurance company formed to insure
people in the same business, occupation, or profession
• Fraternal Benefit Societies -✓✓ Life or health insurance companies formed to provide
insurance for members of an affiliated lodge, religious organization, or fraternal
organization with a representative form of government., nonprofit
• Home Service Insurers -✓✓ home service insurance is industrial insurance sold by
home service or debit
life insurance companies. Face amounts are small; usually $1,000 to $2,000 and
premiums are paid weekly.
• Service insurers -✓✓ Companies that offer prepayment plans for medical or hospital
services, such as health maintenance organizations.
• HMO (Health Maintenance Organization) -✓✓ Health insurance that requires a PCP
and wants you to use only in-network doctors
• PPO (Preferred Provider Organization) -✓✓ A type of health plan that contracts with
medical providers, such as hospitals and doctors, to create a network of participating
providers. You pay less if you use providers that belong to the plan's network. You are
not required to have a PCP
• PCP -✓✓ primary care physician
COMPREHENSIVE REVIEW AND DETAILED
EXPLANATIONS
• Speculative Risk -✓✓ Risk that involves chance of both loss and gain; not insurable
• Pure Risk -✓✓ Risk that involves the chance of loss only, there is no opportunity for
gain; insurable
• Law of Large Numbers -✓✓ Basic principle of insurance that the larger the number of
individual risks combined into a group, the more certainty there is in predicting the
amount of loss that will be incurred in any given period.
• Elements of Insurable Risk -✓✓ Loss must be: due to chance, definite and
measurable, predictable, cannot be catastrophic, loss exposures to be insured must be
large, loss exposures to be insured must be randomly selected.
• Hazard -✓✓ Any factor that gives rise to a peril.
• Peril -✓✓ Specific event causing loss and giving rise to risk. (Fire is a peril to a burning
building)
• Risk Pooling -✓✓ Basic principle of insurance whereby a large number contribute to
cover the losses of a few. The risk is transferred from an individual to a group.
• Physical Hazard -✓✓ Individual characteristics that increase the chance of peril.
(Blindness or deafness)
• Moral Hazard -✓✓ Tendencies that people may have that increase risk and the chance
of loss. (Alcohol and drugs)
• Morale Hazard -✓✓ Individual tendencies that arise from an attitude or state of mind
causing indifference to loss. (Driving reckless with no fear of death)
• Risk Avoidance -✓✓ Avoiding as many risks as possible. (Never flying, never driving,
never investing)
• Risk Reduction -✓✓ Taking actions to reduce risk. (Installing a smoke alarm)
• Risk Retention -✓✓ Accepting the risk and confronting it if and when it occurs. (Self-
insurance)
,• Risk Transfer -✓✓ The practice of passing on the risk in question to another entity,
such as an insurance company.
• Adverse Selection -✓✓ less favorable insurance risks (people in poor health) to seek
or continue insurance to a greater extent than other risks. Tendency of policymakers to
take advantage of favorable options in insurance contracts.
• Multi-line insurers -✓✓ Companies that write more that one line of insurance
• Stock Insurance Company -✓✓ A private insurance company owned and controlled by
a group of stockholders whose investment in the company provides the safety margin
necessary in issuance of guaranteed, fixed premium, nonparticipation policies. Purpose
is making profit for stockholders.
• mutual insurance company -✓✓ Insurance company characterized by having no
capital stock; it is owned by it's policyowners and usually issues participating insurance.
Participating companies because policyowners participate in policy dividends.
• Mutualization -✓✓ Stock company converts to a mutual company
• Demutualizing -✓✓ Mutual company convert to stock company
• Commercial Insurers -✓✓ Stock and mutual companies; they both write life, health,
property, and casualty insurance.
• Assessment Mutual Company -✓✓ An insurance company characterized by member-
insureds who are assessed an individual portion of each loss that occurs. No premium
payment is payable in advance.
Not permitted in Florida
• Advance premium assessment mutual -✓✓ Charges a premium in advance, at the
beginning of the policy period.
Not permitted in Florida
• Reciprocal Insurance Company -✓✓ Insurance company characterized by the fact it's
policyholders insure the risks of other policyholders.
• Lloyd's of London -✓✓ An association of individuals and companies that underwrite
insurance on their own accounts and provide specialized coverages.
Not an insurer
• Reinsurers -✓✓ Specialized branch of the insurance industry because they insure
insurers.
,• Reinsurance -✓✓ Arrangement by which an insurance company transfers a portion of
a risk it has assumed to another insurer.
Limit the loss any one insurer would face should a very large claim become payable.
• ceding company -✓✓ Insurance Company transferring risk
• Risk Retentio Group (RRG) -✓✓ Mutual insurance company formed to insure people in
the same business, occupation, or profession (pharmacy, dentist, engineers)
• Fraternal benefit society -✓✓ Non-profit benevolent organization that provides
insurance to its members. Based on religious, national, or ethnic lines
• Home service or Debt Insurance -✓✓ Industrial insurance
Insurance in small amounts (usually $1,000 to $2,000) with premiums collected weekly
by the selling agent
• Reinsurer -✓✓ An insurance company assuming the risk
• Service providers -✓✓ Organization that provides health coverage by contracting with
service providers to provide medical services to subscribers who pay in advance
through premiums.
HMOs PPOs
• Participating Life Insurance -✓✓ Policy which pays a dividend to its owner based on
financial success of the insurance company
• When a stock life insurance company issues both participating and nonparticipating
policies, the company is doing business as a ________________? -✓✓ MIXED PLAN
• nonparticipating policy -✓✓ life insurance that does not provide policy dividends; also
called a nonpar policy
• Mutual Life Insurance Companies -✓✓ owned by policyholders
• mutual insurers -✓✓ Participating policies
Owned by policyholders
Vote for directors and trustees
Directors and management have control
Typically higher rates
• Demutualization -✓✓ a mutual insurer is converted into a stock insurer
• Domiciliary State -✓✓ The state in which the decedent's domicile (legal home) is
located.
, • Stock and Mutual companies can both write ... -✓✓ Life, health, property and casualty
insurance policies
• Reciprocal Insurers -✓✓ are unincorporated groups of individual members that provide
insurance for other members through indemnity contracts. Each member acts as both
insurer and insured and are managed by Attorney in Fact.
• Assessment insurance -✓✓ Prohibited in Florida
• Lloyd's of London -✓✓ An association of individuals and companies that underwrite
insurance on their own accounts and provide specialized coverages.
• Reinsurers -✓✓ Companies which sell insurance to insurers to reduce the insurer's
exposure to loss.
• ceding company -✓✓ The company transferring the risk
• Risk Retention Group (RRG) -✓✓ a mutual insurance company formed to insure
people in the same business, occupation, or profession
• Fraternal Benefit Societies -✓✓ Life or health insurance companies formed to provide
insurance for members of an affiliated lodge, religious organization, or fraternal
organization with a representative form of government., nonprofit
• Home Service Insurers -✓✓ home service insurance is industrial insurance sold by
home service or debit
life insurance companies. Face amounts are small; usually $1,000 to $2,000 and
premiums are paid weekly.
• Service insurers -✓✓ Companies that offer prepayment plans for medical or hospital
services, such as health maintenance organizations.
• HMO (Health Maintenance Organization) -✓✓ Health insurance that requires a PCP
and wants you to use only in-network doctors
• PPO (Preferred Provider Organization) -✓✓ A type of health plan that contracts with
medical providers, such as hospitals and doctors, to create a network of participating
providers. You pay less if you use providers that belong to the plan's network. You are
not required to have a PCP
• PCP -✓✓ primary care physician
