1. A Florida agent recommends that a client surrender an existing life policy to buy a new one.
What must the agent provide to comply with Florida’s replacement rule?
A) A verbal warning only
B) A completed replacement notice signed by both parties
C) No documentation if the client agrees
D) A letter from the new insurer
B) A completed replacement notice signed by both parties
Florida requires a signed replacement notice to protect consumers from harmful churning of
policies.
2. An insured accidentally misstates her age on a life insurance application. The insurer
discovers this two years later. What can the insurer do?
A) Void the policy retroactively
B) Adjust the death benefit to what the premiums would have purchased at the correct age
C) Cancel the policy without refund
D) Double the premium
B) Adjust the death benefit to what the premiums would have purchased at the correct age
Under the misstatement of age clause, the insurer adjusts benefits, not cancellation, after
the contestable period.
3. A 55-year-old client wants tax-deferred growth and lifetime income without market risk.
Which annuity best suits this goal?
A) Variable annuity
B) Indexed annuity
C) Fixed immediate annuity
D) Equity-indexed universal life
C) Fixed immediate annuity
Fixed immediate annuities guarantee both principal and a set income stream for life, no
market risk.
4. During a health insurance application, the applicant hides a history of high blood pressure.
Six months later, the insurer discovers it. What is the likely outcome?
, A) Policy is automatically void
B) Insurer can rescind only if the misrepresentation was material and intentional
C) No action because the contestable period is two years
D) Insurer must pay all claims regardless
B) Insurer can rescind only if the misrepresentation was material and intentional
During the first two years, insurers may rescind for material misrepresentation that would
have changed underwriting.
5. A Florida licensee is convicted of a felony involving dishonesty. How soon must she report
this to the Florida Department of Financial Services?
A) Within 10 business days
B) Within 30 days
C) Within 60 days
D) Within 90 days
B) Within 30 days
Florida law mandates reporting any administrative action or felony conviction within 30
days.
6. A variable annuity owner wants to start withdrawals at age 59 and avoid surrender charges.
What feature allows partial access without penalty?
A) Free-look period
B) Free withdrawal provision (typically 10% per year)
C) Loan provision
D) Accelerated benefit rider
B) Free withdrawal provision (typically 10% per year)
*Most variable annuities allow annual penalty-free withdrawals up to a percentage (often
10%) of the account value.*
7. A group health plan covers 25 employees. One employee loses coverage due to quitting.
What federal law guarantees the right to buy continuation coverage?
A) HIPAA
B) COBRA
C) ERISA
D) FLSA
B) COBRA
, *COBRA applies to groups with 20+ employees and allows 18 months of continuation
coverage after voluntary termination.*
8. An insured pays a $500 premium for a health policy that renews automatically unless
canceled. The insurer wants to nonrenew due to claims. What must it do?
A) Send a nonrenewal notice 30 days before expiration
B) Cancel mid-term with refund
C) Nonrenew without notice if it’s a guaranteed renewable policy
D) Raise premiums instead
A) Send a nonrenewal notice 30 days before expiration
For guaranteed renewable policies, nonrenewal requires advance notice, but the insurer
cannot cancel mid-term for health reasons.
9. A client buys a $100,000 whole life policy. After 15 years, the cash value is $25,000. The
client surrenders the policy. What is the tax consequence?
A) Only the $25,000 is taxable as ordinary income
B) Gain ($25,000 minus total premiums paid) is taxable as ordinary income
C) No tax because life insurance proceeds are tax-free
D) Tax-free up to $100,000
*B) Gain ($25,000 minus total premiums paid) is taxable as ordinary income*
Surrender proceeds in excess of cost basis (premiums paid) are taxable as ordinary income.
10. A Florida agent sells a Medicare supplement policy to a new enrollee. What is the mandatory
free-look period in Florida?
A) 10 days
B) 15 days
C) 30 days
D) 60 days
C) 30 days
*Florida gives a 30-day free look for Medicare supplement policies, during which the buyer
can return for a full refund.*
11. An insured is disabled and cannot work. His disability policy pays 60% of his prior income.
The policy contains a residual disability benefit. What does this cover?
A) Total disability only
B) Partial loss of income due to ability to work part-time
C) Rehabilitation expenses
, D) Accidental death
B) Partial loss of income due to ability to work part-time
Residual benefits pay a proportionate benefit when the insured returns to work but earns less
due to disability.
12. A variable life insurance policy’s cash value fluctuates based on what?
A) Insurer’s general account investments
B) The performance of separately managed subaccounts (mutual funds)
C) A fixed interest rate guaranteed by the insurer
D) The policy’s death benefit
B) The performance of separately managed subaccounts (mutual funds)
Variable life shifts investment risk to the policyowner; cash value depends on subaccount
performance.
13. An employer offers a Section 125 cafeteria plan. What is the primary advantage for
employees?
A) Premiums are paid with pre-tax dollars, reducing taxable income
B) No deductible applies to any medical service
C) The employer pays 100% of all premiums
D) Employees can withdraw cash tax-free annually
A) Premiums are paid with pre-tax dollars, reducing taxable income
Cafeteria plans allow employees to pay their share of benefits with pre-tax dollars through
salary reduction.
14. A long-term care policy in Florida must include what mandatory provision?
A) Waiver of premium after 30 days of confinement
B) Inflation protection unless the insured rejects it in writing
C) Unlimited lifetime benefits
D) No elimination period
B) Inflation protection unless the insured rejects it in writing
Florida requires LTC insurers to offer inflation protection, and a rejection must be signed by
the applicant.
15. A 70-year-old client wants to leave a guaranteed death benefit to heirs but doesn’t care
about cash value. Which life product is most cost-effective?
A) Single premium whole life
B) Term life insurance
What must the agent provide to comply with Florida’s replacement rule?
A) A verbal warning only
B) A completed replacement notice signed by both parties
C) No documentation if the client agrees
D) A letter from the new insurer
B) A completed replacement notice signed by both parties
Florida requires a signed replacement notice to protect consumers from harmful churning of
policies.
2. An insured accidentally misstates her age on a life insurance application. The insurer
discovers this two years later. What can the insurer do?
A) Void the policy retroactively
B) Adjust the death benefit to what the premiums would have purchased at the correct age
C) Cancel the policy without refund
D) Double the premium
B) Adjust the death benefit to what the premiums would have purchased at the correct age
Under the misstatement of age clause, the insurer adjusts benefits, not cancellation, after
the contestable period.
3. A 55-year-old client wants tax-deferred growth and lifetime income without market risk.
Which annuity best suits this goal?
A) Variable annuity
B) Indexed annuity
C) Fixed immediate annuity
D) Equity-indexed universal life
C) Fixed immediate annuity
Fixed immediate annuities guarantee both principal and a set income stream for life, no
market risk.
4. During a health insurance application, the applicant hides a history of high blood pressure.
Six months later, the insurer discovers it. What is the likely outcome?
, A) Policy is automatically void
B) Insurer can rescind only if the misrepresentation was material and intentional
C) No action because the contestable period is two years
D) Insurer must pay all claims regardless
B) Insurer can rescind only if the misrepresentation was material and intentional
During the first two years, insurers may rescind for material misrepresentation that would
have changed underwriting.
5. A Florida licensee is convicted of a felony involving dishonesty. How soon must she report
this to the Florida Department of Financial Services?
A) Within 10 business days
B) Within 30 days
C) Within 60 days
D) Within 90 days
B) Within 30 days
Florida law mandates reporting any administrative action or felony conviction within 30
days.
6. A variable annuity owner wants to start withdrawals at age 59 and avoid surrender charges.
What feature allows partial access without penalty?
A) Free-look period
B) Free withdrawal provision (typically 10% per year)
C) Loan provision
D) Accelerated benefit rider
B) Free withdrawal provision (typically 10% per year)
*Most variable annuities allow annual penalty-free withdrawals up to a percentage (often
10%) of the account value.*
7. A group health plan covers 25 employees. One employee loses coverage due to quitting.
What federal law guarantees the right to buy continuation coverage?
A) HIPAA
B) COBRA
C) ERISA
D) FLSA
B) COBRA
, *COBRA applies to groups with 20+ employees and allows 18 months of continuation
coverage after voluntary termination.*
8. An insured pays a $500 premium for a health policy that renews automatically unless
canceled. The insurer wants to nonrenew due to claims. What must it do?
A) Send a nonrenewal notice 30 days before expiration
B) Cancel mid-term with refund
C) Nonrenew without notice if it’s a guaranteed renewable policy
D) Raise premiums instead
A) Send a nonrenewal notice 30 days before expiration
For guaranteed renewable policies, nonrenewal requires advance notice, but the insurer
cannot cancel mid-term for health reasons.
9. A client buys a $100,000 whole life policy. After 15 years, the cash value is $25,000. The
client surrenders the policy. What is the tax consequence?
A) Only the $25,000 is taxable as ordinary income
B) Gain ($25,000 minus total premiums paid) is taxable as ordinary income
C) No tax because life insurance proceeds are tax-free
D) Tax-free up to $100,000
*B) Gain ($25,000 minus total premiums paid) is taxable as ordinary income*
Surrender proceeds in excess of cost basis (premiums paid) are taxable as ordinary income.
10. A Florida agent sells a Medicare supplement policy to a new enrollee. What is the mandatory
free-look period in Florida?
A) 10 days
B) 15 days
C) 30 days
D) 60 days
C) 30 days
*Florida gives a 30-day free look for Medicare supplement policies, during which the buyer
can return for a full refund.*
11. An insured is disabled and cannot work. His disability policy pays 60% of his prior income.
The policy contains a residual disability benefit. What does this cover?
A) Total disability only
B) Partial loss of income due to ability to work part-time
C) Rehabilitation expenses
, D) Accidental death
B) Partial loss of income due to ability to work part-time
Residual benefits pay a proportionate benefit when the insured returns to work but earns less
due to disability.
12. A variable life insurance policy’s cash value fluctuates based on what?
A) Insurer’s general account investments
B) The performance of separately managed subaccounts (mutual funds)
C) A fixed interest rate guaranteed by the insurer
D) The policy’s death benefit
B) The performance of separately managed subaccounts (mutual funds)
Variable life shifts investment risk to the policyowner; cash value depends on subaccount
performance.
13. An employer offers a Section 125 cafeteria plan. What is the primary advantage for
employees?
A) Premiums are paid with pre-tax dollars, reducing taxable income
B) No deductible applies to any medical service
C) The employer pays 100% of all premiums
D) Employees can withdraw cash tax-free annually
A) Premiums are paid with pre-tax dollars, reducing taxable income
Cafeteria plans allow employees to pay their share of benefits with pre-tax dollars through
salary reduction.
14. A long-term care policy in Florida must include what mandatory provision?
A) Waiver of premium after 30 days of confinement
B) Inflation protection unless the insured rejects it in writing
C) Unlimited lifetime benefits
D) No elimination period
B) Inflation protection unless the insured rejects it in writing
Florida requires LTC insurers to offer inflation protection, and a rejection must be signed by
the applicant.
15. A 70-year-old client wants to leave a guaranteed death benefit to heirs but doesn’t care
about cash value. Which life product is most cost-effective?
A) Single premium whole life
B) Term life insurance
