Florida 2-20 General Lines Agent License
Exam 2026 – Practice Questions & Answers
with Detailed Explanations
Section 1 — Insurance Fundamentals
1.
Which of the following best describes insurance?
A. A contract transferring certain risks from an insured to an insurer B. A guarantee that no
losses will occur C. A savings account established by a government agency D. A contract
that eliminates all financial responsibility
Answer: A. A contract transferring certain risks from an insured to an insurer
Insurance transfers specified financial risks from the insured to an insurer in exchange for
consideration, usually a premium.
2.
Which element of a loss refers to something that increases the likelihood or severity of a
loss?
A. Peril B. Hazard C. Indemnity D. Exposure
Answer: B. Hazard
,A hazard is a condition that increases the probability or severity of a loss.
3.
A tornado is an example of which insurance concept?
A. Hazard B. Peril C. Risk transfer D. Indemnity
Answer: B. Peril
A peril is the direct cause of a loss, such as fire, windstorm, theft, or collision.
4.
Which type of risk involves the possibility of loss or no loss but no opportunity for gain?
A. Speculative risk B. Pure risk C. Investment risk D. Entrepreneurial risk
Answer: B. Pure risk
Pure risk involves only the possibility of loss or no loss and is the type of risk generally
insurable.
5.
Which is an example of speculative risk?
A. Owning a home B. Driving an automobile C. Investing in the stock market D. Being
injured in an accident
Answer: C. Investing in the stock market
,Speculative risk involves the possibility of gain as well as loss and generally is not covered
by traditional insurance.
6.
What is the principle of indemnity designed to accomplish?
A. Allow the insured to profit from a loss B. Restore the insured approximately to the
financial position held before the loss C. Guarantee replacement with a better property D.
Eliminate deductibles
Answer: B. Restore the insured approximately to the financial position held before
the loss
Indemnity is intended to compensate for a covered loss without allowing the insured to profit
from the insurance.
7.
Which party makes a promise to pay covered losses under an insurance contract?
A. Insured B. Beneficiary C. Insurer D. Adjuster
Answer: C. Insurer
The insurer assumes specified risks and agrees to provide benefits or indemnification
according to the policy terms.
8.
What is consideration in an insurance contract?
, A. The insured's premium and the insurer's promise to perform B. Only the deductible C.
Only the policy application D. The insurance company's profit
Answer: A. The insured's premium and the insurer's promise to perform
Consideration is exchanged by the parties: the insured provides the premium and other
required obligations, while the insurer promises coverage.
9.
Which characteristic means an insurance contract is prepared primarily by one party?
A. Aleatory B. Adhesion C. Bilateral D. Personal
Answer: B. Adhesion
Insurance contracts are contracts of adhesion because the insurer generally drafts the
contract and the insured accepts or rejects it.
10.
An insurance contract is considered aleatory because:
A. Both parties always exchange equal monetary values B. The values exchanged may be
unequal C. It must be written by the insured D. It cannot be canceled
Answer: B. The values exchanged may be unequal
An insured may pay relatively little premium and receive a much larger claim payment, or
pay premiums and never receive a claim.
11.
Exam 2026 – Practice Questions & Answers
with Detailed Explanations
Section 1 — Insurance Fundamentals
1.
Which of the following best describes insurance?
A. A contract transferring certain risks from an insured to an insurer B. A guarantee that no
losses will occur C. A savings account established by a government agency D. A contract
that eliminates all financial responsibility
Answer: A. A contract transferring certain risks from an insured to an insurer
Insurance transfers specified financial risks from the insured to an insurer in exchange for
consideration, usually a premium.
2.
Which element of a loss refers to something that increases the likelihood or severity of a
loss?
A. Peril B. Hazard C. Indemnity D. Exposure
Answer: B. Hazard
,A hazard is a condition that increases the probability or severity of a loss.
3.
A tornado is an example of which insurance concept?
A. Hazard B. Peril C. Risk transfer D. Indemnity
Answer: B. Peril
A peril is the direct cause of a loss, such as fire, windstorm, theft, or collision.
4.
Which type of risk involves the possibility of loss or no loss but no opportunity for gain?
A. Speculative risk B. Pure risk C. Investment risk D. Entrepreneurial risk
Answer: B. Pure risk
Pure risk involves only the possibility of loss or no loss and is the type of risk generally
insurable.
5.
Which is an example of speculative risk?
A. Owning a home B. Driving an automobile C. Investing in the stock market D. Being
injured in an accident
Answer: C. Investing in the stock market
,Speculative risk involves the possibility of gain as well as loss and generally is not covered
by traditional insurance.
6.
What is the principle of indemnity designed to accomplish?
A. Allow the insured to profit from a loss B. Restore the insured approximately to the
financial position held before the loss C. Guarantee replacement with a better property D.
Eliminate deductibles
Answer: B. Restore the insured approximately to the financial position held before
the loss
Indemnity is intended to compensate for a covered loss without allowing the insured to profit
from the insurance.
7.
Which party makes a promise to pay covered losses under an insurance contract?
A. Insured B. Beneficiary C. Insurer D. Adjuster
Answer: C. Insurer
The insurer assumes specified risks and agrees to provide benefits or indemnification
according to the policy terms.
8.
What is consideration in an insurance contract?
, A. The insured's premium and the insurer's promise to perform B. Only the deductible C.
Only the policy application D. The insurance company's profit
Answer: A. The insured's premium and the insurer's promise to perform
Consideration is exchanged by the parties: the insured provides the premium and other
required obligations, while the insurer promises coverage.
9.
Which characteristic means an insurance contract is prepared primarily by one party?
A. Aleatory B. Adhesion C. Bilateral D. Personal
Answer: B. Adhesion
Insurance contracts are contracts of adhesion because the insurer generally drafts the
contract and the insured accepts or rejects it.
10.
An insurance contract is considered aleatory because:
A. Both parties always exchange equal monetary values B. The values exchanged may be
unequal C. It must be written by the insured D. It cannot be canceled
Answer: B. The values exchanged may be unequal
An insured may pay relatively little premium and receive a much larger claim payment, or
pay premiums and never receive a claim.
11.
