Florida 2-15 Insurance License Exam
Study Guide
Hazard - ANSWER -Any factor that gives rise to a peril.
Peril - ANSWER -Specific event causing loss and giving rise to risk. (Fire is a peril to a
burning building)
Risk Pooling - ANSWER -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 - ANSWER -Individual characteristics that increase the chance of
peril. (Blindness or deafness)
Moral Hazard - ANSWER -Tendencies that people may have that increase risk and the
chance of loss. (Alcohol and drugs)
Morale Hazard - ANSWER -Individual tendencies that arise from an attitude or state of
mind causing indifference to loss. (Driving reckless with no fear of death)
Risk Avoidance - ANSWER -Avoiding as many risks as possible. (Never flying, never
driving, never investing)
Risk Reduction - ANSWER -Taking actions to reduce risk. (Installing a smoke alarm)
Risk Retention - ANSWER -Accepting the risk and confronting it if and when it occurs.
(Self-insurance)
Risk Transfer - ANSWER -The practice of passing on the risk in question to another
entity, such as an insurance company.
Adverse Selection - ANSWER -Less favorable insurance risks (people in poor health)
to seek or continue insurance to a greater extent than other risks.
Multi-line insurers - ANSWER -Companies that write more than one line of insurance.
Stock Insurance Company - ANSWER -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 - ANSWER -Insurance company characterized by having
no capital stock; it is owned by its policyowners and usually issues participating
insurance.
Mutualization - ANSWER -Stock company converts to a mutual company.
Demutualizing - ANSWER -Mutual company converts to stock company.
Commercial Insurers - ANSWER -Stock and mutual companies; they both write life,
health, property, and casualty insurance.
Assessment Mutual Company - ANSWER -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.
Advance premium assessment mutual - ANSWER -Charges a premium in advance, at
the beginning of the policy period.
Reciprocal Insurance Company - ANSWER -Insurance company characterized by the
fact its policyholders insure the risks of other policyholders.
Lloyd's of London - ANSWER -An association of individuals and companies that
underwrite insurance on their own accounts and provide specialized coverages.
Reinsurers - ANSWER -Specialized branch of the insurance industry because they
insure insurers.
Reinsurance - ANSWER -Arrangement by which an insurance company transfers a
portion of a risk it has assumed to another insurer.
Ceding Company - ANSWER -Insurance Company transferring risk.
Risk Retention Group (RRG) - ANSWER -Mutual insurance company formed to insure
people in the same business, occupation, or profession (pharmacy, dentist, engineers).
Fraternal Benefit Society - ANSWER -Non-profit benevolent organization that provides
insurance to its members. Based on religious, national, or ethnic lines.
Home Service or Debt Insurance - ANSWER -Industrial insurance in small amounts
(usually $1,000 to $2,000) with premiums collected weekly by the selling agent.
Reinsurer - ANSWER -An insurance company assuming the risk.
Service Providers - ANSWER -Organization that provides health coverage by
contracting with service providers to provide medical services to subscribers who pay in
advance through premiums.
, Participating Life Insurance - ANSWER -Policy which pays a dividend to its owner
based on financial success of the insurance company.
Mixed Plan - ANSWER -When a stock life insurance company issues both participating
and nonparticipating policies.
Speculative Risk - ANSWER -Risk that involves chance of both loss and gain; not
insurable.
Pure Risk - ANSWER -Risk that involves the chance of loss only, there is no
opportunity for gain; insurable.
Law of Large Numbers - ANSWER -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 - ANSWER -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.
Nonparticipating Policy - ANSWER -Life insurance that does not provide policy
dividends; also called a nonpar policy.
Mutual Life Insurance Companies - ANSWER -Owned by policyholders.
Mutual Insurers - ANSWER -Participating policies owned by policyholders.
Demutualization - ANSWER -A mutual insurer is converted into a stock insurer.
Domiciliary State - ANSWER -The state in which the decedent's domicile (legal home)
is located.
Reciprocal Insurers - ANSWER -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 - ANSWER -Prohibited in Florida
ceding company - ANSWER -The company transferring the risk
Fraternal Benefit Societies - ANSWER -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
Study Guide
Hazard - ANSWER -Any factor that gives rise to a peril.
Peril - ANSWER -Specific event causing loss and giving rise to risk. (Fire is a peril to a
burning building)
Risk Pooling - ANSWER -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 - ANSWER -Individual characteristics that increase the chance of
peril. (Blindness or deafness)
Moral Hazard - ANSWER -Tendencies that people may have that increase risk and the
chance of loss. (Alcohol and drugs)
Morale Hazard - ANSWER -Individual tendencies that arise from an attitude or state of
mind causing indifference to loss. (Driving reckless with no fear of death)
Risk Avoidance - ANSWER -Avoiding as many risks as possible. (Never flying, never
driving, never investing)
Risk Reduction - ANSWER -Taking actions to reduce risk. (Installing a smoke alarm)
Risk Retention - ANSWER -Accepting the risk and confronting it if and when it occurs.
(Self-insurance)
Risk Transfer - ANSWER -The practice of passing on the risk in question to another
entity, such as an insurance company.
Adverse Selection - ANSWER -Less favorable insurance risks (people in poor health)
to seek or continue insurance to a greater extent than other risks.
Multi-line insurers - ANSWER -Companies that write more than one line of insurance.
Stock Insurance Company - ANSWER -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 - ANSWER -Insurance company characterized by having
no capital stock; it is owned by its policyowners and usually issues participating
insurance.
Mutualization - ANSWER -Stock company converts to a mutual company.
Demutualizing - ANSWER -Mutual company converts to stock company.
Commercial Insurers - ANSWER -Stock and mutual companies; they both write life,
health, property, and casualty insurance.
Assessment Mutual Company - ANSWER -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.
Advance premium assessment mutual - ANSWER -Charges a premium in advance, at
the beginning of the policy period.
Reciprocal Insurance Company - ANSWER -Insurance company characterized by the
fact its policyholders insure the risks of other policyholders.
Lloyd's of London - ANSWER -An association of individuals and companies that
underwrite insurance on their own accounts and provide specialized coverages.
Reinsurers - ANSWER -Specialized branch of the insurance industry because they
insure insurers.
Reinsurance - ANSWER -Arrangement by which an insurance company transfers a
portion of a risk it has assumed to another insurer.
Ceding Company - ANSWER -Insurance Company transferring risk.
Risk Retention Group (RRG) - ANSWER -Mutual insurance company formed to insure
people in the same business, occupation, or profession (pharmacy, dentist, engineers).
Fraternal Benefit Society - ANSWER -Non-profit benevolent organization that provides
insurance to its members. Based on religious, national, or ethnic lines.
Home Service or Debt Insurance - ANSWER -Industrial insurance in small amounts
(usually $1,000 to $2,000) with premiums collected weekly by the selling agent.
Reinsurer - ANSWER -An insurance company assuming the risk.
Service Providers - ANSWER -Organization that provides health coverage by
contracting with service providers to provide medical services to subscribers who pay in
advance through premiums.
, Participating Life Insurance - ANSWER -Policy which pays a dividend to its owner
based on financial success of the insurance company.
Mixed Plan - ANSWER -When a stock life insurance company issues both participating
and nonparticipating policies.
Speculative Risk - ANSWER -Risk that involves chance of both loss and gain; not
insurable.
Pure Risk - ANSWER -Risk that involves the chance of loss only, there is no
opportunity for gain; insurable.
Law of Large Numbers - ANSWER -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 - ANSWER -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.
Nonparticipating Policy - ANSWER -Life insurance that does not provide policy
dividends; also called a nonpar policy.
Mutual Life Insurance Companies - ANSWER -Owned by policyholders.
Mutual Insurers - ANSWER -Participating policies owned by policyholders.
Demutualization - ANSWER -A mutual insurer is converted into a stock insurer.
Domiciliary State - ANSWER -The state in which the decedent's domicile (legal home)
is located.
Reciprocal Insurers - ANSWER -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 - ANSWER -Prohibited in Florida
ceding company - ANSWER -The company transferring the risk
Fraternal Benefit Societies - ANSWER -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
