FLORIDA INSURANCE 2-14 EXAM 2025|
BRAND NEW EXAM QUESTIONS WITH
100% CORRECT SOLUTIONS 2025/2026
Pure Risks - CORRECT ANSWER-Involve the possibility of loss only. (Insurable)
Peril - CORRECT ANSWER-Cause of risk (when a building burns, fire is the peril)
Hazards - CORRECT ANSWER-The source of danger
Physical Hazard - CORRECT ANSWER-A hazard being of physical nature.
A person being treated of cancer, the disease is the physical endangerment. (Blindness
& deafness)
Insurance - CORRECT ANSWER-Financial protection against loss or harm - An
arrangement by which company gives customers financial protection against loss or
harm such as theft or illness in return for premium payments.
Life Insurance - CORRECT ANSWER-Is based on actuarial or mathematical principles
and guarantees a specified sum of money upon the death of the person who is insured.
Annuities - CORRECT ANSWER-Provide a stream of income by making a series of
payments to the annuitant for the annuitant's lifetime or for a specifically designated
period of time.
Risk - CORRECT ANSWER-Uncertainty regarding loss; the probability of loss occurring
for an insured or prospect
Speculative Risks - CORRECT ANSWER-Involve the possibility of loss and gain. (Not
Insurable)
Risk Avoidance - CORRECT ANSWER-Occurs when individuals evade risk entirely. "If
you don't drive, then you avoid getting in an auto accident."
Risk Reduction - CORRECT ANSWER-Takes place when the chances of loss are
lessened. Changing a lifestyle to minimize a known risk.
,Risk Retention - CORRECT ANSWER-Being aware of the risks involved and taking
precautions for financial protection. Auto policy's deductible is an illustration of risk
retention
Risk Transference - CORRECT ANSWER-The act of shifting the responsibility of risk to
another in the form of an insurance contract.
Adverse Selection - CORRECT ANSWER-Refers to the tendency for those individuals
who present less favorable insurance risk to seek or continue insurance to a great
extent than other risks.
Insuring Pure Risk - CORRECT ANSWER-Loss must be due to chance
Loss must be definite and measurable
Risk must be predictable
Loss must NOT be catastrophic
Exposure to loss must be large
Loss exposures must be randomly selected
Mutual Insurers - CORRECT ANSWER-Participating policies
Owned by policyholders
Vote for directors and trustees
Directors and management have control
Typically higher rates
Assessment Mutual Insurers - CORRECT ANSWER-Prohibited in Florida
Pure Assessment Mutual Company - CORRECT ANSWER-Don't pay premium and total
loss is divided among members
Lloyds of London - CORRECT ANSWER-NOT considered an insurance company
- An association of individuals and companies that individually underwriter insurance.
Fraternal Benefit Societies - CORRECT ANSWER-Must be nonprofit, have a lodge
system, and offer insurance to its members only
Home Service Insurer - CORRECT ANSWER-Insurer that offers relatively small policies
with premiums payable on a weekly basis.
Captive Agents - CORRECT ANSWER-A.k.a. Career agents
Works for only one insurer and sells only that insurers products
Independent Agents - CORRECT ANSWER-Is self-governing and actually works for
himself. This affords him the versatility to represent several insurers and their different
insurance products.
,Special Agents - CORRECT ANSWER-Usually not license and don't sell insurance.
Assist insurance companies field representatives.
Career Agency System - CORRECT ANSWER-(GA) - Build sales staffs and agents are
treated as employees. They are recruited and trained. A principal of the company
supervises agents.
Personal Producing General Agency System - CORRECT ANSWER-(PPGA) - The
agent supplies his own working environment. Agents hired by a PPGA are considered
employees of the PPGA, not the insurance company, and are supervised by the
regional salary.
Independent Agency System - CORRECT ANSWER-Agents represent several insurers
through signed contracts and are paid on commission or fee basis, not through salary.
Regulating the business of insurance - CORRECT ANSWER-Legislation
The Court System
State Insurance Departments
Paul v. Virginia - CORRECT ANSWER-- State tried to control insurance domiciled from
another state.
- U.S. Supreme Court sided against insurance company
- Upholding the right of sate to regulate insurance
- States WIN
United States v. Southeastern Underwriters Association (SEUA) - CORRECT
ANSWER-- Ruling is a form of interstate commerce
- Should be regulated by the federal government
- Fed Gov. WINS
The McCarran-Ferguson Act - CORRECT ANSWER-- Gave back some regulatory
authority to the states
- Did not provide the states to regulate individually
- Insurance regulated by state law "is in the publics best interest"
Intervention by SEC - CORRECT ANSWER-- Dealing with variable annuities
- Securities and Exchange Commission (SEC) should regulate the variable annuities
(since they're used for investments) & variable life insurance.
- Therefore, agents must obey the rules to both SEC and state regulation.
Fair Credit Reporting Act - CORRECT ANSWER-- Fair and accurate report of
information about consumers
- Insurers must inform them about any investigations being made
- Then insurers must let the applicants know the name of the reporting agency
, Financial Services Modernization Act - CORRECT ANSWER-- Revoking the Glass-
Steagall Act
- This changed the industry so commercial banks, investment banks, retail brokerages,
and insurance companies can now enter each other's lines of business
Admitted insurance company - CORRECT ANSWER-- Office of Insurance Regulation
has licensed them to carry out business in Florida
Nonadmitted Insurance Company - CORRECT ANSWER-- Have not been licensed by
the the Florida Office of Insurance Regulation
Policy Replacement - CORRECT ANSWER-- An action which eliminates the original
policy or diminishes its benefits or values
Bad policy remplacement issues - CORRECT ANSWER-- Most the first year's premium
is consumed by the commission
- The premium is higher due to the insured's advanced age
- Waiting periods begin anew
Misuse of Premiums - CORRECT ANSWER-- Improper use of premiums collected by
an insurance producer
- Depositing a client's premium in own personal account
Rebating - CORRECT ANSWER-- Florida and California are the only two states that
allow rebating
- When any part of commission or anything else of value is given to the insured as a
incentive to buy a policy
- Agent must keep copies of rebating schedules for five years
NAIC - CORRECT ANSWER-- National Association of Insurance Commissioners
- No legal power of its own
- Encourages uniformity in state insurance laws and regulations
Florida Insurance Guaranty Association - CORRECT ANSWER-- Funded by insurance
companies through assessments
-FIGA is part of a non-profit,
- Guaranty associations protect policyholders and claimants.
- Holds three separate accounts:
- Health Insurance
- Life Insurance
- Annuity Accounts
NAIFA - CORRECT ANSWER-- National Association of Insurance and Financial
Advisors (NAIFA)
- Designed to protect agents
- Dedicated to supporting life insurance industry
BRAND NEW EXAM QUESTIONS WITH
100% CORRECT SOLUTIONS 2025/2026
Pure Risks - CORRECT ANSWER-Involve the possibility of loss only. (Insurable)
Peril - CORRECT ANSWER-Cause of risk (when a building burns, fire is the peril)
Hazards - CORRECT ANSWER-The source of danger
Physical Hazard - CORRECT ANSWER-A hazard being of physical nature.
A person being treated of cancer, the disease is the physical endangerment. (Blindness
& deafness)
Insurance - CORRECT ANSWER-Financial protection against loss or harm - An
arrangement by which company gives customers financial protection against loss or
harm such as theft or illness in return for premium payments.
Life Insurance - CORRECT ANSWER-Is based on actuarial or mathematical principles
and guarantees a specified sum of money upon the death of the person who is insured.
Annuities - CORRECT ANSWER-Provide a stream of income by making a series of
payments to the annuitant for the annuitant's lifetime or for a specifically designated
period of time.
Risk - CORRECT ANSWER-Uncertainty regarding loss; the probability of loss occurring
for an insured or prospect
Speculative Risks - CORRECT ANSWER-Involve the possibility of loss and gain. (Not
Insurable)
Risk Avoidance - CORRECT ANSWER-Occurs when individuals evade risk entirely. "If
you don't drive, then you avoid getting in an auto accident."
Risk Reduction - CORRECT ANSWER-Takes place when the chances of loss are
lessened. Changing a lifestyle to minimize a known risk.
,Risk Retention - CORRECT ANSWER-Being aware of the risks involved and taking
precautions for financial protection. Auto policy's deductible is an illustration of risk
retention
Risk Transference - CORRECT ANSWER-The act of shifting the responsibility of risk to
another in the form of an insurance contract.
Adverse Selection - CORRECT ANSWER-Refers to the tendency for those individuals
who present less favorable insurance risk to seek or continue insurance to a great
extent than other risks.
Insuring Pure Risk - CORRECT ANSWER-Loss must be due to chance
Loss must be definite and measurable
Risk must be predictable
Loss must NOT be catastrophic
Exposure to loss must be large
Loss exposures must be randomly selected
Mutual Insurers - CORRECT ANSWER-Participating policies
Owned by policyholders
Vote for directors and trustees
Directors and management have control
Typically higher rates
Assessment Mutual Insurers - CORRECT ANSWER-Prohibited in Florida
Pure Assessment Mutual Company - CORRECT ANSWER-Don't pay premium and total
loss is divided among members
Lloyds of London - CORRECT ANSWER-NOT considered an insurance company
- An association of individuals and companies that individually underwriter insurance.
Fraternal Benefit Societies - CORRECT ANSWER-Must be nonprofit, have a lodge
system, and offer insurance to its members only
Home Service Insurer - CORRECT ANSWER-Insurer that offers relatively small policies
with premiums payable on a weekly basis.
Captive Agents - CORRECT ANSWER-A.k.a. Career agents
Works for only one insurer and sells only that insurers products
Independent Agents - CORRECT ANSWER-Is self-governing and actually works for
himself. This affords him the versatility to represent several insurers and their different
insurance products.
,Special Agents - CORRECT ANSWER-Usually not license and don't sell insurance.
Assist insurance companies field representatives.
Career Agency System - CORRECT ANSWER-(GA) - Build sales staffs and agents are
treated as employees. They are recruited and trained. A principal of the company
supervises agents.
Personal Producing General Agency System - CORRECT ANSWER-(PPGA) - The
agent supplies his own working environment. Agents hired by a PPGA are considered
employees of the PPGA, not the insurance company, and are supervised by the
regional salary.
Independent Agency System - CORRECT ANSWER-Agents represent several insurers
through signed contracts and are paid on commission or fee basis, not through salary.
Regulating the business of insurance - CORRECT ANSWER-Legislation
The Court System
State Insurance Departments
Paul v. Virginia - CORRECT ANSWER-- State tried to control insurance domiciled from
another state.
- U.S. Supreme Court sided against insurance company
- Upholding the right of sate to regulate insurance
- States WIN
United States v. Southeastern Underwriters Association (SEUA) - CORRECT
ANSWER-- Ruling is a form of interstate commerce
- Should be regulated by the federal government
- Fed Gov. WINS
The McCarran-Ferguson Act - CORRECT ANSWER-- Gave back some regulatory
authority to the states
- Did not provide the states to regulate individually
- Insurance regulated by state law "is in the publics best interest"
Intervention by SEC - CORRECT ANSWER-- Dealing with variable annuities
- Securities and Exchange Commission (SEC) should regulate the variable annuities
(since they're used for investments) & variable life insurance.
- Therefore, agents must obey the rules to both SEC and state regulation.
Fair Credit Reporting Act - CORRECT ANSWER-- Fair and accurate report of
information about consumers
- Insurers must inform them about any investigations being made
- Then insurers must let the applicants know the name of the reporting agency
, Financial Services Modernization Act - CORRECT ANSWER-- Revoking the Glass-
Steagall Act
- This changed the industry so commercial banks, investment banks, retail brokerages,
and insurance companies can now enter each other's lines of business
Admitted insurance company - CORRECT ANSWER-- Office of Insurance Regulation
has licensed them to carry out business in Florida
Nonadmitted Insurance Company - CORRECT ANSWER-- Have not been licensed by
the the Florida Office of Insurance Regulation
Policy Replacement - CORRECT ANSWER-- An action which eliminates the original
policy or diminishes its benefits or values
Bad policy remplacement issues - CORRECT ANSWER-- Most the first year's premium
is consumed by the commission
- The premium is higher due to the insured's advanced age
- Waiting periods begin anew
Misuse of Premiums - CORRECT ANSWER-- Improper use of premiums collected by
an insurance producer
- Depositing a client's premium in own personal account
Rebating - CORRECT ANSWER-- Florida and California are the only two states that
allow rebating
- When any part of commission or anything else of value is given to the insured as a
incentive to buy a policy
- Agent must keep copies of rebating schedules for five years
NAIC - CORRECT ANSWER-- National Association of Insurance Commissioners
- No legal power of its own
- Encourages uniformity in state insurance laws and regulations
Florida Insurance Guaranty Association - CORRECT ANSWER-- Funded by insurance
companies through assessments
-FIGA is part of a non-profit,
- Guaranty associations protect policyholders and claimants.
- Holds three separate accounts:
- Health Insurance
- Life Insurance
- Annuity Accounts
NAIFA - CORRECT ANSWER-- National Association of Insurance and Financial
Advisors (NAIFA)
- Designed to protect agents
- Dedicated to supporting life insurance industry
