Florida 2-20 Agent’s License Final Exam & Study Guide | 2025/2026 Edition
Questions and Answers
QUESTION 1
Which of the following best describes the purpose of the Florida Department of Financial
Services (DFS) in regulating insurance?
A. To maximize insurer profits through competition
B. To protect policyholders and ensure insurer solvency
C. To manage hurricane-response funds for the state
D. To establish premium rates for all insurers
CORRECT ANSWER: B
RATIONALE: The DFS supervises insurance agents and insurers to ensure fairness, solvency, and
consumer protection. The Office of Insurance Regulation (OIR) handles rate approval, not DFS
directly.
QUESTION 2
How long must an insurance agent in Florida keep records of premiums, commissions, and
policy transactions?
A. Two years
B. Three years
C. Five years
D. Seven years
CORRECT ANSWER: C
RATIONALE: Florida law requires maintaining transaction records for at least five years to allow
regulatory audits and consumer complaint investigations.
QUESTION 3
Which license authority allows an agent to transact property, casualty, surety, health, and
marine insurance?
A. 2-20 General Lines Agent
B. 4-40 Customer Representative
,C. 2-15 Life & Health Agent
D. 20-44 Personal Lines Agent
CORRECT ANSWER: A
RATIONALE: The 2-20 license grants the broadest authority—permitting the holder to sell all
major property and casualty lines and supervise clerical staff.
QUESTION 4
What is a binder in insurance contracts?
A. A temporary agreement providing coverage until the policy is issued
B. A permanent endorsement to extend coverage
C. A receipt for premium only
D. A cancellation notice
CORRECT ANSWER: A
RATIONALE: Binders are legal instruments giving temporary coverage pending policy issuance,
evidencing the insurer’s intent to be bound.
QUESTION 5
Which of the following perils is typically excluded from a standard homeowner’s policy?
A. Lightning
B. Fire
C. Flood
D. Theft
CORRECT ANSWER: C
RATIONALE: Flood losses are insured under the National Flood Insurance Program, not standard
homeowners coverage.
QUESTION 6
The term indemnity in insurance means:
A. Restoring the insured to the same financial position as before a loss
B. Paying more than the value of the loss
C. Guaranteeing profit to the insured
D. Eliminating deductible application
, CORRECT ANSWER: A
RATIONALE: The principle of indemnity prevents overcompensation and moral-hazard incentives.
QUESTION 7
A policy written on more than one property under a single limit is called:
A. Scheduled insurance
B. Blanket insurance
C. Co-insurance
D. Specific insurance
CORRECT ANSWER: B
RATIONALE: Blanket coverage applies one overall limit to multiple locations or items, simplifying
administration but requiring full-value adequacy.
QUESTION 8
Which component of a commercial policy lists the insured’s name, address, policy period, and
limits of insurance?
A. Conditions
B. Declarations page
C. Insuring agreement
D. Exclusions
CORRECT ANSWER: B
RATIONALE: The declarations serve as the “face page” summarizing key contractual information
specific to that insured.
QUESTION 9
Under a replacement cost provision, recovery is based on:
A. Actual cash value
B. Market value
C. Cost to replace with like kind and quality, without depreciation
D. Book value
, CORRECT ANSWER: C
RATIONALE: Replacement-cost policies reimburse full cost of new materials up to the limit,
provided co-insurance conditions are met.
QUESTION 10
Florida’s Unfair Insurance Trade Practices Act prohibits which of the following?
A. Comparing policies with competitors
B. Misrepresenting policy terms or dividends
C. Offering premium discounts for safety devices
D. Publishing rates online
CORRECT ANSWER: B
RATIONALE: Misrepresentation, twisting, and coercion are deemed unfair or deceptive practices
subject to disciplinary action.
QUESTION 11
Under the concept of subrogation, an insurer:
A. Waives its right to recover
B. Pays the insured and then seeks recovery from the party at fault
C. Assigns coverage to another insurer
D. Cancels the policy after payment
CORRECT ANSWER: B
RATIONALE: Subrogation preserves equity by allowing the insurer to recover amounts paid from
negligent third parties.
QUESTION 12
An insurance company formed under the laws of another U.S. state but doing business in
Florida is classified as:
A. Domestic
B. Foreign
C. Alien
D. Admitted
Questions and Answers
QUESTION 1
Which of the following best describes the purpose of the Florida Department of Financial
Services (DFS) in regulating insurance?
A. To maximize insurer profits through competition
B. To protect policyholders and ensure insurer solvency
C. To manage hurricane-response funds for the state
D. To establish premium rates for all insurers
CORRECT ANSWER: B
RATIONALE: The DFS supervises insurance agents and insurers to ensure fairness, solvency, and
consumer protection. The Office of Insurance Regulation (OIR) handles rate approval, not DFS
directly.
QUESTION 2
How long must an insurance agent in Florida keep records of premiums, commissions, and
policy transactions?
A. Two years
B. Three years
C. Five years
D. Seven years
CORRECT ANSWER: C
RATIONALE: Florida law requires maintaining transaction records for at least five years to allow
regulatory audits and consumer complaint investigations.
QUESTION 3
Which license authority allows an agent to transact property, casualty, surety, health, and
marine insurance?
A. 2-20 General Lines Agent
B. 4-40 Customer Representative
,C. 2-15 Life & Health Agent
D. 20-44 Personal Lines Agent
CORRECT ANSWER: A
RATIONALE: The 2-20 license grants the broadest authority—permitting the holder to sell all
major property and casualty lines and supervise clerical staff.
QUESTION 4
What is a binder in insurance contracts?
A. A temporary agreement providing coverage until the policy is issued
B. A permanent endorsement to extend coverage
C. A receipt for premium only
D. A cancellation notice
CORRECT ANSWER: A
RATIONALE: Binders are legal instruments giving temporary coverage pending policy issuance,
evidencing the insurer’s intent to be bound.
QUESTION 5
Which of the following perils is typically excluded from a standard homeowner’s policy?
A. Lightning
B. Fire
C. Flood
D. Theft
CORRECT ANSWER: C
RATIONALE: Flood losses are insured under the National Flood Insurance Program, not standard
homeowners coverage.
QUESTION 6
The term indemnity in insurance means:
A. Restoring the insured to the same financial position as before a loss
B. Paying more than the value of the loss
C. Guaranteeing profit to the insured
D. Eliminating deductible application
, CORRECT ANSWER: A
RATIONALE: The principle of indemnity prevents overcompensation and moral-hazard incentives.
QUESTION 7
A policy written on more than one property under a single limit is called:
A. Scheduled insurance
B. Blanket insurance
C. Co-insurance
D. Specific insurance
CORRECT ANSWER: B
RATIONALE: Blanket coverage applies one overall limit to multiple locations or items, simplifying
administration but requiring full-value adequacy.
QUESTION 8
Which component of a commercial policy lists the insured’s name, address, policy period, and
limits of insurance?
A. Conditions
B. Declarations page
C. Insuring agreement
D. Exclusions
CORRECT ANSWER: B
RATIONALE: The declarations serve as the “face page” summarizing key contractual information
specific to that insured.
QUESTION 9
Under a replacement cost provision, recovery is based on:
A. Actual cash value
B. Market value
C. Cost to replace with like kind and quality, without depreciation
D. Book value
, CORRECT ANSWER: C
RATIONALE: Replacement-cost policies reimburse full cost of new materials up to the limit,
provided co-insurance conditions are met.
QUESTION 10
Florida’s Unfair Insurance Trade Practices Act prohibits which of the following?
A. Comparing policies with competitors
B. Misrepresenting policy terms or dividends
C. Offering premium discounts for safety devices
D. Publishing rates online
CORRECT ANSWER: B
RATIONALE: Misrepresentation, twisting, and coercion are deemed unfair or deceptive practices
subject to disciplinary action.
QUESTION 11
Under the concept of subrogation, an insurer:
A. Waives its right to recover
B. Pays the insured and then seeks recovery from the party at fault
C. Assigns coverage to another insurer
D. Cancels the policy after payment
CORRECT ANSWER: B
RATIONALE: Subrogation preserves equity by allowing the insurer to recover amounts paid from
negligent third parties.
QUESTION 12
An insurance company formed under the laws of another U.S. state but doing business in
Florida is classified as:
A. Domestic
B. Foreign
C. Alien
D. Admitted
