Florida Insurance 20-44 Exam Study Guide 2026/2027
Personal Lines Practice Questions and Florida Statutes
Section 1: General Insurance Principles
1. What is the definition of a contract of indemnity?
A) A contract where the insured makes a profit from a loss
B) A contract that restores the insured to the same financial
condition they were in immediately before the loss
C) A contract that guarantees the insured will not suffer a loss
D) A contract that pays a fixed sum regardless of the actual loss
incurred
ANSWERS>B - Indemnity means to make the insured "whole"
again without allowing them to profit from a loss.
2. Which of the following is an example of a moral hazard?
A) A homeowner leaving a door unlocked
B) A business owner storing flammable materials near a furnace
C) An insured intentionally setting fire to their property to
collect insurance money
D) A driver speeding in heavy rain
,ANSWERS>C - Moral hazard involves intentional dishonesty or
criminal acts to collect insurance.
3. What is the purpose of a binder?
A) To cancel an insurance policy before it expires
B) To provide temporary insurance coverage until the actual
policy is issued
C) To legally transfer a policy from one insurer to another
D) To act as a grace period for late premium payments
ANSWERS>B - A binder provides immediate, temporary proof of
coverage while the formal policy is being underwritten.
4. In insurance terms, what is "subrogation"?
A) The insured's right to sue the insurer for bad faith
B) The insurer's right to recover the amount paid to the insured
from a legally liable third party
C) The process of canceling an insurance policy
D) The transfer of ownership of a policy
ANSWERS>B - Subrogation prevents the insured from collecting
twice and places the financial burden on the at-fault party.
, 5. Which principle requires the insured to prove they have a
financial interest in the property being insured?
A) Utmost Good Faith
B) Indemnity
C) Insurable Interest
D) Adhesion
ANSWERS>C - Without insurable interest, an insurance contract
is considered a wager and is unenforceable.
6. An insurance policy is a "contract of adhesion." What does
this mean?
A) Both parties have equal bargaining power.
B) The insured has the right to modify the policy at any time.
C) The insurer prepares the policy, and the insured must accept
it as written or decline it entirely.
D) The policy automatically renews without input from either
party.
ANSWERS>C - Because the insurer drafts the contract, any
ambiguities are typically interpreted in favor of the insured.
Personal Lines Practice Questions and Florida Statutes
Section 1: General Insurance Principles
1. What is the definition of a contract of indemnity?
A) A contract where the insured makes a profit from a loss
B) A contract that restores the insured to the same financial
condition they were in immediately before the loss
C) A contract that guarantees the insured will not suffer a loss
D) A contract that pays a fixed sum regardless of the actual loss
incurred
ANSWERS>B - Indemnity means to make the insured "whole"
again without allowing them to profit from a loss.
2. Which of the following is an example of a moral hazard?
A) A homeowner leaving a door unlocked
B) A business owner storing flammable materials near a furnace
C) An insured intentionally setting fire to their property to
collect insurance money
D) A driver speeding in heavy rain
,ANSWERS>C - Moral hazard involves intentional dishonesty or
criminal acts to collect insurance.
3. What is the purpose of a binder?
A) To cancel an insurance policy before it expires
B) To provide temporary insurance coverage until the actual
policy is issued
C) To legally transfer a policy from one insurer to another
D) To act as a grace period for late premium payments
ANSWERS>B - A binder provides immediate, temporary proof of
coverage while the formal policy is being underwritten.
4. In insurance terms, what is "subrogation"?
A) The insured's right to sue the insurer for bad faith
B) The insurer's right to recover the amount paid to the insured
from a legally liable third party
C) The process of canceling an insurance policy
D) The transfer of ownership of a policy
ANSWERS>B - Subrogation prevents the insured from collecting
twice and places the financial burden on the at-fault party.
, 5. Which principle requires the insured to prove they have a
financial interest in the property being insured?
A) Utmost Good Faith
B) Indemnity
C) Insurable Interest
D) Adhesion
ANSWERS>C - Without insurable interest, an insurance contract
is considered a wager and is unenforceable.
6. An insurance policy is a "contract of adhesion." What does
this mean?
A) Both parties have equal bargaining power.
B) The insured has the right to modify the policy at any time.
C) The insurer prepares the policy, and the insured must accept
it as written or decline it entirely.
D) The policy automatically renews without input from either
party.
ANSWERS>C - Because the insurer drafts the contract, any
ambiguities are typically interpreted in favor of the insured.
