FLORIDA 2-15 INSURANCE LICENSE EXAM

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FLORIDA 2-15 INSURANCE LICENSE EXAM

-600+ QUESTIONS

AND CORRECT ANSWERS WITH RATIONALES

GRADED A+

Which of the following insurance concepts is founded on the ability to predict the approximate number of deaths or frequency of disabilities within a certain group during a specific time.

• Principle of large loss
• Quantum insurance principle
• Indemnity law
• Law of large numbers - CORRECT ANSWER>>Law of large numbers

The owner of a camera store is worried that her new employees may help themselves to items from inventory without paying for them. What kind of hazard is described.

• Physical hazard
• Ethical hazard
• Morale hazard
• Moral hazard - CORRECT ANSWER>>Moral hazard

All of the following actions are examples of risk avoidance EXCEPT

• Bill won't fly in an airplane
• Wendy keeps her money out of the stock market
• Pat pays his insurance premium
• John never drives a car - CORRECT ANSWER>>Pat pays his insurance premium

Which of the following statements is CORRECT

• Only speculative risk is insurable
• Only pure risk is insurable
• Both pure risk and speculative risks are insurable
• Neither pure risks nor speculative risks are insurable - CORRECT ANSWER>>Only pure risk is

insurable

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Which of the following statements does NOT describe an element of an insurable risk

• The loss must not be due to chance
• The loss must be definite and measurable
• The loss cannot be catastrophic
• The loss exposure to be insured must be large - CORRECT ANSWER>>The loss must not be

due to chance

In the insurance business, risk can best be defined as

• sharing the possibility of a loss
• uncertainty regarding the future
• uncertainty regarding financial loss
• uncertainty regarding when death will occur - CORRECT ANSWER>>uncertainty regarding

financial loss

Buying insurance is one of the most effective ways of

• avoiding risk
• transferring risk
• reducing risk
• retaining risk - CORRECT ANSWER>>transferring risk

Which of the following best describes the function of insurance

• It is a form of legalized gambling
• It spreads financial risk over a large group to minimize the loss to any one individual
• It protects against living too long
• It creates and protects risk - CORRECT ANSWER>>It spread the financial risk over a large

group to minimize the loss to any one individual

tornado is an example of

• a physical hazard
• a speculative risk
• a peril
• a moral hazard - CORRECT ANSWER>>a peril
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Tom buys his wife Mary a $50,000 diamond ring. When she is not wearing the ring, she keeps it in a safe deposit box at a local bank. This is an example of risk

• avoidance
• reduction
• retention
• transference - CORRECT ANSWER>>reduction

Producers are expected to adhere to all of the following standards to protect consumers and promote suitable sales EXCEPT

• selling to customers needs
• determining the suitability if recommended products
• assessing prospects' financial ability to pay commissions
• full and accurate disclosure - CORRECT ANSWER>>assessing prospects' financial ability to pay

commissions

An insurance company organized and based in Florida can be described as what type of company in Florida

• Alien
• Home-based
• Foreign
• Domestic - CORRECT ANSWER>>Domestic

Which of the following statements regarding types of insurers is NOT correct

• Reinsurers usually deal with policy owners
• Mutual insurance companies are "owned" by their policy owners
• Stock insurance companies seek profit for their shareholders
• Fraternal benefit societies must be nonprofit organizations - CORRECT ANSWER>>Reinsurers

usually deal with policy owners

Regarding landmark cases and laws involving the regulation of insurance, which of the following statements is NOT correct

• Insurers are required to disclose when an applicants consumer/credit history is being

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• The NAIC has standing committees that work regularly to examine various aspects of the

insurance industry

• The Federal Trade Commission (FTC) directly supervises all insurance marketing activities.
• The McCarren-Ferguson Act (1945) led directly to our current understanding that the

insurance industry is predominantly regulated by state governments - CORRECT ANSWER>>The FTC directly supervises all insurance marketing activities

Which of the following statements regarding the National Association of Insurance Commissioners (NAIC) is NOT correct

• the NAIC is empowered to prosecute and punish criminal violators in the insurance industry
• the NAIC seems to preserve state rather than federal regulation of the insurance industry
• the NAIC promotes uniformity in state insurance laws and regulations
• the NAIC seems to promote efficient administration of insurance laws and regulations. -

CORRECT ANSWER>>the NAIC is empowered to prosecute and punish criminal violators in the insurance industry

In an insurance transaction, licensed agents legally represent which of the following?

• Insurer
• Applicant and insured
• State office of insurance regulation
• Themselves - CORRECT ANSWER>>Insurer

In Florida, properly licensed and appointed agents may act as brokers in insurance transactions, in which case they may legally represent

• the insurer
• the applicant and insured
• the state office of insurance regulation
• themselves - CORRECT ANSWER>>the applicant and insured

A life insurance company organized in Illinois, with its home office in Philadelphia, is licensed to conduct business in Florida. In Florida, this company is classified as

• a domestic company
• an alien company
• a foreign company
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