FLORIDA 2-15 INSURANCE FINAL REVIEW TEST 2023-2024
ACTUAL EXAM QUESTIONS DETAILED VERIFIED ANSWERS
WITH RATIONALES /A+ GRADE ASSURED
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 - ANSWER C. The concept of
insurancedeveloped from the need to minimize the adverse effects of risk associated
with the probability of financial loss.
Which of the following risks is insurable?
• pure risks
• gambling
• speculative risks
• investing - ANSWER A. Only pure risks are insurable because they involve only the
chanceof loss. They are pure in the sense that they do not mix both profits and losses.
Insurance is concerned with the economic problems created by pure risks.
Buying insurance is one of the most effective ways of
• avoiding risk
• transferring risk
• reducing risk
• retaining risk - ANSWER B. Buying insurance is one of the most effective ways of
transferring risk. Through the insurance contract, the burden of carrying the risk and
indemnifying the financial loss is transferred from the individual to the insurance
company.
,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 risks - ANSWER B. The function of insurance is to safeguard
againstfinancial loss by having the losses of few paid by the contributions of many who are
exposed to the same risk.
All of the following are elements of an insurable risk EXCEPT
• the loss must be due to chance
• the loss must be predictable
• the loss must be catastrophic
• the loss must have a determinable value - ANSWER C. One of the criteria for an
insurablerisk is that it NOT be catastrophic. A principle of insurance holds that only a small
portion of agiven group will experience loss at any one time. Risks that would adversely
affect large numbers of people or large amounts of property - wars or floods, for example -
are typically not insurable.
The amount of money an insurer sets aside to pay future claims is called
• a premium
• a reserve
• a dividend
• an accumulated interest - ANSWER B. Reserves can be defined as the amounts that
areset aside to fulfill the insurance company's obligation to pay future claims. The
reserve is compiled from past premium payments and interest.
Which of the following constitutes an insurable interest?
• the policyowner must expect to benefit from the insured's death
• the policyowner must expect to suffer a loss when the insured dies or becomes disabled
• the beneficiary, by definition, has an insurable interest in the insured
,• the insured must have a personal or business relationship with the beneficiary - ANSWER
B. Insurable interest requires the policyowner to benefit from the insured's continuing to
liveor enjoy good health or to suffer a loss when the insured dies or is disabled.
Which of the following statements describes the parol evidence rule?
• a written contract cannot be changed once it is signed
• an oral contract cannot be modified by written evidence
• a written contract cannot be changed by oral evidence
• an oral contract takes precedence over any earlier written contract - ANSWER C. The
parol evidence rule states that when parties put their agreement in writing, all previous
verbal statements come together in that writing, and a written contract cannot be changed
ormodified by parol (oral) evidence.
Which of the following factors determines whether policy dividends will be paid on a
participating policy?
• reserves and experience
• expenses and claims costs
• interest and benefits
• premiums and renewability - ANSWER B. If expenses and claims costs are less
thanexpected, dividends are likely to be paid.
A licensed agent legally represents
• the insurer
• the applicant/insured
• the state insurance department
• himself or herself - ANSWER A. An agent is an individual who has been authorized by
aninsurer to be its representative to the public and to offer for sale its goods and services.
All of the following statements regarding policy replacement are correct EXCEPT
• replacement involves convincing a policyholder to lapse or terminate an existing policy
andto purchase another
, • interrupting one cash value insurance plan to begin another could cause serious
financialproblems for the policyowner
• even if the customer wants to replace his or her existing policy, an agent can effect a
policyreplacement only by following the replacement regulations in the agent's state
• pr - ANSWER D. The new policy will probably be at a higher premium rate because it
willbe based on the insured's then-attained age.
With regard to insurable risks, which of the following statements is NOT correct?
• only pure risks are insurable
• an insurable risk must involve loss that is within the insured's control
• insurers will not insure risks that are catastrophic in nature
• an insurable risk must be measurable - ANSWER B. To be insurable, a risk must
involvethe chance of loss that is fortuitous and outside the insured's control.
On August 9, Albert made an application for life insurance that his agent submitted a day
laterwithout a premium payment. On August 21, the insurer issued the policy as applied for
and onAugust 24, the agent delivered the policy and collected the initial premium. On what
day was the contract offer made?
• August 9
• August 10
• August 21
• August 24 - ANSWER C. If an applicant does not submit an initial premium with the
application, the applicant is inviting the insurance company to make a contract offer. The
insurer can respond by issuing a policy (the offer) that the applicant can accept by paying
thepremium when the policy is delivered.
All statements made by an applicant in an application for life insurance are considered to be
• warranties
• affirmations
ACTUAL EXAM QUESTIONS DETAILED VERIFIED ANSWERS
WITH RATIONALES /A+ GRADE ASSURED
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 - ANSWER C. The concept of
insurancedeveloped from the need to minimize the adverse effects of risk associated
with the probability of financial loss.
Which of the following risks is insurable?
• pure risks
• gambling
• speculative risks
• investing - ANSWER A. Only pure risks are insurable because they involve only the
chanceof loss. They are pure in the sense that they do not mix both profits and losses.
Insurance is concerned with the economic problems created by pure risks.
Buying insurance is one of the most effective ways of
• avoiding risk
• transferring risk
• reducing risk
• retaining risk - ANSWER B. Buying insurance is one of the most effective ways of
transferring risk. Through the insurance contract, the burden of carrying the risk and
indemnifying the financial loss is transferred from the individual to the insurance
company.
,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 risks - ANSWER B. The function of insurance is to safeguard
againstfinancial loss by having the losses of few paid by the contributions of many who are
exposed to the same risk.
All of the following are elements of an insurable risk EXCEPT
• the loss must be due to chance
• the loss must be predictable
• the loss must be catastrophic
• the loss must have a determinable value - ANSWER C. One of the criteria for an
insurablerisk is that it NOT be catastrophic. A principle of insurance holds that only a small
portion of agiven group will experience loss at any one time. Risks that would adversely
affect large numbers of people or large amounts of property - wars or floods, for example -
are typically not insurable.
The amount of money an insurer sets aside to pay future claims is called
• a premium
• a reserve
• a dividend
• an accumulated interest - ANSWER B. Reserves can be defined as the amounts that
areset aside to fulfill the insurance company's obligation to pay future claims. The
reserve is compiled from past premium payments and interest.
Which of the following constitutes an insurable interest?
• the policyowner must expect to benefit from the insured's death
• the policyowner must expect to suffer a loss when the insured dies or becomes disabled
• the beneficiary, by definition, has an insurable interest in the insured
,• the insured must have a personal or business relationship with the beneficiary - ANSWER
B. Insurable interest requires the policyowner to benefit from the insured's continuing to
liveor enjoy good health or to suffer a loss when the insured dies or is disabled.
Which of the following statements describes the parol evidence rule?
• a written contract cannot be changed once it is signed
• an oral contract cannot be modified by written evidence
• a written contract cannot be changed by oral evidence
• an oral contract takes precedence over any earlier written contract - ANSWER C. The
parol evidence rule states that when parties put their agreement in writing, all previous
verbal statements come together in that writing, and a written contract cannot be changed
ormodified by parol (oral) evidence.
Which of the following factors determines whether policy dividends will be paid on a
participating policy?
• reserves and experience
• expenses and claims costs
• interest and benefits
• premiums and renewability - ANSWER B. If expenses and claims costs are less
thanexpected, dividends are likely to be paid.
A licensed agent legally represents
• the insurer
• the applicant/insured
• the state insurance department
• himself or herself - ANSWER A. An agent is an individual who has been authorized by
aninsurer to be its representative to the public and to offer for sale its goods and services.
All of the following statements regarding policy replacement are correct EXCEPT
• replacement involves convincing a policyholder to lapse or terminate an existing policy
andto purchase another
, • interrupting one cash value insurance plan to begin another could cause serious
financialproblems for the policyowner
• even if the customer wants to replace his or her existing policy, an agent can effect a
policyreplacement only by following the replacement regulations in the agent's state
• pr - ANSWER D. The new policy will probably be at a higher premium rate because it
willbe based on the insured's then-attained age.
With regard to insurable risks, which of the following statements is NOT correct?
• only pure risks are insurable
• an insurable risk must involve loss that is within the insured's control
• insurers will not insure risks that are catastrophic in nature
• an insurable risk must be measurable - ANSWER B. To be insurable, a risk must
involvethe chance of loss that is fortuitous and outside the insured's control.
On August 9, Albert made an application for life insurance that his agent submitted a day
laterwithout a premium payment. On August 21, the insurer issued the policy as applied for
and onAugust 24, the agent delivered the policy and collected the initial premium. On what
day was the contract offer made?
• August 9
• August 10
• August 21
• August 24 - ANSWER C. If an applicant does not submit an initial premium with the
application, the applicant is inviting the insurance company to make a contract offer. The
insurer can respond by issuing a policy (the offer) that the applicant can accept by paying
thepremium when the policy is delivered.
All statements made by an applicant in an application for life insurance are considered to be
• warranties
• affirmations
