FLORIDA INSURANCE 2-15 EXAM 2024/2025 WITH 100% ACCURATE SOLUTIONS, Exams of Nursing

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FLORIDA INSURANCE 2-15 EXAM 2024/

WITH 100% ACCURATE SOLUTIONS

Insurance - Precise 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 - Precise Answer ✔✔Is based on actuarial or mathematical principles and guarantees a specified sum of money upon the death of the person who is insured. Health Insurance - Precise Answer ✔✔Evolved from scientific principles to provide funds for medical expensed due to sickness or injury and to cover loss of income during disability Annuities - Precise 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 - Precise Answer ✔✔Uncertainty regarding loss; the probability of loss occurring for an insured or prospect Speculative Risks - Precise Answer ✔✔Involve the possibility of loss and gain. (Not Insurable) Pure Risks - Precise Answer ✔✔Involve the possibility of loss only. (Insurable) Peril - Precise Answer ✔✔Cause of risk (when a building burns, fire is the peril)

Hazards - Precise Answer ✔✔The source of danger Physical Hazard - Precise Answer ✔✔A hazard being of physical nature. A person being treated of cancer, the disease is the physical endangerment. (Blindness & deafness) Risk Avoidance - Precise Answer ✔✔Occurs when individuals evade risk entirely. "If you don't drive, then you avoid getting in an auto accident." Risk Reduction - Precise Answer ✔✔Takes place when the chances of loss are lessened. Changing a lifestyle to minimize a known risk. Risk Retention - Precise 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 - Precise Answer ✔✔The act of shifting the responsibility of risk to another in the form of an insurance contract. Adverse Selection - Precise 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 - Precise 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 - Precise Answer ✔✔Participating policies Owned by policyholders Vote for directors and trustees Directors and management have control Typically higher rates Assessment Mutual Insurers - Precise Answer ✔✔Prohibited in Florida Pure Assessment Mutual Company - Precise Answer ✔✔Don't pay premium and total loss is divided among members Lloyds of London - Precise Answer ✔✔NOT considered an insurance company

• An association of individuals and companies that individually underwriter insurance. Fraternal Benefit Societies - Precise Answer ✔✔Must be nonprofit, have a lodge system, and offer insurance to its members only Service Providers - Precise Answer ✔✔Contract for and sell medical and hospital care services. Participants are known as subscribers. Home Service Insurer - Precise Answer ✔✔Insurer that offers relatively small policies with premiums payable on a weekly basis.

Captive Agents - Precise Answer ✔✔A.k.a. Career agents Works for only one insurer and sells only that insurers products Independent Agents - Precise 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 - Precise Answer ✔✔Usually not license and don't sell insurance. Assist insurance companies field representatives. Career Agency System - Precise 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 - Precise 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 - Precise Answer ✔✔Agents represent several insurers through signed contracts and are paid on commission or fee basis, not through salary. Regulating the business of insurance - Precise Answer ✔✔Legislation The Court System State Insurance Departments Paul v. Virginia - Precise 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) - Precise Answer ✔✔- Ruling is a form of interstate commerce
• Should be regulated by the federal government
• Fed Gov. WINS The McCarran-Ferguson Act - Precise 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 the FTC - Precise Answer ✔✔- FTC tried to control the advertising and sales literature used by the health insurance industry
• Thus, supreme court held that the McCarran-Ferguson Act disallowed this
• FTC tried even harder to force more federal control Intervention by SEC - Precise 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 - Precise 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 - Precise 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 - Precise Answer ✔✔- Office of Insurance Regulation has licensed them to carry out business in Florida Nonadmitted Insurance Company - Precise Answer ✔✔- Have not been licensed by the the Florida Office of Insurance Regulation HMO - Precise Answer ✔✔Health Maintenance Organization
• Health care management stressing preventive health care, early diagnosis and treatment on an outpatient basis Policy Replacement - Precise Answer ✔✔- An action which eliminates the original policy or diminishes its benefits or values Bad policy remplacement issues - Precise 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 - Precise Answer ✔✔- Improper use of premiums collected by an insurance producer
• Depositing a client's premium in own personal account

Rebating - Precise 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 - Precise Answer ✔✔- National Association of Insurance Commissioners
• No legal power of its own
• Encourages uniformity in state insurance laws and regulations Florida Insurance Guaranty Association - Precise 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 - Precise Answer ✔✔- National Association of Insurance and Financial Advisors (NAIFA)
• Designed to protect agents
• Dedicated to supporting life insurance industry NAHU - Precise Answer ✔✔- National Association of Health Underwriters
• Designed to protect agents

• Dedicated to supporting the health insurance industry A.M. Best Rating Agency - Precise Answer ✔✔- Profitability, leverage, & liquidity
• A++ to F and S (suspended) Standard and Poors (S&P) Rating Agency - Precise Answer ✔✔- Claims and the ability to pay
• AAA to C to R Moodys Investor Services Rating Agency - Precise Answer ✔✔- Financial strength
• Aaa to C Fitch IBCA (formerly Duff & Phelps) - Precise Answer ✔✔- Credit worthiness of securities
• AAA to CCC Weiss Ratings, Inc. - Precise Answer ✔✔- Strength and safety of financial institutions and rates risk adjusted mutual funds and stocks
• A to F Elements of Contract - Precise Answer ✔✔Offer & Acceptance + Consideration + Legal Purpose + Competent Parties = Legally Binding Contract Offer & Acceptance - Precise Answer ✔✔Completed when a premium payment accompanies the offer made by the proposed insured

Legal Purpose - Precise Answer ✔✔The policy owner must have an insurable interest in the insured Competent - Precise Answer ✔✔Just like " innocent until proven guilty" Aleatory - Precise Answer ✔✔(1) There is an element of chance for both parties (2) The dollar values exchanged may not be equal Adhesion - Precise Answer ✔✔The contract has been prepared by one party (the insurer), rather than by negotiation between the contracting parties. Unilateral - Precise Answer ✔✔Promise for Performance Valued Contracts - Precise Answer ✔✔Pay a predetermined amount with no way to assess loss Indemnity Contracts - Precise Answer ✔✔Pay the amount of the loss only (up to the policy limit) STOLI - Precise Answer ✔✔- Stranger-Orignated Life Insurance

• Typically target seniors

Brokers - Precise Answer ✔✔-Florida does not issue separate licenses for brokers

• Cannot bind the contract

Agents - Precise Answer ✔✔- The acts of the agent are considered the acts of the company

• Can bind the contract Entities involved in agency - Precise Answer ✔✔The agent The insured The insurance company Express Authority - Precise Answer ✔✔The authority that an agent has in writing in the contract with the insurer that the agent represent Implied Authority - Precise Answer ✔✔Authority that is given not in writing but that is necessary for the agent to transact insurance Apparent Authority - Precise Answer ✔✔A third party is led to believe and that the agent is given due to the agent's actions. Waiver - Precise Answer ✔✔The voluntary giving up of a legal, given right. Estoppel - Precise Answer ✔✔Simply means the legal enforcement of a waiver. Parol Evidence Rule - Precise Answer ✔✔When parties put their agreement in writing, all previous verbal statements come together in that writing, and a written contract cannot be changed or modified. Void Contract - Precise Answer ✔✔Fraud + Prior Knowledge
• Have two years from the date of the contract purchase to dispute the validity of a contract

Voidable - Precise Answer ✔✔One of the parties has a legal reason to reject or cancel the contract Categories of Life Insurance - Precise Answer ✔✔Ordinary Industrial Group Ordinary Life Insurance - Precise Answer ✔✔- Term, Whole Life, Universal Life, Endowment

• The most common Industrial Life Insurance - Precise Answer ✔✔- Sold by home service insurers
• Over the years has been used less
• Mainly, to cover funeral expense Agent in charge - Precise Answer ✔✔A insurance agency must have one, but the agent does not have any specific duties or responisbilities Term Life Insurance - Precise Answer ✔✔- Most common. Policy premiums are based on mortality and loading.
• Premiums stay level, and there are no cash values Mortality - Precise Answer ✔✔The relative incidence of death within a group. Loading - Precise Answer ✔✔Amount added to net premiums to cover the company's operation expenses and contingencies

Decreasing Term - Precise Answer ✔✔- Face value declines over time

• Usually purchases to cover debts whose balances decrease over time Increasing Term - Precise Answer ✔✔- Commonly used as a hedge against inflation.
• Used to ward of decreased purchasing power.
• Death benefit increases with time.
• Depends on CPI Option To Renew - Precise Answer ✔✔- most popular on ART annual renewal term) and YRT (yearly renewal term).
• Allows the policyowner to renew the policy without the insured having to go through medical underwriting. Option To Covert - Precise Answer ✔✔- allows the policyowner the choice of exchanging a term policy for a whole life policy at renewal time. Whole Life Insurance - Precise Answer ✔✔- Offers coverage for the insured's entire lifetime.
• Can be broken down into six different types o Straight whole life o Universal life o Variable life o Adjustable life o Modified life o Family life

Advantages of Whole Life - Precise Answer ✔✔- Advantages o Guaranteed for life and will not cancel because of age o Cash value builds o Premium costs can be fixed or flexible o Cash value can be used to pay the premiums o Additional insurance can be added without the need for medical examination o The policy can be converted to an annuity o Loan values are available for borrowing against the principal Disadvantages of Whole Life - Precise Answer ✔✔- Disadvantages o The required premium levels may make it hard to buy enough protection o Could prove more costly than term insurance over time o Make sure the client knows all the facts of the policy and is aware of everything they are applying for. Straight Whole Life - Precise Answer ✔✔Premium level protection; level premiums, until insured's death or age 100. Limited Pay Whole Life - Precise Answer ✔✔Level premiums limited to certain time period, less than life. Single Premium Whole Life - Precise Answer ✔✔Paid up for life with one large premium payment Modified Whole Life - Precise Answer ✔✔Level premiums for designated timeframe (typically 5 years); higher premiums thereafter

Graded Premium Whole Life - Precise Answer ✔✔Lower premiums for designated timeframe (typically 5-10 years); payments rise annually thereafter until leveling off Traditional Whole Life - Precise Answer ✔✔Funds invested in general accounts Minimum Deposit Whole Life - Precise Answer ✔✔Cash values begin immediately and are use to pay future premiums (partially or on full). Indexed Whole Life - Precise Answer ✔✔(Indexed means to follo shadow or mirror) Face amount increases with the Consumer Price Index. Indeterminate Premium Whole Life - Precise Answer ✔✔Lower premium rate initially (2-3 years) and adjusted (up or down) according to the insurers mortality, expense and investment projections. Enhanced ('Economatic') Whole Life - Precise Answer ✔✔Mutual insurers issue policy with lower premium and face amount that diminishes after a few years. Dividends are used to purchase paid-up additions Whole Life - Precise Answer ✔✔- Death Benefit is Fixed

• Only one death benefit option
• Premium is fixed
• Mortality Rates are fixed & guaranteed
• Cash Value is Fixed & Guaranteed
• No investment options
• No partial surrenders

Variable Life - Precise Answer ✔✔- Death Benefit is Variable

• Only one death benefit option
• Premium is fixed
• Mortality Rates are fixed & guaranteed
• Cash Value is Variable & No Guaranteed
• Yes, investment options
• No partial surrenders Universal Life - Precise Answer ✔✔- Death Benefit is Adjustable
• Two death benefit options
• Premium is Flexible
• Mortality Rates are current & guaranteed maximum
• Cash Value is current, Guaranteed maximum
• No investment options
• Yes, partial surrenders Variable Universal Life - Precise Answer ✔✔- Death Benefit is Variable & Adjustable
• Two death benefit options
• Premium is Flexible
• Mortality Rates are current & guaranteed maximum
• Cash Value is variable, and no Guarantee
• Yes, investment options
• Yes, partial surrenders

Endowment Policies - Precise Answer ✔✔- To endow is to "furnish with an income"

• A type of life insurance that is payable to the insured if she/he is still living on the policy's maturity date.
• Can provide a death benefit to the beneficiary or a living benefit to the policyowner. Endowment Premiums - Precise Answer ✔✔- Are always the most expensive and build cash values the fastest.
• Could be considered investment policies rather than insurance Modified Endowment Contracts - Precise Answer ✔✔- A Modified Endowment Contract (MEC) makes different tax considerations to a policy
• It must pass the "7-pay test" o If the total amount a policyowner pays into the contract during its first seven years exceeds the sum of the net level premiums that would have been payable to provide paid-up future benefits. Family Income Policies - Precise Answer ✔✔Whole Life + Decreasing Term
• This policy pays the beneficiary a monthly income for the balance of the family income coverage period.
• The insurer must die prior to the time the selected family income coverage period ends. Starts when policy is issued. Family Maintenance Policies - Precise Answer ✔✔Whole Life + Level Term
• The policy will pay the beneficiary a monthly income for a preselected number of years.
• Must die prior to a selected date
• The specified income period begins on the date of death.

Family Plan Policies - Precise Answer ✔✔o All family members are covered under one plan. Multiple Protection Policies - Precise Answer ✔✔Pays a benefit of double or triple the face amount if death occurs during a specified period. Joint Life Policies - Precise Answer ✔✔Covers two or more people. Using some type of permanent insurance, it pays the death benefit when one of the insured's dies. Premiums are less than MPP's Last Survivor Policy (Second-to-Die) - Precise Answer ✔✔Covers two life's; benefit is paid upon the death of the last surviving insured Juvenile Insurance - Precise Answer ✔✔Permanent insurance written on underage children (usually from one day to age 14 or 15 years.) Jumping Juvenile Policy - Precise Answer ✔✔When the child reaches age 21, coverage increases to five times the face amount, premiums remain the same and no evidence of insurability is required. Credit Life Insurance - Precise Answer ✔✔Decreasing Term that pays the amounts due on a loan if the debtor dies before the load is paid off Interest Sensitive Whole Life - Precise Answer ✔✔Premiums vary to reflect the insurer's changing assumptions with regard to death investment and expense factors. Adjustable Life - Precise Answer ✔✔Permanent + Term

Combines permanent and term life policies allowing changes to face amount, period payments, and term during policy lifetime. Universal Life - Precise Answer ✔✔UL policies are characterized by considerable flexibility. UL policies allow premium payments and face amounts to be adjusted up or down according to the policyowners needs. Accidental Death Benefit Rider - Precise Answer ✔✔pays a multiple of the death proceeds if the cause of death is a covered accidental event. Accelerated Benefit Rider - Precise Answer ✔✔Pays a portion of the death benefit if the insured is diagnosed with a terminal illness. No lapse guarantee rider - Precise Answer ✔✔Guarantees a death benefit for life so the insured is covered even if premium payments lapse. Additional Insured Rider - Precise Answer ✔✔Provides a death benefit on the lives of family members Childrens Insurance Rider - Precise Answer ✔✔Extends a death benefit to the insureds child Rights of Ownership - Precise Answer ✔✔- Decision on choosing and changing the beneficiary

• Decision on just how the death benefits will be disbursed to the beneficiary
• Right to policy loans
• Right to policy dividends and their disbursement method

• Right to Assign ownership of the policy to someone else
• The right to cancel the policy and select a no forfeiture option. The Insuring Clause - Precise Answer ✔✔- Outlines the conditions under which the policy will pay.
• If the insured dies, the insurer promises to pay the beneficiary the death benefit as laid out in the policy.
• It contains the face value of the policy, the insured's name, and the name of the insurer. Free Look Provision - Precise Answer ✔✔- Allows the applicant to look over the policy after they receive it.
• 14 days and 30 days Consideration Clause - Precise Answer ✔✔- Spells out exactly how much premium payments are and when they are due.
• The legal consideration for a life policy consists of the application and payment of the initial premium. Grace Period - Precise Answer ✔✔- A stated period of time after the premium due date during which the policy remains in force even though the premium has not been paid. The Reinstatement Clause - Precise Answer ✔✔- Stipulates the conditions under which the policy can be restored.
• All overdue premiums plus interest must be paid if they restore.
• Usually policies may be reinstated three years after lapse.

Policy Loan Provision - Precise Answer ✔✔- A permanent life insurance may be borrowed against

• If insured dies, the loan amount and any interest due must be repaid from the death benefit proceeds. Automatic Premium Loan Provision - Precise Answer ✔✔- Enables the insurer to withdraw funds from the policy if any cash value has accumulated within the contract Incontestable Clause - Precise Answer ✔✔- A time limit (usually 2 years) in which the insurer can dispute a policy based on the validity of statements made on the original application. Absolute Assignment - Precise Answer ✔✔- The transfer is irrevocable and the assignee receives full control of the policy. - The assignee can even change the beneficiary without the beneficiary's permission, unless otherwise stated. Collateral Assignment - Precise Answer ✔✔as a means of establishing security on a debt. Accelerated Death Benefits Provision - Precise Answer ✔✔- Allows the policyowner to withdraw funds from their life insurance policy early, before death. The Suicide Provision - Precise Answer ✔✔- This is designed to protect the insurance carrier.
• A two-year period of time in which the policy's death benefit will not be paid if the insured commits suicide.

Misstatement of Age or Sex Provision - Precise Answer ✔✔- Designed to enable the insurer to make the adjustment between the death benefit at the misstated rate and what the death benefit should have been if the age and/or sex had not been misstated. Exclusions - Precise Answer ✔✔- War or Military Service

• Aviation
• Hazardous Occupation or Hobby
• Felony Commission
• Suicide War or Military Service - Precise Answer ✔✔- Status clause excludes payment of proceeds if insured dies while in military. Results clause excludes payment if the insured dies as a result of declared war. Nonforfeiture Options - Precise Answer ✔✔- privileges allowed under a life insurance contract after cash values are created Cash Surrender Value - Precise Answer ✔✔- the policyowner may want to give up the value of the policy in exchange for cash
• May not be aloud to do this for the first two or three years. Reduced Paid Up Insurance - Precise Answer ✔✔- the policyowner may request the cash value of the policy to be used to pay for itself.
• It's the same type of insurance as the original policy except all riders, including those for disability and accidental death

Extended Term Insurance - Precise Answer ✔✔- does not allow the policy to continue to earn interest, increase cash value, or pay dividends.

• Allows the face amount of the policy to remain the same for a specified period of time. Policy Dividends - Precise Answer ✔✔- Are not taxable income as they are considered a return of premiums paid
• Shareholders receive dividends in stock companies (taxable)
• Mutual companies pay their dividends in form of return of excess premium (NOT taxable)
• Participating policies usually have higher premiums.
• Surrender values are the same for both Dividend Options - Precise Answer ✔✔- Cash in Hand
• Apply Dividends Against Premium Payments
• Allow Dividends to Accumulate at Interest
• Use Dividends to Buy Paid-up Additions
• Use Dividends to Purchase One-Year Term Insurance Cash In Hand - Precise Answer ✔✔Through a company check Apply Dividends Against Premium Payments - Precise Answer ✔✔- Used to pay policy premiums and lessen the out of pocket expenses Allow Dividends to Accumulate at Interest - Precise Answer ✔✔- They do not have to be disbursed. Can be left in the account to accumulate interest. Dividends are not taxable, however the interest earned is taxable.

Use Dividends to Buy Paid up Additions - Precise Answer ✔✔- additional life insurance can be purchases as long as it is of the same kind as original policy. Use Dividends to Purchase One Year Term Insurance - Precise Answer ✔✔- purchase one year term insurance at net rays, usually limited to no more than the current cash value of the contract. Policy Riders - Precise Answer ✔✔To make alterations to original policy Guaranteed Insurability Rider - Precise Answer ✔✔Permits Insured to buy specific amounts of additional insurance at specified intervals (usually 3 years) without evidence of insurability Waiver of Premium - Precise Answer ✔✔- exempts the owner from paying premiums while they're disabled. Automatic Premium Loan Rider (AVC) - Precise Answer ✔✔- If the premium is not paid after grace period, the cash value of the policy can be used to pay the premium

• Creating reduced paid-up insurance Payor Rider - Precise Answer ✔✔- provides an additional safeguard for life insurance taken out on a minor.
• If the adult premium payor dies or becomes totally disabled, premium payments will be waived until the child's a specific age of adulthood, such as 21. Accidental Death Benefit Rider - Precise Answer ✔✔- "Double Indemnity"
• Provide an additional amount usually equal to the face amount if death occurs under certain conditions stated in the policy.

• Can be written to triple the policy's face amount. Return of Premium Rider - Precise Answer ✔✔- The beneficiary could receive the paid premiums as well as the death benefit
• Also, with ROP the premium payments paid could go to the living owner. Cost of Living Adjustment Rider (COLA) - Precise Answer ✔✔- Based on the Consumer Price Index (CPI).
• If inflation increases, so does the value of the policy.
• Limited to 5% increase per year. Other Insureds Rider - Precise Answer ✔✔Allows owners to add other family members the base policy. Factors That Determine Premium Costs - Precise Answer ✔✔Mortality Interest Expenses Net Single Premium - Precise Answer ✔✔Amount needed today to fund the future benefits Net Level Premiums - Precise Answer ✔✔Premium payments over the number of years Gross Premiums - Precise Answer ✔✔Amount policyowner is required to pay after the addition of the expense factor

Net Single Premium = - Precise Answer ✔✔Mortality Cost - Interest Gross Premium = - Precise Answer ✔✔Net Single Premium + Expenses Policy Reserves - Precise Answer ✔✔Intangible and belong to the insurer Extra Percentage Tables - Precise Answer ✔✔- Most commonly used method of Rating Substandard Risks

• Numerical system that calculate premium rates for those who present a higher health risk for the insurer Single Premium Payment - Precise Answer ✔✔Lump Sum Method
• Used to be the only way
• Nowadays there are too many people that lack financial knowledge to handle this much money at once Interest Only Payments - Precise Answer ✔✔- The insurance company gives the money out at a certain rate
• The beneficiary can take the money out at anytime Installment Payments - Precise Answer ✔✔- The shorter the payout period, the larger each payment amount
• Equal number of money at intervals from the proceeds Income For Life - Precise Answer ✔✔- Allows the beneficiary to receive a guaranteed income for the rest of their life.