Florida Insurance 2-14 Exam Terms
Insurance - CORRECT 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 - CORRECT ANSWER - Is ba...
Florida Insurance 2-14 Exam Terms
Insurance - CORRECT 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 - CORRECT ANSWER - Is based on actuarial or mathematical principles and guarantees a
specified sum of money upon the death of the person who is insured.
Annuities - CORRECT 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 - CORRECT ANSWER - Uncertainty regarding loss; the probability of loss occurring for an insured or
prospect
Speculative Risks - CORRECT ANSWER - Involve the possibility of loss and gain. (Not Insurable)
Pure Risks - CORRECT ANSWER - Involve the possibility of loss only. (Insurable)
Peril - CORRECT ANSWER - Cause of risk (when a building burns, fire is the peril)
Hazards - CORRECT ANSWER - The source of danger
Physical Hazard - CORRECT ANSWER - A hazard being of physical nature.
A person being treated of cancer, the disease is the physical endangerment. (Blindness & deafness)
Risk Avoidance - CORRECT ANSWER - Occurs when individuals evade risk entirely. "If you don't drive,
then you avoid getting in an auto accident."
,Risk Reduction - CORRECT ANSWER - Takes place when the chances of loss are lessened. Changing a
lifestyle to minimize a known risk.
Risk Retention - CORRECT 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 - CORRECT ANSWER - The act of shifting the responsibility of risk to another in the
form of an insurance contract.
Adverse Selection - CORRECT 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 - CORRECT ANSWER - Loss must be due to chance
Assessment Mutual Insurers - CORRECT ANSWER - Prohibited in Florida
,Pure Assessment Mutual Company - CORRECT ANSWER - Don't pay premium and total loss is divided
among members
Lloyds of London - CORRECT ANSWER - NOT considered an insurance company
- An association of individuals and companies that individually underwriter insurance.
Fraternal Benefit Societies - CORRECT ANSWER - Must be nonprofit, have a lodge system, and offer
insurance to its members only
Home Service Insurer - CORRECT ANSWER - Insurer that offers relatively small policies with premiums
payable on a weekly basis.
Captive Agents - CORRECT ANSWER - A.k.a. Career agents
Works for only one insurer and sells only that insurers products
Independent Agents - CORRECT 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 - CORRECT ANSWER - Usually not license and don't sell insurance. Assist insurance
companies field representatives.
Career Agency System - CORRECT 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 - CORRECT 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 - CORRECT ANSWER - Agents represent several insurers through signed
contracts and are paid on commission or fee basis, not through salary.
Regulating the business of insurance - CORRECT ANSWER - Legislation
The Court System
State Insurance Departments
Paul v. Virginia - CORRECT 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) - CORRECT ANSWER - - Ruling is a form
of interstate commerce
- Should be regulated by the federal government
- Fed Gov. WINS
The McCarran-Ferguson Act - CORRECT 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 SEC - CORRECT 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.
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