Life & Health Annuities & Variable Contracts (FLORIDA) Questions And Correct Answers
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Course
FLORIDA HEALTH AND LIFE
Institution
FLORIDA HEALTH AND LIFE
Human Life Value is the economic valuation of an individual based on the individual's
____________ both present and future. - CORRECT ANSWER- earning potential: This
earning's potential valuation extends to the individual's dependents as their existence
and subsidence depends on the individual's...
Life & Health Annuities & Variable
Contracts (FLORIDA) Questions And
Correct Answers
Human Life Value is the economic valuation of an individual based on the individual's
____________ both present and future. - CORRECT ANSWER- earning potential: This
earning's potential valuation extends to the individual's dependents as their existence
and subsidence depends on the individual's viability as a wage earner and financial
provider.
Never flying in a plane will greatly reduce the likelihood of ever being involved in an
airplane crash. This is an example of which risk management technique? - CORRECT
ANSWER- risk avoidance
_________________ can provide a consistent flow of income to an insured for his
lifetime or an allotted amount of time or until death. - CORRECT ANSWER- Annuities
Geri stores her gasoline next to her matches and dynamite; to most this appears to be a
___________ which could lead to an explosion. - CORRECT ANSWER- Hazard
The aggregating of assets to create a pool of resources to address losses experienced
by pool members is called: - CORRECT ANSWER- Risk Pooling
________________ is ONLY the chance of loss - CORRECT ANSWER- Pure Risk
Grumbly Greg Granger leaves his keys in his unlocked car when he goes to the store.
Greg tells everyone , I hope somebody steals that "hunk of junk" so I can make an
insurance claim and buy a new car.
What type of hazard is Grumbly Greg exhibiting? - CORRECT ANSWER- moral hazard
Wearing a helmet when riding a motorcycle may not eliminate the exposure to bodily
injury from a motorcycle accident BUT it would minimize any injury that would occur if
an accident happened.
What type of risk treatment technique is this? - CORRECT ANSWER- risk reduction
What are the elements of an "insurable risk"? - CORRECT ANSWER- Loss must be
due to chance: losses must be random and outside of the insured's control
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,Loss must be definite and measurable: the risk must be definite as to cause, time, place
and amount
Loss must be predictable: that is, the loss must be determinable using statistical
concepts
Loss cannot be catastrophic: no one loss can be large enough to "wipe-out" the pool of
funds
Loss exposures must constitute a large number: large enough to predict loss
probabilities
Loss exposures must be randomly selected: random selection encourages statistical
accuracy
Loss exposure must not encourage "adverse selection": adverse selection is the pooling
of exposures that are disproportionately predisposed and therefore more likely to suffer
loss
Risk Transfer is a way to deal with risk so that the loss is handled by another party.
What is the most common form of risk transfer - CORRECT ANSWER- Insurance
Which association handles claims of insolvent life, accident, and health insurance
companies? - CORRECT ANSWER- Florida Life and Health Insurance Guaranty
Association
What information is important regarding "fraternal benefit societies"? - CORRECT
ANSWER- · Fraternls ARE considered insurance companies
· They are set up as non-profit organizations
· Fraternals provide life and health insurance to members of a religious or social
organization
· They operate solely for the benefits of their members
· They are smaller in policyholder count than commercial insurer counterpart
· Fraternals are "regionalized" organizations most of the time
·They provide non-insurance benefits to membership (outside of insurance protection)
What Are Social insurance programs - CORRECT ANSWER- government programs
that are funded with taxpayer dollars and serve national and state purposes.
Government programs ( Also known as Social Insurance programs) include: -
CORRECT ANSWER- Social Security, Medicare, and Medicaid.
What are some appropriate insurance sales practices? - CORRECT ANSWER- selling
to the customer's needs;
determining the suitability of any product before recommending the product;
full and accurate disclosure of the insurance company and products.
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,What is Mutualization? - CORRECT ANSWER- when a stock company converts itself to
the mutual company
What is Demutualization? - CORRECT ANSWER- when a mutual company converts to
a stock company.
The two main purposes of industry oversight are to ensure: - CORRECT ANSWER-
"consumer protection" and "insurer solvency"
What is Insurer Solvency? - CORRECT ANSWER- The solvency ratio of an insurance
company is the size of its capital relative to all risks it has taken
Jack purchases his insurance from a company that pays him a dividend at the end or
each year (lucky Jack). What type of insurer does Jack have his insurance with? -
CORRECT ANSWER- Mutual Insurer: Mutuals issue "participating polices" which allow
their policyholders to share in dividends. Policy Dividends are essentially a return of
premium that remains after the company has paid expenses. These dividends are not
guaranteed to a policyholder.
What are Risk Retention Groups ? - CORRECT ANSWER- mutual insurers created for
the purpose of insuring people of their professions (e.g. lawyers, dentists, engineers).
___________________ Organizations focus on preventive care and treatment. -
CORRECT ANSWER- Health Maintenance Organization commonly referred to as
HMOs focus on preventive care and treatment. HMOs have a set contract with certain
physicians and hospitals that work with the network that subscribers may use.
What does HMO stand for? - CORRECT ANSWER- Health Maintenance Organization
Which Federal Act re-established the states as the regulators of insurance? -
CORRECT ANSWER- The McCarran-Ferguson Act of 1945 re-establish the states as
the regulators of insurance. The law permits federal antitrust to the extent that state law
does not regulate. Overall, the states on balance reacted by conforming state insurance
laws to confirm to federal law.
With this type of authority an agent acts on behalf of its principal without express or
implied authority granted by the principal - CORRECT ANSWER- Apparent Authority is
when an agent acts on behalf of the principal but without any express or implied
authority. An unknowing third party may be induced to contract with the agent due to the
agent's "apparent authority".
James has convinced his neighbor, a senior citizen, to allow James to take out life
insurance on the life of the neighbor with James named as the beneficiary. James has
advised he will pay all of the premiums and James has offered the neighbor $2,500 for
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, participating in the transaction. This is an example of: - CORRECT ANSWER- Stranger
Originated Life Insurance is strictly prohibited by Florida statute
The courts have ruled that any ambiguities in contracts are construed in the most
favorable light to the __________ party. - CORRECT ANSWER- non-drafting party (the
insured).
Life insurance ___ a personal contract between insurer and insured. - CORRECT
ANSWER- IS NOT!
True or False? The acts of the agent are the acts of the insurer. - CORRECT ANSWER-
It is true, the acts of the agent are "defacto" the acts of the insurer
What is the difference between the concepts of waiver and estoppel? - CORRECT
ANSWER- waiver is the relinquishment of a right where as estoppel is the required
forbearance of a right due to an act or failure to act
Insurance Agents as a Fiduciary are required to? - CORRECT ANSWER- Be fit and
proper
Be honest and trust worthy
Have a good business reputation
Be qualified to perform insurance functions
Have knowledge of, and abide by, state laws and regulations
act in good faith
True or False? To be enforceable at law a contract must have a legal purpose. -
CORRECT ANSWER- TRUE! Contracts which have illegal objects and reasons are not
enforceable and are not binding.
What is the difference between Valued Contracts & Indemnity Contracts? - CORRECT
ANSWER- Valued Contracts pay a stipulated amount listed specifically in the policy.
Indemnity Contracts pay the value of a loss subject to the policy limits.
_______ Law governs the relationship between an agent and insurer and that being that
an act by the agent is an act by the principal - CORRECT ANSWER- Agency Law
governs the relationship between an agent and insurer
What can render a contract unenforceable.? - CORRECT ANSWER- Fraud and the
breach of a Warranty are grounds for invalidating a contract.
Big Money Mountain Insurance Company has received Jill's life insurance application
and has issued the policy on a standard basis. The original application was on a super-
preferred basis. What has Big Money Mountain done? - CORRECT ANSWER- Made a
"counteroffer" to Jill by issuing a standard policy:
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