Florida Life & Health Insurance License, Practice Exams

What minimum surplus must a Florida HMO maintain at all times?

1. The lesser of $1,000,000 or 8 percent of total liabilities, measured at each quarterly statement date
2. A flat 5 percent of total annualized premium, with no minimum dollar amount
3. The greater of $1,500,000, 10% of total liabilities, or 2% of total annualized premium ✓
4. A flat $500,000 at all times, regardless of liabilities or premium volume

Why: Section 641.225(1) requires the greater of $1,500,000, 10% of total liabilities, or 2% of total annualized premium.

Under § 627.564, a group life policy may reserve to the insurer the option to pay part of the death benefit toward funeral or last-illness expenses in an amount not exceeding:

1. $500 above the named beneficiary's share
2. $5,000 of the certificate's death benefit
3. $2,000 ✓
4. $1,000 to any equitably entitled person

Why: Section 627.564 permits, at the insurer's option, payment of up to $2,000 to a person equitably entitled by reason of funeral or last-illness expenses.

A person turns 65 and enrolls in Part B. During the six months that follow, they apply for a Medigap policy. The insurer must:

1. Issue any plan offered, regardless of health ✓
2. Charge a surcharge for pre-existing conditions
3. Require a full medical exam before issuing
4. Decline if the applicant has a chronic illness

Why: During the six-month Medigap open enrollment period (age 65 + enrolled in Part B), coverage is guaranteed issue regardless of health.

An insurer formed under the laws of another U.S. state and operating in Florida is classified as a:

1. Reciprocal insurer
2. Foreign insurer ✓
3. Domestic insurer
4. Alien insurer

Why: A "foreign" insurer is one formed under the laws of any state, district, territory, or commonwealth of the United States other than Florida.

A 'free-look' provision in an individual health policy gives the insured the right to:

1. Examine other applicants' policies before buying their own
2. Return the policy within a set period for a full premium refund ✓
3. Cancel any single claim within ten days of filing it
4. Switch to a different insurer at no cost in the first year

Why: The free-look period (commonly 10 days, or longer for Medicare supplements) lets the insured return the policy for a full refund if not satisfied.

Under section 626.211, when the department deems an applicant lacking one or more required qualifications, what must it do?

1. Automatically schedule a hearing before the department within 10 days after the application is filed
2. Refer the application to the appointing insurer, which decides whether the license should issue
3. Issue a temporary 90-day license so the applicant may transact while curing the deficiency
4. Disapprove the application and notify the applicant, stating the grounds of disapproval ✓

Why: Section 626.211(4) requires the department to disapprove the application and notify the applicant of the grounds of disapproval when the applicant lacks required qualifications.

For an annuity issued to a senior consumer age 65 or older, the surrender charge must be reduced so that no charge exists after the end of the:

1. 7th policy year as measured from the first deposit
2. 10th policy year, or 10 years after each premium, if later ✓
3. 15th policy year regardless of any later premiums
4. 5th policy year following the contract's effective date

Why: Section 627.4554(9) requires the charge to phase out so none exists after the 10th policy year or 10 years after each premium, whichever is later.

A return-of-premium (ROP) term policy:

1. Pays double the original face amount if the insured dies within the first ten policy years
2. Returns a portion of the death benefit to the insurer when the insured dies
3. Automatically converts into a whole life contract at the end of the level term period
4. Refunds the premiums paid if the insured outlives the level term ✓

Why: ROP term refunds the premiums paid if the insured survives the level term period.

"Insurance" is defined under the Florida Insurance Code as a contract whereby one undertakes to:

1. Indemnify another or pay a specified or determinable benefit upon determinable contingencies ✓
2. Provide investment advice about securities for a stated fee
3. Guarantee a fixed rate of return on deposits placed with a financial institution and insured by the FDIC
4. Manage another person's financial accounts for a percentage of assets

Why: "Insurance" is a contract whereby one undertakes to indemnify another or pay or allow a specified amount or determinable benefit upon determinable contingencies.

A producer replacing a client's existing life policy must, under replacement rules:

1. Provide a replacement notice and notify the existing insurer ✓
2. Hold the new policy's effective date for two years after the old one lapses
3. Obtain written approval from the replacing insurer's actuary
4. Reimburse the client for any surrender charge out of the producer's commission

Why: Replacement regulations require disclosure (a replacement notice) and give the existing insurer a chance to conserve the policy.

Under the HMO Act, an assessment paid to the Florida Health Maintenance Organization Consumer Assistance Plan is treated how for the paying HMO?

1. It may be carried as an admitted asset of the HMO
2. It may be offset against surplus requirements
3. It may not be allowed as an asset of any HMO ✓
4. It is refundable on demand within 30 days

Why: Section 641.228(2) provides that no assessment paid to the plan shall be allowed as an asset of any HMO.

An "affiliated party" under the office's enforcement statute is generally a person who:

1. Serves as a member of the Financial Services Commission
2. Directs or participates in the conduct of the affairs of a licensee or insurer ✓
3. Has filed a written consumer complaint against the insurer with the Division of Consumer Services
4. Holds a policy issued by the insurer and has paid premium on it for at least 12 months

Why: For purposes of the enforcement section, an "affiliated party" means any person who directs or participates in the conduct of the affairs of a licensed entity or insurer.

Under s. 817.234, all claim and application forms must contain a fraud-warning statement, approved by the Office of Insurance Regulation, advising that a person who files a statement containing false information is guilty of:

1. A licensing violation only
2. A second-degree misdemeanor
3. A felony of the third degree ✓
4. A civil infraction

Why: Section 817.234(1)(b) requires claim and application forms to carry the OIR-approved statement that a person who knowingly and with intent to defraud files a statement or application containing false, incomplete, or misleading information is guilty of a felony of the third degree.

Under section 626.171, an application for an agent license must be made in what manner by the applicant?

1. Under the oath of the applicant and signed by the applicant ✓
2. Verbally to a department investigator
3. By a licensed attorney on the applicant's behalf only
4. Orally before a notary

Why: Section 626.171(1) requires the application to be made under the oath of the applicant and signed by the applicant.

A worker's 'primary insurance amount' (PIA) is:

1. The ceiling on the annual earnings that are subject to Social Security tax
2. The total of all FICA taxes the worker and the employer paid into the system
3. The benefit payable at full retirement age, the basis for other benefits ✓
4. A one-time death payment of $255

Why: The PIA is the monthly benefit at full retirement age; survivor and disability benefits are figured as percentages of it.

The department may not issue a license as an agent or adjuster to any individual who has not done what, subject to statutory exemptions?

1. Obtained a professional insurance designation
2. Completed 40 hours of prelicensing education
3. Qualified for, taken, and passed a written examination ✓
4. Worked at least one year under a sponsoring agent

Why: Section 626.221(1) prohibits issuance of an agent or adjuster license to anyone who has not qualified for, taken, and passed a written examination, subject to listed exemptions.

A policyowner uses dividends to receive a check each year. This is the ____ dividend option.

1. paid-up additions
2. cash ✓
3. accumulate at interest
4. reduction of premium

Why: The cash option simply pays the dividend to the owner; it is the simplest of the dividend options.

Under a Section 162 executive bonus plan, the employer pays the premium as a bonus. The employer:

1. Owns the policy and its cash value, with the employee named only as insured
2. Deducts the bonus, and the employee reports it as income ✓
3. Takes no deduction, and the employee owes no tax
4. Cannot deduct the bonus, because it funds life insurance

Why: The employer deducts the bonus as compensation; the employee owns the policy and includes the bonus in taxable income.

In providing emergency services and care as a covered service, a Florida HMO may NOT do which of the following?

1. Require prior authorization for the receipt of emergency services and care ✓
2. Establish a network of participating emergency facilities
3. Review emergency claims for medical necessity after the fact
4. Contract with hospitals to provide trauma services to subscribers

Why: Section 641.513(1)(a) prohibits requiring prior authorization for prehospital transport, treatment, or emergency services and care.

Key person disability insurance provides benefits to:

1. The business, to offset the loss when a key employee is disabled ✓
2. Every employee of the firm equally, regardless of their role
3. A lender, to pay off the company's outstanding commercial loans
4. The disabled employee's family, to replace their lost personal income

Why: Key person disability is owned by and paid to the business to cover losses and the cost of replacing an essential employee who becomes disabled.

Withdrawing taxable gains from a deferred annuity before age 59½ generally results in:

1. No tax consequence of any kind on the withdrawal
2. A 10% IRS penalty plus ordinary income tax on the gain ✓
3. Immediate forfeiture of the entire annuity principal balance
4. Favorable long-term capital-gains tax treatment instead

Why: Pre-59½ distributions of gains are subject to ordinary income tax plus a 10% IRS penalty.

Under 'experience rating' of a group health plan, the premium is based on:

1. The individual medical exam results of each covered member
2. The actual claims history of that particular group ✓
3. A single uniform rate charged to every group in the region
4. The number of years the employer has been in business

Why: Experience rating sets premiums from the group's own claims experience; community rating instead charges all groups in an area the same base rate.

An immediate annuity is characterized by income payments that begin:

1. On the contract anniversary after the annuitant turns 59 1/2
2. Within one payment interval of purchase (generally within a year) ✓
3. After a deferral period of at least ten accumulation years
4. Once the annuitant submits satisfactory proof of insurability

Why: A single-premium immediate annuity (SPIA) starts payments within one payment period — usually within 12 months — of the lump-sum purchase.

The term "Person" under the Florida Insurance Code definitions includes:

1. Individuals, insurers, companies, associations, partnerships, corporations, agents, and brokers, among others ✓
2. Only entities that hold a certificate of authority as insurers, excluding agents, brokers, and unincorporated associations
3. Only individuals and corporations domiciled in Florida, excluding partnerships, associations, and out-of-state entities
4. Only natural individuals who reside in this state, have reached the age of majority, and hold no insurance license

Why: "Person" is broadly defined to include an individual, insurer, company, association, organization, partnership, corporation, agent, general agent, broker, and similar entities.

A fraternal benefit society provides insurance:

1. To its members through a lodge or membership system, on a nonprofit basis ✓
2. To the general public for a profit, distributing earnings to its stockholders
3. Exclusively through group annuity contracts sold to employers
4. Only to federal, state, and municipal government employees

Why: Fraternal benefit societies are nonprofit membership organizations providing insurance to members under a lodge system.

If the named beneficiary of a life policy is a minor child, the death proceeds:

1. Are forfeited entirely until the child reaches the age of majority
2. Must by law be split equally among all of the insured's relatives
3. Are usually paid to a guardian or trust, not directly to the minor ✓
4. Revert to the insurance company until a court orders otherwise

Why: Insurers generally will not pay proceeds directly to a minor; a guardian, custodian, or trust receives and manages the funds.

"False statements and entries" as an unfair practice includes knowingly:

1. Filing with a supervisory or other public official any false material statement ✓
2. Correcting a false entry in the agency's own records as soon as it is discovered
3. Delivering a written policy summary to a prospective buyer at or before the time the application is signed
4. Paying a rebate under a filed rebating schedule that is available to an entire actuarial class of insureds

Why: Section 626.9541(1)(e) makes it an unfair practice knowingly to file with any supervisory or other public official, or to make, publish, disseminate, circulate, deliver or place before the public, any false material statement, or knowingly to make a false entry of a material fact in any book, report or statement.

When active employment is a condition of group life coverage, § 627.5685 requires the policy to let an insured continue coverage during total disability for a period of at least:

1. 1 year following the onset of the disabling condition
2. 90 days from the date premium contributions cease
3. 6 months from the date the total disability started ✓
4. 30 days after the insured stops active employment

Why: Section 627.5685 requires continuation of coverage during total disability for at least 6 months from the date the disability started.

What is the stated purpose of Florida's Life Insurance Solicitation law?

1. To set the maximum first-year and renewal commissions payable to agents on life insurance sales
2. To require every life insurer transacting business in this state to maintain a principal office in Tallahassee staffed during business hours and to file annual reports of the policies sold there
3. To require insurers to deliver information improving the buyer's ability to select an appropriate plan and understand the policy's basic features ✓
4. To establish a reward fund paying up to $25,000 for information reporting insurance fraud

Why: The purpose of the Life Insurance Solicitation section is to require insurers to deliver information that improves the buyer's ability to select the most appropriate plan and understand the basic features of the policy.

Under s. 627.6741, the Medicare supplement open enrollment period for an individual age 65 or older begins with the first month in which the individual has attained age 65 and is enrolled in Medicare Part B and lasts how long?

1. 2 months
2. 12 months
3. 6 months ✓
4. 3 months

Why: Section 627.6741(1)(a)1. establishes a 6-month open enrollment period beginning with the first month in which the individual is 65 and enrolled in Medicare Part B, during which the insurer may not condition issuance or price on health status.

Which of the following is expressly EXCLUDED from coverage by the Florida Life and Health Insurance Guaranty Association?

1. A fixed individual annuity owned by a Florida resident
2. An individual major medical health policy
3. A whole life policy issued by a licensed domestic insurer
4. Fraternal benefit societies and dental service plan insurance ✓

Why: Section 631.713(3) excludes fraternal benefit societies, dental service plan insurance, and several similar lines from the part.

A Medicare Part A benefit period begins when a patient is admitted and ends:

1. 60 days after the patient has been discharged ✓
2. On the last calendar day of that same month
3. Only when the patient changes to a different hospital
4. After exactly one full year from the admission date

Why: A benefit period starts at admission and ends after the patient has been out of a hospital/SNF for 60 consecutive days; a new period (and deductible) can then begin.

The code provides that, in certain circumstances, the office may impose an administrative fine on an insurer:

1. Only if the Legislature approves the penalty in its following session
2. Only after an officer of the insurer is convicted of a felony in state court
3. Instead of conducting any financial examination
4. In lieu of suspension or revocation of the certificate of authority ✓

Why: Section 624.4211 authorizes an administrative fine in lieu of suspension or revocation of the certificate of authority.

A primary tax advantage of a deferred annuity during accumulation is that earnings:

1. Are taxed each year but at a reduced capital-gains rate
2. Are completely exempt from income tax even when withdrawn
3. Generate an annual deduction equal to the interest credited
4. Grow tax-deferred until they are withdrawn ✓

Why: Annuity earnings accumulate tax-deferred; taxes apply only when distributions are taken.

Under the incontestability provision, after how long in force during the insured's lifetime may the insurer generally no longer contest the policy for a misstatement?

1. 6 months
2. 1 year
3. 2 years ✓
4. 5 years

Why: After 2 years in force during the insured's lifetime the insurer cannot contest the policy except for nonpayment of premium.

A group health policy must also offer the policyholder the option to insure an eligible unmarried child until the end of the calendar year in which the child reaches what age?

1. Age 28
2. Age 30 ✓
3. Age 26
4. Age 35

Why: The policy must offer optional dependent coverage to the end of the year in which the child reaches age 30, subject to conditions.

Under the individual conversion-on-termination requirement, an insured whose eligibility ends before Medicare/Medicaid eligibility may obtain a converted policy without evidence of insurability if application and first premium are made within how many days?

1. 31 days ✓
2. 45 days
3. 60 days
4. 63 days

Why: This conversion right requires application and first premium within 31 days after termination, with no evidence of insurability.

Single-premium whole life insurance is funded by:

1. Flexible deposits that the owner may raise or lower in any given year
2. A modest first-year premium followed by much larger renewal premiums for life
3. A single large premium that fully pays up the policy at issue ✓
4. Level annual premiums paid until the insured reaches sixty-five years of age

Why: One lump-sum premium creates a fully paid-up permanent policy with no further premiums due.

A Medicare supplement policy is best described as a health benefit plan that:

1. Covers only outpatient prescription drugs that Medicare Part D excludes from its formulary
2. Reimburses expenses not paid by Medicare due to deductibles, coinsurance, or other limitations ✓
3. Replaces the federal Medicare program entirely, so the insured need not enroll in Part A or Part B
4. Provides extended custodial care in a licensed nursing home after Medicare's 100-day benefit ends

Why: A Medicare supplement policy reimburses Medicare-covered expenses left unpaid because of deductibles, coinsurance, or other Medicare limitations.

Premiums an individual pays for their own personal life insurance are:

1. Deductible up to an annual IRS-set dollar limit
2. Not deductible for federal income-tax purposes ✓
3. Fully deductible as an itemized personal expense
4. Deductible only if the policy is term insurance

Why: Personal life insurance premiums are a personal expense and are not income-tax deductible.

A state insurance guaranty association exists to:

1. Guarantee that every applicant will be approved for coverage
2. Pay covered claims of insurers that become insolvent, up to set limits ✓
3. Provide free legal representation to policyholders in disputes
4. Set the premium rates that all insurers in the state must charge

Why: Guaranty associations protect policyholders by covering claims (within statutory limits) when a member insurer becomes insolvent; their existence may not be used in advertising or sales.

The Florida Life and Health Insurance Guaranty Association Act is intended primarily to protect policyowners and others against an insurer's failure to perform due to what?

1. A lapse in the insurer's reinsurance
2. A change in the insurer's ownership
3. Its impairment or insolvency ✓
4. A decline in the insurer's stock price

Why: Section 631.712 states the purpose is to protect against an insurer's failure to perform contractual obligations due to its impairment or insolvency.

A 50-year-old withdraws $10,000 of gain from a nonqualified deferred annuity. Besides ordinary income tax, the IRS penalty is:

1. $1,000 ✓
2. $2,000
3. $500
4. $0

Why: A premature distribution before 59½ incurs a 10% penalty: 10% × $10,000 = $1,000, on top of ordinary income tax on the gain.

An employee is injured on the job and needs medical care and wage replacement. The coverage that responds is:

1. Workers' compensation ✓
2. Medicare Part B
3. A Medicare Supplement policy
4. An individual disability income policy only

Why: Workers' compensation is the state-mandated, no-fault coverage for job-related injuries and occupational disease.

An absolute assignment of a life insurance policy:

1. Temporarily pledges the policy to a lender solely as security for a loan
2. Transfers all ownership rights to the assignee ✓
3. Lets the original owner revoke the transfer at any time in the future
4. Applies only to the cash value and never to the policy's death benefit

Why: An absolute assignment is a complete, permanent transfer of all ownership rights; a collateral assignment is only a temporary, partial pledge.

Under section 626.451, within how many days after being found guilty of or pleading to a qualifying felony must a licensee personally advise the department in writing?

1. Within 30 days ✓
2. Within 60 days
3. Within 10 days
4. Within 15 days

Why: Section 626.451(6) requires the licensee to advise the department in writing within 30 days after being found guilty of or pleading guilty or nolo contendere to a felony or qualifying crime.

The federal Genetic Information Nondiscrimination Act (GINA) generally restricts the use of genetic information in:

1. Health insurance and employment decisions ✓
2. Setting state automobile insurance premium rates
3. Property and casualty insurance underwriting only
4. Determining eligibility for federal student loans

Why: GINA limits how genetic information may be used in health coverage and employment, prohibiting discrimination based on genetic test results.

Two insurers enter into a concerted agreement intended to create an unreasonable restraint of trade in the business of insurance. Which unfair trade practice does this describe?

1. Unfair discrimination
2. Defamation
3. Boycott, coercion, and intimidation ✓
4. False statements and entries

Why: Boycott, coercion, and intimidation is entering into any agreement to commit, or by concerted action committing, any act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance.

Life insurance is generally a 'valued' (not indemnity) contract because it pays:

1. A benefit reduced by other coverage in force
2. Nothing unless the beneficiary documents expenses
3. Only the actual financial loss the family proves
4. A stated face amount, not the measured economic loss ✓

Why: Life insurance pays the agreed face amount regardless of proven loss; medical expense insurance instead indemnifies actual costs.

A preferred provider organization (PPO) plan generally allows members to:

1. Receive a fixed cash amount per day instead of expense reimbursement
2. See only network providers, with no out-of-network coverage at all
3. Visit any provider but only after a primary-care physician referral
4. Use out-of-network providers at a higher cost, with no referral needed ✓

Why: A PPO covers care from out-of-network providers at higher cost sharing and does not require a gatekeeper referral; an EPO covers in-network only.

Insurance contracts are 'unilateral' because:

1. The insured alone is obligated to pay all future claims
2. Either party may cancel the agreement without any notice
3. Both parties are equally bound to perform specific duties
4. Only the insurer makes a legally enforceable promise ✓

Why: Only the insurer makes an enforceable promise (to pay covered claims); the insured is not legally compelled to continue paying premiums.

Effective January 1, 2020, the Association's per-life liability for basic hospital, basic medical-surgical, or major medical expense health insurance policies (excluding long-term care) is limited to what amount?

1. $100,000
2. $300,000
3. $500,000 ✓
4. $750,000

Why: Section 631.717(12)(d) sets a $500,000 limit for those health insurance policies, effective January 1, 2020.

An insurer must give an individual health policyholder at least how many days' advance written notice of cancellation, nonrenewal, or a change in rates (other than for nonpayment)?

1. 10 days
2. 30 days
3. 45 days ✓
4. 60 days

Why: At least 45 days' advance written notice is required; only 10 days applies for nonpayment of premium.

An applicant pays the initial premium and receives a conditional receipt, then dies before the policy is issued — but would have been insurable. The insurer:

1. Pays the death claim ✓
2. Denies the claim because no policy issued
3. Pays half pending an investigation
4. Refunds the premium and pays nothing

Why: Under a conditional receipt, coverage is effective as of the receipt (or exam) date if the applicant was insurable as applied for, so the claim is paid.

A producer who holds client premiums must keep them in a fiduciary capacity, which means the producer must:

1. Report each premium directly to the federal tax authorities
2. Lend the premiums to other clients who are short on funds
3. Invest the premiums for personal profit until they are remitted
4. Keep those funds separate and not mix them with personal money ✓

Why: As a fiduciary, the producer holds premiums in trust for the insurer and must not commingle them with personal funds (doing so is commingling).

If the age or sex of the insured under a Florida life policy has been misstated, the amount payable under the policy shall be:

1. The amount the premium paid would have purchased at the correct age or sex ✓
2. Reduced by a flat fifty percent statutory penalty
3. Whatever amount the insurer elects after the loss, since the misstatement voids the policy's incontestability protection
4. The full stated face amount, because no adjustment may be made once the policy has been in force two years

Why: Section 627.456 requires that, on a misstatement of age or sex, the amount payable be what the premium would have purchased according to the correct age or sex.

Under the required "Reinstatement" provision, if the insurer requires an application and does not act, the policy is automatically reinstated on what day after the conditional receipt date absent prior written disapproval?

1. The 45th day ✓
2. The 60th day
3. The 30th day
4. The 90th day

Why: Lacking approval, the policy is reinstated on the 45th day after the conditional receipt unless the insurer previously gave written disapproval.

An owner assigned a policy to a lender as collateral for a $30,000 loan. At the insured's death (face $200,000, loan still $30,000), the lender receives:

1. $100,000, split evenly with the beneficiary
2. The full $200,000 death benefit
3. Nothing, because collateral assignments end at death
4. $30,000, with the remaining $170,000 to the beneficiary ✓

Why: Under a collateral assignment, the lender is paid only the amount of the debt ($30,000); the balance goes to the named beneficiary.

Medicaid differs from Medicare in that Medicaid is:

1. Available only to honorably discharged veterans of the U.S. armed forces
2. A needs-based program jointly funded by federal and state governments ✓
3. Funded entirely by payroll taxes withheld from current workers' paychecks
4. An age-based program automatically available to everyone at age sixty-five

Why: Medicaid is a means-tested (needs-based) program jointly funded by the states and federal government; Medicare is primarily age/disability-based.

All other factors being equal, paying premiums monthly rather than annually generally results in:

1. A lower total cost due to a volume discount for frequent payments
2. An automatic reduction in the policy's face amount each month
3. A higher total annual cost because of added administrative loading ✓
4. Exactly the same total cost regardless of the payment frequency

Why: More frequent modes carry higher total cost (loading) to offset administrative expense and lost interest to the insurer.

A contributory group life plan, in which employees pay part of the premium, generally requires:

1. 100% of all eligible employees to enroll in the plan
2. Only the highly compensated employees to participate
3. No minimum level of employee participation at all
4. At least 75% of eligible employees to participate ✓

Why: Contributory plans typically require at least 75% participation, while noncontributory (employer-paid) plans require 100%.

An applicant who regularly scuba dives in caves is most likely to be:

1. Declined outright, as no insurer covers a hazardous hobby
2. Charged a higher (rated) premium or have the avocation excluded ✓
3. Required to buy an annuity rather than life insurance
4. Offered the preferred rate class, since diving is a sport

Why: Hazardous avocations increase risk; insurers respond with a rating, an exclusion rider, or a higher premium.

A 60-year-old annuity owner withdraws $5,000 of gain. Because the owner is past 59½, the withdrawal is:

1. Ordinary income, with no 10% penalty ✓
2. Tax-free as a return of premium
3. Subject to the 10% penalty anyway
4. Taxed at capital-gains rates

Why: After 59½ the 10% premature-distribution penalty no longer applies; the gain is still ordinary income.

'Defamation' in insurance regulation refers to:

1. Sharing part of a commission with another licensed producer
2. Making false or maligning statements about an insurer's financial condition ✓
3. Filing a consumer complaint with the state insurance department about an unreasonably delayed claim
4. Refusing to renew a policy after a single claim is filed

Why: Defamation is making, publishing, or circulating false statements that are maligning, especially about the financial condition of an insurer.

A SIMPLE IRA retirement plan is intended for:

1. Government workers not covered by Social Security, who defer pay through a 457(b) plan instead
2. Small employers, with employee salary deferrals and an employer match ✓
3. Self-employed individuals who have no employees at all other than a spouse on the payroll
4. Large corporations with thousands of unionized employees

Why: A SIMPLE IRA is for small employers (generally up to 100 employees) and combines employee salary-reduction contributions with required employer contributions.

Under the Florida Insurance Code, the privacy rules the Department and Commission must adopt to govern use of a consumer's nonpublic personal financial and health information must be no more restrictive than which federal standard?

1. The Sarbanes-Oxley Act of 2002
2. The Fair Debt Collection Practices Act
3. Title V of the Gramm-Leach-Bliley Act of 1999 ✓
4. The Securities Exchange Act of 1934

Why: Section 626.9651 requires the privacy rules to be consistent with, and not more restrictive than, the standards contained in Title V of the Gramm-Leach-Bliley Act of 1999 and the NAIC privacy regulation.

Which policy combines flexible premiums with cash value invested in separate accounts and requires a securities license to sell?

1. Universal life with flexible premiums crediting a declared interest rate to cash value
2. Group annually renewable term funded by the employer
3. Variable universal life with separate-account investing ✓
4. Whole life with a guaranteed level premium

Why: Variable universal life adds separate-account investing (securities-licensed) to universal life's flexible premiums.

The 'unpaid premium' provision in a health policy allows the insurer to:

1. Charge double the missed premium as a late penalty fee
2. Refuse to process the claim until a new application is filed
3. Deduct any premium due and unpaid from a claim payment ✓
4. Cancel the policy retroactively to its original issue date

Why: If a premium is due and unpaid when a claim is payable, the insurer may deduct the amount owed from the claim proceeds.

Retirement plan 'catch-up' contributions allow individuals to contribute additional amounts once they reach age:

1. 50 ✓
2. 40
3. 59 and one half
4. 65

Why: Participants age 50 and older may make catch-up contributions above the standard annual limits to IRAs and employer plans.

Under the Florida Insurance Code definitions, the term "Office" refers to which entity?

1. The Department of Financial Services and its divisions
2. The Office of the Chief Financial Officer within the department
3. The Office of Financial Regulation of the commission
4. The Office of Insurance Regulation of the Financial Services Commission ✓

Why: By definition, "Office" means the Office of Insurance Regulation of the Financial Services Commission.

Under s. 817.234, a person who, with intent to injure, defraud, or deceive an insurer, presents a claim statement known to contain false, incomplete, or misleading material information commits:

1. A first-degree misdemeanor only
2. Insurance fraud, a felony ✓
3. A noncriminal civil infraction only
4. A breach of contract only

Why: Section 817.234(1)(a) makes it insurance fraud, punishable as a felony under subsection (11), to present or prepare a claim statement known to contain false, incomplete, or misleading information material to the claim, when done with intent to injure, defraud, or deceive an insurer.

A '20-pay whole life' policy:

1. Requires premium payments every year for the insured's entire lifetime
2. Is paid up after twenty years of premiums but covers the insured for life ✓
3. Provides level coverage for exactly twenty years, then terminates
4. Builds no cash value at all because the premium period ends early

Why: Limited-pay whole life concentrates premiums into a set period (here 20 years) while coverage lasts for life.

In a cross-purchase buy-sell agreement among four business owners, the number of life insurance policies required is:

1. 12 ✓
2. 4
3. 8
4. 16

Why: Cross-purchase requires each owner to insure every other owner: n(n−1) = 4 × 3 = 12 policies; an entity plan would need only 4.

The optional 'misstatement of age' provision in a health policy provides that, if the insured's age was misstated, the benefits will be:

1. Adjusted to what the premium paid would have purchased at the correct age ✓
2. Doubled as a penalty against the insurer for issuing the policy at the wrong age
3. Forfeited in full, with every premium the policyowner paid returned without interest
4. Paid in full, since age never affects health benefits

Why: Benefits are adjusted to the amount the premium actually paid would have bought at the correct age, rather than voiding coverage.

A producer who represents only one insurer under an exclusive contract is a:

1. Public adjuster retained by the claimant
2. Fee-based insurance consultant
3. Captive (exclusive) agent ✓
4. Independent broker under the American agency system

Why: A captive (career/exclusive) agent represents a single insurer; an independent agent or broker may place business with several.

Which of the following is a compulsory ground for license discipline under section 626.611?

1. Demonstrated lack of fitness or trustworthiness to engage in the business of insurance ✓
2. Failure to join a recognized professional agents' association within 12 months of licensure
3. Earning fewer commissions in a year than the appointing insurer projected for the territory
4. Operating an agency office in a rural county

Why: Section 626.611(1)(g) makes demonstrated lack of fitness or trustworthiness a compulsory ground for refusal, suspension, or revocation.

The aggregate cap on fines against an insurer for all willful violations of the unfair trade practices part arising from the same action is:

1. $50,000
2. $100,000
3. $250,000
4. $500,000 ✓

Why: Fines against an insurer may not exceed an aggregate amount of $500,000 for all willful violations arising out of the same action.