Florida Life & Health Insurance License, Practice Exams

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

1. A flat $500,000 regardless of liabilities or premium
2. The greater of $1,500,000, 10% of total liabilities, or 2% of total annualized premium ✓
3. A flat 5% of total annualized premium with no dollar floor in that particular circumstance
4. The lesser of $1,000,000 or 8% of total liabilities

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

On reinstatement of a Florida life policy issued before October 1, 1981, overdue premiums and indebtedness carry interest at a rate not exceeding:

1. 6 percent per year compounded annually ✓
2. 8 percent per year as set by the office annually
3. 10 percent per year for the reinstatement period only
4. 4 percent per year compounded monthly until repaid

Why: Section 627.459 caps reinstatement interest at 6 percent per year compounded annually (post-1981 policies reference § 627.4585).

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. Require a full medical exam before issuing
3. Charge a surcharge for pre-existing conditions
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. Domestic insurer
2. Foreign insurer ✓
3. Alien insurer
4. Reciprocal 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. Return the policy within a set period for a full premium refund ✓
2. Cancel any single claim within ten days of filing it
3. Switch to a different insurer at no cost in the first year
4. Examine other applicants' policies before buying their own

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. Issue a temporary license while the applicant cures the deficiency under the policy's terms
2. Disapprove the application and notify the applicant, stating the grounds of disapproval ✓
3. Automatically schedule a hearing within 10 days
4. Refer the application to the appointing insurer for a decision

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.

A Florida life policy's required reinstatement provision allows reinstatement upon written application made within what period after the date of default in premium payment?

1. 3 years ✓
2. 1 year from the missed premium due date
3. 2 years measured from policy issuance
4. 5 years following the lapse of coverage

Why: Section 627.459 requires that the policy may be reinstated upon written application at any time within 3 years after the date of default.

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

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

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. Provide investment advice for a fee
2. Indemnify another or pay a specified or determinable benefit upon determinable contingencies ✓
3. Guarantee a fixed rate of return on deposits unless an exception clearly applies for the coverage that is in force
4. Manage another's financial accounts

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. Pay the surrender charges from personal funds
3. Wait two years before the new policy is effective
4. Get written permission from the new insurer's actuary

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

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. Directs or participates in the conduct of the affairs of a licensee or insurer ✓
2. Holds any policy issued by the insurer
3. Has filed a consumer complaint
4. Sits on the Financial Services Commission unless an exception clearly applies for the coverage that is in force

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, 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 noncriminal civil infraction only
2. A first-degree misdemeanor only
3. Insurance fraud, a felony ✓
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.

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

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

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 benefit payable at full retirement age, the basis for other benefits ✓
2. The total of all Social Security taxes the worker paid under the policy's terms
3. A one-time lump sum paid at the worker's death
4. The maximum a worker may contribute each year

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

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. cash ✓
2. paid-up additions
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. Deducts the bonus, and the employee reports it as income ✓
2. Cannot deduct any of the premium it pays
3. Owns the policy and its entire cash value in most situations
4. Pays no tax because the bonus is exempt

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. Contract with hospitals to provide trauma services to subscribers
3. Establish a network of participating emergency facilities
4. Review emergency claims for medical necessity after the fact

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. The disabled employee's family, to replace their lost personal income
3. Every employee of the firm equally, regardless of their role
4. A lender, to pay off the company's outstanding commercial loans

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. Favorable long-term capital-gains tax treatment instead
4. Immediate forfeiture of the entire annuity principal balance

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 actual claims history of that particular group ✓
2. A single uniform rate charged to every group in the region
3. The individual medical exam results of each covered member
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. Within one payment interval of purchase (generally within a year) ✓
2. Only after a deferral period of at least ten years in most situations
3. Exactly when the annuitant reaches age 65
4. After the annuitant submits 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. Only natural individuals
2. Individuals, insurers, companies, associations, partnerships, corporations, agents, and brokers, among others ✓
3. Only entities licensed as insurers unless an exception clearly applies for the coverage that is in force according to the insurer's rules
4. Only Florida residents

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 the same as a commercial insurer under the policy's terms
3. Only to government employees
4. Exclusively as group annuities

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

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

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.