Florida Life & Health Insurance License, Practice Exams

An irrevocable life insurance trust (ILIT) is used primarily to:

1. Keep life insurance proceeds out of the insured's taxable estate ✓
2. Allow the insured to freely change the policy's terms at any time
3. Guarantee the policy's cash value against any market loss
4. Convert the death benefit into a currently deductible expense

Why: An ILIT owns the policy so the proceeds are excluded from the insured's gross estate; because it is irrevocable, the insured gives up control.

Under section 626.311, the license of a life agent covers what scope of business?

1. Only individual whole life policies unless an exception clearly applies for the coverage that is in force
2. All classes of life insurance business (except a limited credit insurance license) ✓
3. Life and health insurance combined
4. Only group life and annuities

Why: Section 626.311(2) provides that, except for a limited credit insurance license, a life agent's license covers all classes of life insurance business.

Group, blanket, or franchise health policies must provide a reasonable extension of benefits for a certificateholder who is in what condition at the date the policy is discontinued?

1. Total disability ✓
2. Hospital confinement only
3. An active claim under appeal
4. Pregnancy

Why: An extension of benefits is required for a certificateholder who is totally disabled at the date of discontinuance.

An inflation protection rider on a long-term care policy:

1. Increases the daily benefit amount over time to offset rising care costs ✓
2. Lowers the premium each year that overall inflation declines
3. Refunds part of the premium during years of high inflation rates
4. Shortens the elimination period as the insured grows older

Why: Inflation protection raises the benefit (simple or compound) over the years so the coverage keeps pace with the rising cost of care.

If the department or office finds that a person has engaged in conduct violating the Unfair Insurance Trade Practices part, it may first issue an order requiring the person to:

1. Forfeit all insurance contracts written in the prior year
2. Cease and desist from engaging in that method, act, or practice ✓
3. Pay treble damages to every affected policyholder
4. Surrender all business records permanently

Why: Upon finding a violation, the department or office may order the person to cease and desist from engaging in the unfair method of competition, act, or practice or the unlawful transaction of insurance.

Which document is altered "after being issued" can itself become the basis of a misrepresentation violation under the statute?

1. A property and casualty certificate of insurance ✓
2. A statutory financial statement filed with the office
3. An agent's appointment form
4. A surplus lines affidavit

Why: The misrepresentation definition specifically references a property and casualty certificate of insurance altered after being issued among the materials that, if misleading, constitute the violation.

A producer convinces a client to drop a policy at Company A and buy one at Company B using misleading comparisons. This is:

1. Twisting ✓
2. Churning
3. Rebating
4. Coercion

Why: Inducing a replacement between different insurers through misrepresentation is twisting; doing it within the same insurer is churning.

When the office conducts an examination, the statute requires it to examine each insurer at intervals tied to the insurer's:

1. Total premium volume only in that particular circumstance
2. Risk classification as high, average, or low risk ✓
3. Number of licensed agents
4. Year of incorporation

Why: Examination frequency under s. 624.316 is tied to the insurer's risk classification: at least every 3 years for high-risk and at least every 5 years for average- and low-risk insurers.

An employee has $100,000 of employer-paid group term life. The amount subject to imputed income is:

1. $50,000 ✓
2. $100,000
3. $0
4. $25,000

Why: The first $50,000 is tax-free; the cost of the remaining $50,000 is imputed taxable income.

Section 624.418 of the code addresses which administrative action against an insurer?

1. Suspension or revocation of a certificate of authority for violations and special grounds ✓
2. Licensing of nonresident agents
3. Approval of advertising materials
4. Establishment of the guaranty association unless an exception clearly applies for the coverage that is in force

Why: Section 624.418 governs suspension and revocation of an insurer's certificate of authority for violations and on special grounds.

Which activity is expressly treated as 'solicitation of insurance' requiring a license under section 626.112?

1. Performing only clerical filing of completed policies under the policy's terms
2. Describing the benefits or terms of insurance coverage, including premiums ✓
3. Delivering mail to the agency office
4. Cleaning the agency premises after hours

Why: Section 626.112(1)(b) lists describing the benefits or terms of coverage, including premiums or rates of return, as solicitation requiring a license.

A prescription drug plan formulary is:

1. A tiered list of the medications the plan covers ✓
2. A government registry of every drug approved nationwide for sale
3. The maximum the insured may spend on drugs in a lifetime
4. A required second opinion before any prescription is filled

Why: A formulary is the plan's list of covered drugs, usually arranged in cost-sharing tiers (generic, preferred brand, non-preferred, specialty).

Under the required "Time Limit on Certain Defenses" provision, after how many years from the issue date may only fraudulent misstatements in the application be used to void an individual health policy or deny a claim?

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

Why: The statutory provision bars contesting except for fraudulent misstatements after 2 years from the issue date.

A 'dual eligible' individual is someone who qualifies for:

1. Both Medicare and Medicaid ✓
2. Two separate private major medical plans at once
3. Both an HSA and a flexible spending account together
4. Medicare Part A but not Part B coverage

Why: Dual eligibles qualify for both Medicare and Medicaid; Medicaid may help cover Medicare premiums and cost sharing for those with limited income.

A client wants the chance for higher returns and accepts market risk on the annuity's value. The best fit is a:

1. Variable annuity ✓
2. Fixed annuity
3. Immediate fixed annuity
4. Bank certificate of deposit

Why: A variable annuity invests in separate accounts where the owner bears market risk and reward; a fixed annuity guarantees a set return.

Under Florida's Unfair Insurance Trade Practices law, what is the core conduct that constitutes "twisting"?

1. Using policy values in an existing policy to buy another policy with the same insurer to generate new commissions under the policy's terms
2. Knowingly making misleading representations or incomplete or fraudulent comparisons to induce a person to lapse or surrender a policy ✓
3. Charging different premiums to individuals of the same actuarial class and equal life expectancy
4. Telling an applicant that a specific ancillary product is required by law when it is not

Why: Twisting is knowingly making misleading representations or incomplete/fraudulent comparisons to induce a person to lapse, surrender, or terminate a policy. The first option describes churning; the others describe unfair discrimination and sliding.

Renewable term insurance lets the owner renew at the end of each term:

1. Only after passing a fresh medical examination each term
2. Without evidence of insurability, at a premium that rises each term ✓
3. At the same level premium for the rest of the insured's life
4. Only while the insured remains under forty years of age

Why: Renewability guarantees renewal without proving insurability, though the premium rises with age.

Under the required "Claim Forms" provision, if the insurer does not furnish claim forms within how many days, the claimant may submit written proof of the nature and extent of the loss instead?

1. 10 days
2. 15 days ✓
3. 20 days
4. 45 days

Why: If forms are not given within 15 days, the claimant may meet proof-of-loss requirements with a written statement.

Under ERISA, a Summary Plan Description (SPD) must be provided to participants to:

1. Explain the plan's benefits, rights, and obligations in plain language ✓
2. Guarantee that every claim filed will be paid in full
3. Set the premium rates the insurer is permitted to charge in most situations
4. Replace the need for any formal written plan document

Why: ERISA requires plans to furnish an SPD describing benefits, eligibility, and participants' rights and procedures.

An insured dies by suicide 14 months after issue, within the policy's two-year suicide period. The insurer will:

1. Refunds the premiums paid and pays no death benefit ✓
2. Pays the full death benefit
3. Pays half of the face amount
4. Pays double under accidental death in most situations

Why: Suicide within the stated period is excluded; the insurer refunds premiums (or returns the reserve) rather than paying the death benefit.

How often, at a minimum, must the Office examine the affairs and accounts of a Florida HMO?

1. Once every year
2. Once every 5 years ✓
3. Once every 10 years
4. Only when a complaint is filed

Why: Section 641.27(1) requires examination as often as expedient, but not less frequently than once every 5 years.

Under section 626.202, the acquisition of what percentage of the voting securities of a licensed entity is considered a change of ownership or control triggering a new fingerprint filing?

1. 1 percent or more
2. 5 percent or more
3. 10 percent or more ✓
4. 25 percent or more

Why: Section 626.202(2) provides that acquisition of 10 percent or more of the voting securities of a licensed entity is considered a change of ownership or control.

An endowment policy is distinguished by the fact that it:

1. Pays the face amount at a set maturity date if the insured is still living ✓
2. Provides only temporary coverage that expires with no value
3. Invests the entire premium in the insurer's separate investment accounts chosen by the owner
4. Decreases its face amount steadily over the policy's term

Why: An endowment pays the face amount either at the insured's death or upon reaching the maturity date while living; modern tax rules limit their use.

For a willful violation of the Unfair Insurance Trade Practices part, the statute authorizes a fine of up to:

1. $10,000 for each willful violation
2. $50,000 for each willful violation
3. $100,000 for each willful violation ✓
4. $200,000 for each willful violation

Why: The penalty provision authorizes a fine of up to $100,000 for each willful violation of the part (and up to $12,500 for each nonwillful violation).

Which dividend option increases both death benefit and cash value with no new underwriting?

1. Paid-up additions ✓
2. Cash payment
3. Reduction of premium
4. Accumulate at interest

Why: Paid-up additions use dividends to buy single-premium whole life, raising both the death benefit and cash value without evidence of insurability.

A nonqualified deferred compensation plan is an arrangement in which an employer agrees to:

1. Pay an executive future compensation, without meeting qualified-plan rules ✓
2. Contribute equally for every employee under strict nondiscrimination tests
3. Match the employee's 401(k) contributions dollar for dollar each year
4. Provide tax-free retirement income guaranteed by the federal government

Why: Nonqualified deferred comp promises future pay to select executives; it avoids qualified-plan nondiscrimination rules but the employer's deduction is deferred until paid.

An employee gets married, a HIPAA 'special enrollment' event. The employee may:

1. Enroll in the group plan outside the normal open enrollment ✓
2. Only enroll at the next annual open enrollment period
3. Never add a new spouse to an existing plan
4. Enroll only after a 12-month waiting period

Why: HIPAA special enrollment lets employees enroll after qualifying life events (marriage, birth, loss of other coverage) without waiting for open enrollment.