Florida Common Law

At the time of an insurance sale, all of the following are true EXCEPT: A. A producer has ethical responsibilities to the client and insurer B. Personal information about the client should never be released without prior approval from the client C. A producer only needs to disclose to a prospect the information that the prospect requests D. Precision and accuracy in completing the application are in the best interest of both the insurer and the prospective insured

C— A producer only needs to disclose to a prospect the information that the prospect requests Explanation: An agent must inform a prospective purchaser that they are acting as a life insurance agent and the full name of the insurer that the agent is representing, whether the prospect requests it or not.

Insurers and agents who sell variable contracts are subject to: A. State insurance regulation B. Municipal regulation C. Both state insurance regulation and federal securities regulation D. Federal securities regulation

C— Both state insurance regulation and federal securities regulation Explanation: Variable contracts and the agents who sell them are subject to state insurance regulation by the Office of Insurance Regulation (OIR) and federal securities regulation by the Securities and Exchange Commission (SEC).

All of the following are correct about Life insurance policy loan interest rate EXCEPT: A. An adjustable rate of interest can be charged B. An insurance company may charge a fixed rate of up to 10% C. There are no restrictions or limitations on policy loan rates D. Adjustable interest rates are based on a published index

C— There are no restrictions or limitations on policy loan rates Explanation: A Life insurance company can charge a fixed rate of not more than 10% annual interest on policy loans.

Late premiums paid by an individual life insurance policyholder during the 30-day grace period may, at the option of the insurer, be subject to an interest charge not in excess of ____ per year for the number of days' grace elapsing before the payment of the premium: A. 4% B. 6% C. 10% D. 8%

D— 8% Explanation: Late premium payments made during the grace period may be subject to an interest charge not in excess of 8% per year. If the insured dies during the grace period before the overdue premium is paid, the amount of such premium with interest may be deducted from the death benefit paid.

Which of the following is NOT considered to be an element of replacement? A. An existing policy is allowed to lapse B. The agent knows a new policy will take the place of an existing policy C. An existing policy is reissued with a reduced cash value D. An existing policy is subjected to a loan of 10% of its value

D— An existing policy is subjected to a loan of 10% of its value Explanation: Replacement includes a transaction in which a new life insurance policy is purchased with funds that the applicant borrowed from their existing policy in amounts that exceed 25% of the policy's loan value.

Suitability information gathered from consumers must be retained for review by the Department: A. By both agents and insurers for 5 years B. For 3 years by agents only C. By neither agents nor insurers D. For 4 years by insurers only

A— By both agents and insurers for 5 years Explanation: Insurers and agents must maintain records of the information collected from the consumer used in making the recommendations that were the basis for an insurance transaction for five years after the transaction is completed by the insurer.

To comply with disclosure requirements, producers must deliver which of the following documents to all insurance applicants? A. Buyer's Guide and Policy summary B. Policy summary and policy receipt C. Proposal form and Buyer's Guide D. Policy guidelines and proposal form

A— Buyer's Guide and Policy summary Explanation: Producers must provide to each prospective life insurance purchaser a Buyer's Guide and a Policy Summary prior to accepting the applicant's initial premium, unless the policy provides for an unconditional refund for at least 14 days, in which case the Guide and Summary must be delivered prior to or at the time of policy delivery.

Which of the following is true about the Replacement rule?. A. The Replacement rule applies only to health insurance B. Up to 30 days is allowed for a full refund of premium C. The agent must leave a copy of all sales proposals used in the presentation with the applicant D. The agent has 90 days from the effective date to deliver a Buyer's Guide

C— The agent must leave a copy of all sales proposals used in the presentation with the applicant Explanation: When replacement is involved, the agent must leave with the applicant the original or a copy of all sales proposals used for presentation to the applicant.

Which of the following must be given to an applicant when replacement occurs? A. Termination notice B. Notice regarding insurer solvency C. Best's rating of the replacing insurer D. Notice regarding replacement

D— Notice regarding replacement Explanation: When replacement is involved, the agent shall have the applicant, not later than at the time of taking the application, sign a Notice to Applicant Regarding Replacement of Life Insurance, which must also be signed by the agent and left with the applicant.

Which of the following statements is FALSE? A. The common stock and other assets of a separate account are under the supervision of the Securities and Exchange Commission B. Variable products are covered by the Florida Life & Health Insurance Guaranty Fund C. Variable annuities and variable life insurance policies are considered to be securities D. Insurers selling variable products are subject to regulation by the state Office of Insurance Regulation

B— Variable products are covered by the Florida Life & Health Insurance Guaranty Fund Explanation: The Florida L&H Insurance Guaranty Fund does not cover that portion or part of a variable life insurance contract or variable annuity that is not guaranteed by the insurer.

Which of the following groups is not eligible for group life insurance? A. Trustee groups B. Social groups C. Labor unions D. Employer and employee groups

B— Social groups Explanation: Under state law, groups eligible for group life coverage include employer/employee groups, labor union groups, trustee groups, debtor groups, association groups and credit union member groups.

Which of the following statements is true regarding group life insurance? A. It is written with a master policy for the benefit of qualified groups B. A group member is prohibited from assigning incidents of ownership C. Group life rates are generally higher than those for individual policies D. Only the group member can pay the premiums for the group policy

A— It is written with a master policy for the benefit of qualified groups Explanation: On employer/employee group life, it is the employer who is the master policyholder. The insured employees receive Certificates of Insurance summarizing their coverage.

All of the following are duties of a replacing insurer EXCEPT: A. Immediately send a copy of the Notice Regarding Replacement to the existing insurer B. Require a statement, signed by any replacing agent, acknowledging such replacement C. Maintain copies of every Notice Regarding Replacement, all sales proposals and a register cross-indexed by replacing agent and existing insurer for three years D. Ensure that all appointed agents take a 3-hour course on replacement annually

D— Ensure that all appointed agents take a 3-hour course on replacement annually Explanation: Although the Replacement Rules are covered extensively in a Life insurance pre-license course, there are no required post-licensing educational requirements in that area.

Which of the following is the minimum number of lives required in Florida for group life insurance policy eligibility? A. No minimum B. 8 C. 10 D. 3

A— No minimum Explanation: There is no minimum number of lives required for a group life policy in this state so long as the organization is one that is eligible for group coverage.

For an individual life contract on an insured 64 years of age or older, the insurer must advise the applicant of which of the following? A. Their right to designate a secondary addressee to receive a copy of any policy lapse notices B. Their right to name a trustee to exercise ownership rights under the policy C. Their right to an extended free look period D. Their right to a large-print copy of the policy if required

A— Their right to designate a secondary addressee to receive a copy of any policy lapse notices Explanation: An insurer must notify a life insurance applicant 64 years of age or older of the right to designate a secondary addressee at the time of application, or at any time the policy is in force.

All of the following statements are correct about group life insurance EXCEPT: A. Rates are typically more favorable than for individual policies B. Certificate holders need not be notified if the policy expires C. It is generally written as a one-year renewable term plan D. A member can assign her incidents of ownership

B— Certificate holders need not be notified if the policy expires Explanation: Every insurer shall notify each group certificate holder when the master policy has expired or has been cancelled.

When replacing life insurance, the duties of the replacing insurance company include all of the following EXCEPT: A. Sending to the existing insurer a copy of the Notice immediately B. Providing to each purchaser a Buyer's Guide and a Policy Summary C. Maintaining a copy of the Notice and all sales proposals used for at least 5 years D. Requiring from the agent with the application a copy of the Notice Regarding Replacement

C— Maintaining a copy of the Notice and all sales proposals used for at least 5 years Explanation: Replacing insurers must maintain copies of the Notice Regarding Replacement and all sales proposals used for at least 3 years or until the conclusion of the next regular audit by the insurance department, whichever is later.

Which of the following activities would not result in the suspension of an agent's license? A. Misrepresenting the financial condition of an insurance company B. Demonstrating incompetency to transact business as an insurance agent C. Attaining a license for the sole purpose of handling controlled business D. Selling any replacement policy that causes an insured to lapse an existing policy

D— Selling any replacement policy that causes an insured to lapse an existing policy Explanation: The Rules Regarding Replacement do not apply when replacing group life, credit life, existing life insurance that is a non-convertible term policy that will expire in 5 years or less and cannot be renewed, variable life or variable annuities.

How will a Life insurance beneficiary designation naming a spouse be changed by divorce? A. There will be no change allowed under Florida law B. Insurer policy rules will determine the result C. The beneficiary change requires a court decree D. The beneficiary designation is voided by the divorce

D— The beneficiary designation is voided by the divorce Explanation: A beneficiary designation naming a former spouse becomes void at the time the policyholder's marriage is judicially dissolved.

All of the following are correct insurance agent marketing responsibilities EXCEPT A. A presentation may not include references to life insurance policy cost indexes B. An agent must inform a prospect, prior to the presentation, that they are a life insurance agent and provide the name of their insurer C. Any reference to policy dividends must include a statement that such dividends are not guaranteed D. Any presentation comparing two or more life policies must recognize the time value of money using interest adjustments

A— A presentation may not include references to life insurance policy cost indexes Explanation: When life insurance cost indexes are used in a sales presentation, they must include a statement that explains that the cost indexes are useful only for the comparison of the relative costs of two or more similar policies.

All of the following statements regarding the Life Insurance Policy Summary are correct EXCEPT: A. It must illustrate all guaranteed policy dividend values B. It must illustrate all guaranteed cash surrender values C. It must be given to each new policy owner no later than at policy delivery D. It must present the generic name of the policy as well as the company's name for it

A— It must illustrate all guaranteed policy dividend values Explanation: A Policy Summary that includes dividends must include a statement that dividends are based on the company's current dividend scale and are not guaranteed.

Which of the following is NOT required when a group life insurance policy is canceled? A. The policyholder must notify the Department of the cancellation B. The policyholder must notify the group members C. The insurance company must notify the group members D. The insurance company must notify the group policyholder

A— The policyholder must notify the Department of the cancellation Explanation: Every insurer shall notify each group certificate holder when the master policy has expired or has been cancelled. The insurer may take this action through the policyholder by notifying them and requesting that they notify the certificate holders. The policyholder shall advise each certificate holder of the notice of expiration or cancellation as soon as possible.

An insurer must establish a suitability supervision system that includes all of the following EXCEPT: A. Reasonable procedures to inform agents of suitability requirements B. Limiting annuity replacements to agents with 3 or more years' experience C. Product-specific training for agents explaining all material annuity features D. Reasonable procedures to detect unsuitable recommendations

B— Limiting annuity replacements to agents with 3 or more years' experience Explanation: Although agents do not have to satisfy any experience requirements in order to recommend annuity purchases, they do have to make sure that their recommendations

Which life insurance non-forfeiture option will provide coverage for the longest period of time? A. Cash surrender B. Reduced paid-up C. Automatic premium loan D. Extended term

B— Reduced paid-up Explanation: If a policyholder selects the reduced paid-up non-forfeiture option when their whole life policy lapses, the insurer will use the cash value in the policy to purchase the policyholder a new whole life policy that will have reduced face amount, but will provide coverage until the insured dies or until the policy reaches maturity, whichever occurs first.

Which of the following describes the limitations that Florida insurance regulations set regarding combining the advertising of insurance policies with association membership? A. They forbid these two to be advertised together B. They require separate applications and separate signatures C. They require a signed statement of understanding by the applicant D. They require the insurance solicitation to come at least 30 days after the association membership

B— They require separate applications and separate signatures Explanation: An advertisement that is also an invitation to join an association must solicit insurance coverage on a separate and distinct application that requires separate signatures for each application.

Life insurance death benefits may be attached by the creditors of the insured upon their death: A. Never B. When no beneficiary designation has been made C. When the designated beneficiary has no legal capacity D. When the beneficiary designation is revocable

B— When no beneficiary designation has been made Explanation: Whenever the insurance, by designation or otherwise, is payable to the insured's estate, the insurance proceeds will become part of the insured's estate and for all purposes will be administered by the executor of the estate, meaning that the proceeds may be subject to the claims of the insured's creditors.

During what period is a new life insurance policyholder entitled to review a policy and return it for a full refund? A. Within 30 days of purchase B. Within 14 days after delivery of the policy C. During the 14 days prior to its effective date D. After receipt, but only with the prior approval of the agent

B— Within 14 days after delivery of the policy Explanation: All premiums, return premiums, and other funds belonging to insurers or others received by an agent are trust funds received by the licensee in a fiduciary capacity.

In which of the following ways is a beneficiary protected from the creditors of the deceased insured? A. The cash surrender value of a life insurance policy can be attached by an ordinary creditor B. When the policy is made payable to the estate, the proceeds are protected from the creditors C. If the policy is made payable to a named beneficiary, then the creditors can make no claim on the proceeds D. The proceeds of an insurance policy can always be claimed by the deceased insured's creditors

C— If the policy is made payable to a named beneficiary, then the creditors can make no claim on the proceeds Explanation: Life insurance proceeds payable to a designated beneficiary are exempt from the claims of creditors of the insured unless the policy or a valid assignment provides otherwise.

Which of the following applies when an insured wish to convert industrial insurance policies into an ordinary policy? A. The multiple policies can only be reissued as one industrial policy B. This is not permitted under Florida law C. It is possible to convert $3,000 or more of industrial insurance D. Any such conversion requires a physical examination

C— It is possible to convert $3,000 or more of industrial insurance Explanation: Industrial life is usually sold door-to-door by so called "debit" agents. Since premiums are paid weekly, the grace period is 4 weeks, or 28 days. When an insured has industrial life insurance policies with a single insurer that total $3,000 or more in face value, the insured has the option to convert all of these policies into one ordinary life insurance policy without evidence of insurability.

All of the following are true regarding an employer group life insurance policy delivered in this state EXCEPT: A. Coverage must be convertible for at least 31 days after termination of employment B. The insured employees receive Certificates of Insurance C. The employer is the master policyholder D. They may be written only if the employer has at least 10 eligible employees

D— They may be written only if the employer has at least 10 eligible employees Explanation: There is no required minimum number of lives necessary to be covered on a group life insurance policy issued in this state so long as the organization is one that is eligible for group life insurance.

An application for a variable annuity must show all of the following on the first page EXCEPT the: A. Method used to calculate the value of the separate account B. Agent's name C. Name of the insurer D. Agent's insurance license identification number

C— Method used to calculate the value of the separate account Explanation: State law requires that an application for a variable life insurance policy or a variable annuity display the name of the insurer prominently on the first page of the application, along with the name and license identification number of the agent as shown on their agent's license.

Which of the following statements applies to the rights of a spouse under a group insurance policy when the insurance on a covered employee ceases due to termination of employment? A. Conversion privileges must be provided for dependents B. Conversion rights of the surviving spouse are less than those the insured employee possessed C. Coverage continues at the same rate and premium D. Conversion privileges extend to the spouse but not to the children

A— Conversion privileges must be provided for dependents Explanation: A group life policy must provide that, if the insurance on a person covered under the policy or on the dependent of a person covered ceases because of termination of employment, such person is entitled to have issued to them, without evidence of insurability, an individual life insurance policy provided application is made and the first premium is paid within 31 days of such termination.

Which of the following rules would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new Life insurance? A. Disclosure rule B. Replacement rule C. Conversion rule D. Reinstatement rule

B— Replacement rule Explanation: The Replacement rule applies when it is known by the proposing agent that existing life insurance has been or is to be lapsed, forfeited, surrendered, or otherwise terminated because a new policy is being purchased.

All of the following information must be gathered from an annuity applicant in order to determine their suitability EXCEPT: A. Personal information, including age and sex of the annuitants and dependents B. Occupation C. Tax status D. Financial information, including income, assets, and net worth

B— Occupation Explanation: To ensure that recommendations that result in transactions involving annuity products meet the needs and financial objectives of the applicant, agents must establish that their recommendations are suitable based upon information provided by the applicant at the time of the transaction.