Before you begin, note that each of the questions has four answers, and all of the four answers apply in some way
to the question (except for question #3). The three wrong answers are not correct, but they are possible answers.
When the tests became more difficult in September of '96, it seems to have been in part because more of the answers
became more closely related to the questions. That makes the choice tougher. This is as close as we can make
the questions to the way they are on the state exams. The sample questions are from the Life Insurance and
Variable Annuities PMReview for Florida.
1. Which of the following is considered a service provider?
Fraternal benefit society
Blue Cross
Labor unions
All of the above
Answer A - Incorrect. Although a Fraternal benefit society exists for the benefit of members and perhaps
the public at large, that is not where the test builder is going with this question. In insurance terms,
a fraternal benefit society is not a service organization. It is a life insurance company.
Answer B - Correct. According to the State of Florida Insurance Commission, HMO's, PPOs, and
Blue Cross/Blue Shield are what is known as service providers or service organizations. _
They don't issue policies, they write contracts... etc. They are not insurance companies!
Now here is some bad news: In the text, in the back of the book where it is only covering health and
gets more specific, it says that Blue Cross and Blue Shield are not insurance companies "per se"
(which means not really insurance companies) but at the end of that descriptive paragraph, it says
"but in Florida, Blue Cross and Blue Shield are considered mutual insurance companies."
So... in one place it says they are and another place, it says they aren't! Isn't
that great for preparing you for a test?
Therefore: if the question is: "Are Blue Cross and Blue Shield insurance companies or service
providers?" you answer "Service Providers." If the question is: "In Florida, are Blue Cross and
Blue Shield considered mutual insurance companies?" you answer "Yes."
Also, don't ask anyone from Blue Cross and Blue Shield about this. They will tell you
exactly what they feel is the company position today. We don't care and you don't
either. We only care what is on the state test taken directly from the textbook we are studying.
It is our goal at PMReview to prepare you for the exams, and blend what is found in the FAIFA
textbook with what will appear on the state test so you will understand what the questions are asking.
Answer C - Incorrect. Although a labor union exists for the benefit of members and perhaps the general
public, that is not the intent of the question. In insurance terms, and that is what we are concerned with
here, a labor union is not a service organization. This is an example of the test makers using an answer which
could "sound right" in the mind of the public, but it is not the correct INSURANCE answer. Answers which
"sound right" are used a lot on the exams.
Answer D - Incorrect. "All of the above" is not correct in insurance terms. If you asked someone at Publix, they
might very well choose this answer, but it won't get you anywhere with the insurance department test. Be careful
about "common knowledge" kinds of questions. If they are asking the question, it's most likely an insurance related
question.
2. Indifference to loss is an example of _______.
a moral hazard
a physical hazard
risk avoidance
a morale hazard
Answer A - Incorrect. Indifference is a hazzard, that's true, but it doesn't fit into the category of
moral because moral in LIFE insurance is "legal" or "not legal" issues.
Answer B - Incorrect. Indifference is a hazzard all right, but it isn't a physical hazzard. It's
a lifestyle hazzard. Look again.
Answer C - Incorrect. Indifference is a hazzard and has nothing to do with the four ways of handling risk,
one of which is mentioned here.
Answer D - Correct. To figure this one out, you need to realize that indifference is a lifestyle attribute, and is
a hazzard, and has nothing to do with being "legal" or "not legal." Morale, as defined in Life insurance is or are
lifestyle issues. This changes slightly when we get to health insurance.
3. Which officers at the insurance company must sign the policy to make it effective?
The company actuary and company president
The company president and secretary
The company president and company chief underwriter
Bert and Ernie
Answer A - Incorrect. No, it sounds good. But it isn't correct. Try again.
Answer B - Correct. Yes, that's right. Did you guess? The president and the secretary. This is slightly
confusing because the secretary in this case is the corporate secretary. The textbook doesn't have
the word "corporate" in the material, but that is what is meant by the question.
Answer C - Incorrect. No -- but a good guess! ... it sure sounds like a good possibility. Try again.
Answer D - Incorrect. Of course I like this answer. And of course you just clicked on it to see what
I was going to say, right? I have a good time teaching the 40 hour course, and a good time with
the in-class reviews, so you can expect to have fun in this on-line version as well.
4. How long is the grace period on a life insurance policy when the premium was not paid when due?
10 days
30 days
31 days
One month but not less than 30 days
Answer A - Incorrect. A good try, but not correct. You will find 10 days in other places in the book, but not on this answer. Take another shot.
Answer B - Incorrect. Nope, 30 days isn't right.... because it is only true part of the time. Try again.
Answer C - Incorrect. No, sorry. 31 days is true, but only part of the time. Try another.
Answer D - Correct. Yes, one month but not less than 30 days. This is the best answer, but it still doesn't
tell the whole story... you will find questions like this on the state exam where you don't like any of the answers.
Ready for the complete answer? It is: 30 days unless the premium is paid monthly (which a whole lot of
policy owners do). Then it is one month but not less than 30 days. But, if the policy owner is 64 years of age
or older (this part of the answer is found in the back of the book in the law section), then the policy owner has
21 more days in addition to the 30 or 31. And... for industrial policies (also known as home service or debit
policies) the answer is 4 weeks (plus the 21 days if the policy owner is 64 or older). Does that make sense?
Is this unbelieveable or what?
To be honest about this question, I don't think the state will provide answers like our sample question
did: 30, 31, and One month but not less than 30 days. They won't make it that tough because that is not
fair, but they could have answers like 15, 20, 45, and One month but not less than 30 days. What if they
have answers of 15 days, 20 days, 30 days, and 45 days? Well... then you choose 30 and don't argue with
the people who are giving the exam. You know there is more to the answer than what they are providing,
but you have a very good idea of what to choose and let it go at that.
There are some unusual answers once in a while, and we see it as our job to talk to you in a common sense
way to explain what answers the state is looking for, and why.
There is another hint here: inside this review, we have a section called "Test Taking Hints." There are
a number of clues for you to know to do better on the test. One of those is "the longest answer may have
a good chance of being correct." People who make tests often come up with short "bad" answers and then
when they are doing the right one, they spell it out in a more lengthy answer. Just something to think
about as a possibility. It was true in this example.
5. What is the youngest age a person can purchase a life insurance policy in Kentucky?
21
18
16
15
Answer A - Incorrect. No, but a good guess since 21 is used for other similar purposes in our culture. Take another try.
Answer B - Incorrect. No, but a good try. 18 sounds right but isn't. I'll bet this answer will draw more guesses from the general public.
Answer C - Incorrect. Nope. I just threw this number in since it is used in social security purposes as leaving childhood.
Answer D - Correct. Yes, believe it or not. This is right!
I explain in class that I think the state has a good reason for picking this number. I met a woman in
the insurance industry who is now 23, who became a parent at 15, and was basically shifted to adulthood at
the age of 15. She would have had a very valid need at the age of 15 for buying life insurance for the benefit
of her child. The state needed to pick a good age, and this is as good as any.
This age is in the book in Chapter 9. I didn't get it out of the state insurance code. It is also the reason
that juvenile policies can be purchased by an adult up to age 15 of the child... at that age, the "children"
can buy policies themselves.
Do you find it surprising that a person 15 can sign a contract? The answer to that question is in this review.
Now, return to the main menu and find out more about your options.
